Prices are increasingly set by algorithms. One concern is that intelligent algorithms may learn to collude on higher prices even in absence of the kind of communication or agreement necessary to establish an antitrust infringement. However, exactly how this may happen is an open question. I show in a simulated environment of sequential competition that competing reinforcement learning algorithms can indeed learn to converge to collusive equilibria. When the set of discrete prices increases, the algorithm considered increasingly converges to supra-competitive asymmetric cycles. I show that results are robust to various extensions and discuss practical limitations and policy implications.
{"title":"Autonomous algorithmic collusion: Q‐learning under sequential pricing","authors":"Timo Klein","doi":"10.1111/1756-2171.12383","DOIUrl":"https://doi.org/10.1111/1756-2171.12383","url":null,"abstract":"Prices are increasingly set by algorithms. One concern is that intelligent algorithms may learn to collude on higher prices even in absence of the kind of communication or agreement necessary to establish an antitrust infringement. However, exactly how this may happen is an open question. I show in a simulated environment of sequential competition that competing reinforcement learning algorithms can indeed learn to converge to collusive equilibria. When the set of discrete prices increases, the algorithm considered increasingly converges to supra-competitive asymmetric cycles. I show that results are robust to various extensions and discuss practical limitations and policy implications.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12383","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43220248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I study a model of competition between data intermediaries, which collect personal data from consumers and sell them to downstream firms. Competition has a limited impact on benefiting consumers: If intermediaries offer high compensation for data, consumers share data with multiple intermediaries, which lowers the downstream price of data and hurts intermediaries. Anticipating this, intermediaries offer low compensation for data. Although consumers are exclusive suppliers of data, the nonrivalry of data can lead to concentration and high intermediary profits in data markets. In particular, if downstream firms use data to extract surplus
{"title":"Competing data intermediaries","authors":"Shota Ichihashi","doi":"10.1111/1756-2171.12382","DOIUrl":"https://doi.org/10.1111/1756-2171.12382","url":null,"abstract":"I study a model of competition between data intermediaries, which collect personal data from consumers and sell them to downstream firms. Competition has a limited impact on benefiting consumers: If intermediaries offer high compensation for data, consumers share data with multiple intermediaries, which lowers the downstream price of data and hurts intermediaries. Anticipating this, intermediaries offer low compensation for data. Although consumers are exclusive suppliers of data, the nonrivalry of data can lead to concentration and high intermediary profits in data markets. In particular, if downstream firms use data to extract surplus","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-08-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12382","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45620211","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study optimal methods for Alternative Dispute Resolution (ADR), a technique to achieve settlement and avoid costly adversarial hearings. Participation is voluntary. Disputants are privately informed about their marginal cost of evidence provision. If ADR fails to engender settlement, the disputants can use the information obtained during ADR to determine what evidence to provide in an adversarial hearing. Optimal ADR induces an asymmetric information structure but makes the learning report-independent. It is ex ante fair and decreases the disputants’ expenditures, even if they fail to settle. We highlight the importance of real-world mediation techniques, such as caucusing, for implementing optimal ADR
{"title":"Managing a conflict: optimal alternative dispute resolution","authors":"Benjamin Balzer, Johannes J. Schneider","doi":"10.1111/1756-2171.12374","DOIUrl":"https://doi.org/10.1111/1756-2171.12374","url":null,"abstract":"We study optimal methods for Alternative Dispute Resolution (ADR), a technique to achieve settlement and avoid costly adversarial hearings. Participation is voluntary. Disputants are privately informed about their marginal cost of evidence provision. If ADR fails to engender settlement, the disputants can use the information obtained during ADR to determine what evidence to provide in an adversarial hearing. Optimal ADR induces an asymmetric information structure but makes the learning report-independent. It is ex ante fair and decreases the disputants’ expenditures, even if they fail to settle. We highlight the importance of real-world mediation techniques, such as caucusing, for implementing optimal ADR","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12374","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41827728","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study contracting between a public good provider and users with private valuations of the good. We show that, once the provider extracts the users' private information, she benefits from manipulating the collective information received from all users when communicating with them. We derive conditions under which such manipulation determines the direction of distortions in public good provision. If the provider is non‐manipulative, the public good is always underprovided, whereas overprovision occurs with a manipulative provider. With overprovision, not only high‐valuation users, but also low‐valuation users may obtain positive rents—users may prefer facing a manipulative provider.
{"title":"Public good overprovision by a manipulative provider","authors":"G. Celik, Dongsoo Shin, Roland Strausz","doi":"10.1111/1756-2171.12370","DOIUrl":"https://doi.org/10.1111/1756-2171.12370","url":null,"abstract":"We study contracting between a public good provider and users with private valuations of the good. We show that, once the provider extracts the users' private information, she benefits from manipulating the collective information received from all users when communicating with them. We derive conditions under which such manipulation determines the direction of distortions in public good provision. If the provider is non‐manipulative, the public good is always underprovided, whereas overprovision occurs with a manipulative provider. With overprovision, not only high‐valuation users, but also low‐valuation users may obtain positive rents—users may prefer facing a manipulative provider.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12370","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45756545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We model a moral hazard in teams problem in which a profit-maximizing principal offers private contracts to multiple agents. Public contracts are common knowledge to all agents, but private contracts are known only by the principal and each individual agent. Public contracts can induce efficient outcomes but are subject to effort-reducing collusion between the principal and any given agent. Private contracts, by construction, are immune to such collusion but necessarily inefficient, as the principal is forced to make the team collectively the residual claimant (on margin), whereas efficiency requires that each individual agent be the residual claimant on his own.
{"title":"Team incentives under private contracting","authors":"M. Goldmanis, Korok Ray","doi":"10.1111/1756-2171.12371","DOIUrl":"https://doi.org/10.1111/1756-2171.12371","url":null,"abstract":"We model a moral hazard in teams problem in which a profit-maximizing principal offers private contracts to multiple agents. Public contracts are common knowledge to all agents, but private contracts are known only by the principal and each individual agent. Public contracts can induce efficient outcomes but are subject to effort-reducing collusion between the principal and any given agent. Private contracts, by construction, are immune to such collusion but necessarily inefficient, as the principal is forced to make the team collectively the residual claimant (on margin), whereas efficiency requires that each individual agent be the residual claimant on his own.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12371","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48717632","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the effect on the quality of three high-volume non-emergency treatments of a reform that relaxed restrictions on patient choice of hospital. We employ a quasi difference-in-difference strategy and use control functions allowing for patient selection into providers correlated with unobserved morbidity. Public hospitals facing more rivals reduced quality, increased waiting times, and reduced length of stay for hip and knee replacements. This is likely due to regulated prices implying larger losses on these treatments compared to coronary artery bypass grafts, where no effects were found. Our findings are robust to estimation methods and competition measures, allowing for private providers’ entry.
{"title":"Hospital competition and quality for non‐emergency patients in the English NHS","authors":"Giuseppe Moscelli, H. Gravelle, L. Siciliani","doi":"10.1111/1756-2171.12373","DOIUrl":"https://doi.org/10.1111/1756-2171.12373","url":null,"abstract":"We investigate the effect on the quality of three high-volume non-emergency treatments of a reform that relaxed restrictions on patient choice of hospital. We employ a quasi difference-in-difference strategy and use control functions allowing for patient selection into providers correlated with unobserved morbidity. Public hospitals facing more rivals reduced quality, increased waiting times, and reduced length of stay for hip and knee replacements. This is likely due to regulated prices implying larger losses on these treatments compared to coronary artery bypass grafts, where no effects were found. Our findings are robust to estimation methods and competition measures, allowing for private providers’ entry.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12373","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49101524","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the adoption of fuel-efficient precalciner kilns in the cement industry using the universe of adoption decisions in the United States over 1973-2013. We find that cement plants are more likely to adopt the technology if fuel costs are high, nearby competitors are few, and local demand conditions are favorable. We relate the findings to the Schumpeterian and induced innovation hypotheses regarding the effects of competition and factor prices. Our results suggest firms may be most responsive to factor prices under advantageous competitive and demand conditions.
{"title":"Finding Mr. Schumpeter: technology adoption in the cement industry","authors":"Jeffrey T. Macher, Nathan H. Miller, M. Osborne","doi":"10.1111/1756-2171.12362","DOIUrl":"https://doi.org/10.1111/1756-2171.12362","url":null,"abstract":"We examine the adoption of fuel-efficient precalciner kilns in the cement industry using the universe of adoption decisions in the United States over 1973-2013. We find that cement plants are more likely to adopt the technology if fuel costs are high, nearby competitors are few, and local demand conditions are favorable. We relate the findings to the Schumpeterian and induced innovation hypotheses regarding the effects of competition and factor prices. Our results suggest firms may be most responsive to factor prices under advantageous competitive and demand conditions.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":"52 1","pages":"78-99"},"PeriodicalIF":2.3,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12362","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49584343","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Moral hazard in teams with subjective evaluations","authors":"Chen Cheng","doi":"10.1111/1756-2171.12360","DOIUrl":"https://doi.org/10.1111/1756-2171.12360","url":null,"abstract":"","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":"52 1","pages":"22-48"},"PeriodicalIF":2.3,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12360","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45348072","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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