1,674 research outputs found
The Impact of Intelligent Agents on Electronic Markets: Customization, Preference Revelation and Pricing.
Apart from reducing buyer search costs, web-based commerce has also enabled the use of
intelligent agent technologies that reduce seller search costs by targeting buyers, customizing,
and pricing products in real-time. Our model of an electronic market with customizable products
analyzes the pricing, profitability and welfare implications of these agent-based technologies
that price dynamically, based on product preference and demographic information revealed by
consumers. We find that in making the trade-off between better prices and better customization,
consumers invariably choose less-than-ideal products. Furthermore, this trade-off impacts
buyers on the higher end of the market more, and causes a transfer of consumer surplus towards
buyers with a lower willingness to pay. As buyers adjust their product choices in response
to better demand agent technologies, sellers may experience reduced revenues, since the gains
from better buyer information are countered by the lowering of the total value created from
the transactions. We study the strategic and welfare implications of these findings, and discuss
managerial and technology development guidelines.Information Systems Working Papers Serie
Currency Portfolios and Currency Exchange in a Search Economy
We develop a dual currency search model to study equilibrium currency exchange and the determination of nominal exchange rates. Agents hold portfolios consisting of two distinct currencies. We study equilibria in which the two currencies are identical and equilibria in which the two currencies differ according to their relative purchasing power risk. We use numerical methods to solve for the steady-state distributions of currency portfolios, nominal exchange rates and value functions. When one of the currencies is 'risky', equilibria exist in which the safe currency trades for multiple units of the risky currency with the observed ratio being the nominal exchange rate. However, due to the decentralized trading environment, we obtain a steady state distribution of nominal exchange rates. The mean and variance of the nominal exchange rate distribution are based on the fundamentals of the model and change in predictable ways when the fundamentals change. -- Wir entwickeln ein Modell mit zwei Währungen, um das Gleichgewicht beim Austausch der Währungen und die nominalen Wechselkurse zu bestimmen. Die Wirtschaftssubjekte halten Portfolios, die aus den zwei verschiedenen Währungen bestehen. Wir untersuchen Gleichgewichte, in denen die zwei Währungen identische Eigenschaften haben und Gleichgewichte, in denen sich die zwei Währungen hinsichtlich ihres Kaufkraftrisikos unterscheiden. Es werden numerische Methoden verwendet, um die Verteilungen der Währungsportfolios, der nominalen Wechselkurse und der Wertfunktionen im langfristigen Gleichgewicht zu bestimmen. Wenn eine der Währungen risikobehaftet ist, dann existieren Gleichgewichte, in denen die sichere Währung gegen mehrere Einheiten der risikobehafteten Währung gehandelt wird. Das Austauschverhältnis ist der nominale Wechselkurs. Da der Handel dezentral erfolgt, ergibt sich eine Gleichgewichtsverteilung der Wechselkurse. Der Mittelwert und die Varianz dieser Verteilung hängt von den Fundamentalfaktoren des Modells ab. Wenn sich die Fundamentalfaktoren ändern, dann ändert sich diese Verteilung in vorhersehbarer Weise.
An Agent Based Market Design Methodology for Combinatorial Auctions
Auction mechanisms have attracted a great deal of interest and have been used in diverse e-marketplaces. In particular, combinatorial auctions have the potential to play an important role in electronic transactions. Therefore, diverse combinatorial auction market types have been proposed to satisfy market needs. These combinatorial auction types have diverse market characteristics, which require an effective market design approach. This study proposes a comprehensive and systematic market design methodology for combinatorial auctions based on three phases: market architecture design, auction rule design, and winner determination design. A market architecture design is for designing market architecture types by Backward Chain Reasoning. Auction rules design is to design transaction rules for auctions. The specific auction process type is identified by the Backward Chain Reasoning process. Winner determination design is about determining the decision model for selecting optimal bids and auctioneers. Optimization models are identified by Forward Chain Reasoning. Also, we propose an agent based combinatorial auction market design system using Backward and Forward Chain Reasoning. Then we illustrate a design process for the general n-bilateral combinatorial auction market. This study serves as a guideline for practical implementation of combinatorial auction markets design.Combinatorial Auction, Market Design Methodology, Market Architecture Design, Auction Rule Design, Winner Determination Design, Agent-Based System
Strategic pricing of financial options
The mainstream model of option pricing is based on an exogenously given process of price movements. The implication of this assumption is that price movements are not affected by actions of market participants. However, if we assume that there are indeed impacts on the price movements it no longer possible to apply the standard pricing models. As a result we need an approach explaining interdependent actions. Game theory is in a position to offer proper olutions. This paper applies game theoretic concepts to determine option prices. Consequently, both the option price and the underlying´s expiration price are endogenously determined. --game theory,Nash equilibrium,option pricing,real option
Platform Pricing Structure and Moral Hazard
We study pricing by a monopoly platform that matches buyers and sellers in an environment with cross-market externalities. Said platform has no private information, does not set the commodity's price and can only charge trading parties for the transaction. Our innovation consists in introducing moral hazard on the sellers' side and an equilibrium notion of platform reputation in an infinite horizon model. With linear fees the platform can mitigate, but not eliminate, the loss of reputation induced by moral hazard. If lump-sum fees (registration fees) can be levied, moral hazard can be overcome. The upfront payment determines the participation threshold of sellers and extracts them, while (lower) transactions fees provide incentives for good behavior. This breaks the equivalence of lump-sum payments and linear fees (Rochet and Tirole (2006)). We draw implications for the role of subsidies (Caillaud and Jullien (2003)).Platforms; Two-Sided Markets; Reputation; Moral Hazard
House prices, sales, and time on the market : a search-theoretic framework
We build a search model of the housing market which captures the illiquidity of housing assets. In this model, households experience idiosyncratic shocks over time which affect how much they value their residence (e.g. the location of their job could change). When hit by a shock, households become mismatched and seek to buy a new home. Yet they take time to locate an appropriate housing unit and to sell their current home. Competitive forces are present in the housing market since, by posting lower prices, sellers increase the average number of buyer visits they get and sell their property faster. We characterize a stationary equilibrium for a fixed housing stock. We then calibrate a stochastic version of the model to reproduce selected aggregate statistics of the U.S. economy. The model is consistent with the high volatility of prices, sales and average time on the market, the positive correlation of prices and sales, and the negative correlation of prices and average time on the market observed in the data. This is not the case when we consider the perfectly competitive version of the modelHouse prices, Sales, Time on the market, Search frictions, Competitive search
Money Talks? An Experimental Study of Rebate in Reputation System Design
Reputation systems that rely on feedback from traders are important institutions for helping sustain trust in markets, while feedback information is usually considered a public good. We apply both theoretical models and experiments to study how raters' feedback behavior responds to different reporting costs and how to improve market efficiency by introducing a pre-commitment device for sellers in reputation systems. In particular, the pre-commitment device we study here allows sellers to provide rebates to cover buyers' reporting costs before buyers make purchasing decisions. Using a buyer-seller trust game with a unilateral feedback scheme, we find that a buyer’s propensity to leave feedback is more sensitive to reporting costs when the seller cooperates than when the seller defects. The seller’s decision on whether to provide a rebate significantly affects the buyer’s decision to leave feedback by compensating for the feedback costs. More importantly, the rebate decision has a significant impact on the buyer's purchasing decision via signaling the seller's cooperative type. The experimental results show that the rebate mechanism improves the market efficiency.reputation, trust, feedback mechanism, asymmetric information, public goods, experimental economics
Impact of Search Engine Characteristics on Electronic Markets and Sellers' Pricing Strategies
Internet-based electronic markets facilitate buyer search for seller
offerings and comparison of products on the basis of price and product
features. Search engine capabilities such as Recall, Precision and
Ranking Accuracy determine the efficiency with which buyers can
search for and compare products and the resulting buyer surplus and
seller profits. This research investigates the impact of each of these factors
on buyer and seller strategies at equilibrium. This paper explains
certain counter intuitive market phenomena where some successful
electronic markets offer less choice to buyers than their competitors.
The analysis is driven by a set of analytical models of an electronic
market under varying conditions of sellers' market shares, buyer search
strategies and search engine technology. The models developed here
draw from existing theories in information economics and computer
science. The results demonstrate that precision has a greater direct
impact on buyer surplus than recall and that buyers will forego some
choice in exchange for greater accuracy of product description, especially
in products that are complex or are characterized by ambiguity
in product description and terms of trade. Finally, the seller with the
greatest market share stands to gain most from offering search engine
services to buyers and in a market characterized by two or more sellers
with significant market shares, search engine services will always be
offered free of cost to buyers.Information Systems Working Papers Serie
Internet auctions in marketing: The consumer perspective
Internet auctions for consumer are among the most popular and most successful business models in electronic commerce. Research so far, however, has focused on prerequisites and consequences of auctions as a marketing intstrument of suppliers. Even though it is a key success factor from a marketing perspective, the demand side has not inspired similar attention. This paper focuses on the attitudes, motives, and behavior of auction customers. It shows why ccurrent beliefs about bidder characteristics are myths. Taking these misconceptions as a starting point, the existence of an experiential and a pragmatic type of auction customer is proposed. An explorative empirical study looking for the characteristics of both types of auction customers is described. Results indicate that less than half of auction shoppers in the sudy are experiential oriented. Except substantial additional demand concerning technological and emotional qualities of auctions these shoppers do not differ dramatically from pragmatic oriented shoppers. Both types are open-minded towards further development of consumer auctions to commercial marketplaces. Business models of auctioneers and suppliers should concentrate on the basic utility of the auction algorithm by facilitating individual matchmaking instead of pursuing costly additional utility by promoting the entertainment value of auctions. --
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