Social Learning and Delay in a Dynamic Model of Price Competition

This paper studies dynamic price competition over two periods between two firms selling differentiated durable goods to two buyers who are privately informed about their types, but have valuations of the two goods dependent on the other buyer's type. The firms' pricing strategy in period 1 must take into account the buyers' incentive to wait and learn from the other buyer's decision. We construct an equilibrium based on the key observation that the expected price of either good in period 2 is the same as its price in period 1 on and off the path of play. The equilibrium is shown to be non-preemptive in the sense that even if either firm fails to make a sale in period 1, it still makes a sale with positive probability in period 2. A characterization of the equilibrium is given in terms of the probability of delay as a function of the degree of interdependence between the two buyers

Role of Digital Divide in Optimal Zero Rating Policy

Several Internet Service Providers (ISPs) and Content Providers (CPs) have proposed zero rating plans whereby consumers get access to certain websites without paying for it. While open-access advocates have decried these plans, arguing that they are anti-competitive, ISPs and CPs argue that suchinitiativesenableInternet-deprivedsegmentsofsocietytofinallybeabletoaccesstheInternet. Our worklooksatthisissueinthepresenceofdigitaldivide. WeanalyzeISP’sandCPs’decision-makingas well as its subsequent impact on social welfare when a fraction of the population does not have access to the Internet. Our research finds that zero-rating plans can enhance social welfare for most levels of digital divide. However, Internet regulators need to be vigilant, since the ISPs may sometime deviate fromastrategythatmaximizessocialwelfare. Thestudyhasimplicationsforpolicymakers,particularly those,forwhomincreasingInternetpenetrationremainsacrucialgoal