Social, Behavioral and Experimental Economics Seminar: Itay Fainmesser
Learning through market segmentation
Abstract:
A marketplace platform is trying to learn about consumers’ willingness-to-pay for a product based on past purchases of consumers with the same observable characteristics. The platform cannot set prices and therefore has to rely on price experimentation by (short-run) sellers. Sellers can price discriminate, and their pricing depends on the information about consumers’ willingness to pay, which they receive from the platform. We show that by applying an appropriate dynamic market segmentation (and withholding some information from the sellers) the platform can induce pricing that will allow it to learn accurately the willingness-to-pay of low valuation consumers. However, only manipulating the information it shares with sellers, can never allow the platform to gain information that discriminates between different high valuation consumers. We provide welfare and policy implications.
Speaker bio:
Fainmesser studies social networks, social media and the digital economy. His recent work studies the pricing of network goods, the market for online influence, and user privacy in online platforms. His work was published in top economics and management journals such as The Review of Economic Studies, Management Science, and The Journal of Economic Theory. He received his PhD in business economics from Harvard University and his BSc in computer science and economics from the Tel Aviv University, Israel.