Federico Innocenti

University of Mannheim

will give a presentation on: 

Bayesian Persuasion with heterogeneous receivers and limited attention.

Abstract:

In a Bayesian Persuasion framework with heterogeneous priors, I identify a novel strategy which is optimal for a monopolistic sender if the society is sufficiently polarized in terms of priors. Persuasion can still arise with competition, if two necessary conditions are met: a) biased senders; b) limited attention by receivers. I examine a sequential game where first each receiver decides which sender to pay attention to, and then senders persuade as monopolist in their own segments. In this setting, Echo Chambers might arise endogenously and such allocation of attention is Pareto dominated by a monopoly. With any positive fraction of single-homing receivers, full revelation is not an equilibrium. Conversely, when the fraction of single-homing is sufficiently large, the optimal strategies under monopoly constitute an equilibrium even in presence of multi-homing receivers.

Paper available here.

Vitoria Rabello de Castro

University of Minnesota

will give a presentation on:

 Entry Timing in the Face of Switching Costs and its Welfare Effects: Evidence from Same-Day Grocery Delivery Platforms .

Abstract:

The online grocery market has seen massive entry over the last five years by firms ranging from traditional brick-and-mortar chains to online platforms. This paper documents the welfare impact of a major online retailer’s acquisition of a national grocery chain. The largest delivery services offer subscriptions, and, in the data, consumers rarely switch between them. I find that switching costs significantly affect consumer platform choice, suggesting potential for future exercise of market power. To study this acquisition’s impact, I model competition between two large platforms. The first is the major online retailer engaging in the merger. The second, the rival, is an independent platform with massive coverage. The platforms compete in a dynamic entry game, and two opposing forces influence entry timing. On the one hand, firms chase a first-mover advantage resulting from consumer lock-in. On the other hand, I find that entry costs fall over time for both firms, leading to significant costs of early entry. I estimate that, before the acquisition, the major online retailer had very large entry costs. The acquisition reduced this cost, posing a competitive threat to the rival. Consumer lock-in then contributed to raising the stakes of early entry for both firms, accelerating entry timing by more than two years across new markets. Further, I find that a merger between the two platforms, resulting in a monopoly, would delay entry significantly. These results show that strategic competition in entry timing plays an important role in mergers’ welfare effect.

Paper available here.