Job Market Paper: “Seller reputation with an Imperfect Review System” (pdf)
Abstract: I model the transactions that take place in an electronic marketplace where both adverse selection and moral hazard problems are present. A built-in review system is employed within the platform to ease the information problem and provide an incentive for the seller through reputation. The transactions with satisfied and unsatisfied consumers receive reviews with possibly distinct probabilities. These probabilities affect the type of Perfect Bayesian Equilibrium and the effort provided by the seller. I show that when the price is fixed, increasing the likelihood of a successful transaction being reviewed on the platform never decreases the seller's effort, with the possibility of a discrete jump. By contrast, increasing the likelihood of a failed transaction receiving a review may cause a discrete drop in the seller's effort. The seller's profit is non-monotonous in the probabilities of receiving reviews. Under endogenous price, the seller effort is continuous and non-monotonous in both parameters of the review system.
“Product Market Outcomes with Targeted and Random Advertising” (pdf)
Abstract: This paper explores the product market outcomes with random and targeted advertising. With random advertising, the pricing and advertising strategies are independent. In contrast, pricing and targeted advertising strategies are correlated since the level of targeting changes the distribution of valuation of the consumers the firms face. As a result, firms pass part of the targeting cost to the consumers. Moreover, the firms partially segment the market by targeting their customer base. Hence, consumers face higher prices with targeting. Random advertising does not provide enough income for the firm(s) to promote their products and creates entry barriers in small markets. The market profit may be shared unevenly between ex-ante symmetric firms in contrast to targeted advertising. Targeting removes the barrier to entry and enables symmetric incentives to the firms in small markets. Despite higher prices, targeting technology improves the welfare of markets of all sizes thanks to the elimination of unnecessary advertisement.
Work in Progress
“A model of Competition between Offline firms and the Online Market”
Abstract: Consumers in a local area now have the option of an online market in addition to their local brick-and-mortar retailers. Hence, when developing their strategy to compete for the demand, local firms must simultaneously consider the competition against the online market and local rivals. In this project, I study local firms' price strategy with the two dimensions of the competition in a framework I build on Hotelling's linear city model. I show that the price strategy of the local firms depends on their location with respect to each other. Moreover, neither minimum nor maximum differentiation of the firms' location is the most profitable in the two-dimensional competition.