[Biz] Information Economics

Information Economics

This course was taught by Prof. Ling-Chieh Kung. The course aims to explore the incentives and decision-making process of different decision-makers under the condition of information asymmetry. For example, we explore how manufacturers make decisions about different selling channels in the supply chain. In the multi-sided platform, how the platform decides the best pricing and business strategy among the incentive and utility maximization problems of all players involved - consumers, platforms, and delivery staff - is also a topic that we are very concerned about. Of course, classic topics such as screening theory, signalin theory, moral hazard, etc., are also covered in this course.

In the case studies in this course, we discuss whether a retailer introduces the mobile payment service when facing a group of heterogeneous customers. This is an open question, so we must make corresponding reasonable assumptions and design a model to analyze and discuss this issue.

For customers, we assume the whole market does not favor one payment method over another in aggregate.
For a retailer, We assume the retailer has time preference across periods, and that once the platform is set up, only a fixed maintenance cost is needed for each period. Although the one-time setup cost may be one of the major concerns of setting up a new payment platform, it can be combined with the maintenance cost using discount factor in each period and focus on one period only. By doing so, the model can be focused on only 1 period, say 1 year.
For a mobile payment service platform, we assume the platform already has a working service, and the setup cost is sunk and thus not in consideration. Moreover, we introduce information asymmetry between the platform and a retailer in the follow-up setting. We hereafter assume the quality of the platform, i.e. the potential demand it is bringing is privately known to the platform.

The game proceeds as follows. First, the platform offers a contract to the retailer. Given the contract, the retailer decides whether to accept the contract and join the platform or keep on accepting cash only. The retailer then announces the retail price, and each consumer buys a product with the payment method generating the highest nonnegative utility for him, or nothing if all payment methods generates a negative utility. The results and analysis can be seen in our reports: Case one (page 7~10) and Case two (page 2~5).

In addition, our final project: Online-Offline Retailing Cooperation with BOPS Scheme under Price Competition studies the competition and cooperation relationship between online and offline merchants in the retail industry with a game theory model. We consider the BOPS (buy online and pick up in-store) channel and analyze the conditions and efficiency of its competition and cooperation. In particular, cooperation is only possible if the BOPS channel is more eﬀicient than the original offline channel. This finding holds regardless of the eﬀiciency of online channel, consumers’ willingness to pay and the traveling cost as long as all parameters are within the range in consideration.

The business and pricing strategy and marketing research on the platform have always been my research topics that I pay close attention to and love. In particular, the platform has flourished under the development of the Internet in the past 30 years. Many technology giants seen today, such as Amazon, Google, Facebook, Netflix, Uber, etc., are companies that provide PaaS services. The scope of platform research is quite extensive, from platform design, platform pricing mechanism design, platform content design (User-generated Content and Professional-generated Content, UGC and PGC), advertising matching algorithm, user retention, fake account and fake comment detection , page information design (although this is a more human-machine interface (HCI) style research), platform user guidance (for example, Uber should have incentives to improve the quality and driving strategies of taxi drivers), etc., are all very attractive and quite influential to the people of today’s generation. I hope that I can extend the existing literature on these issues in the future and continue to explore interesting and valuable research issues.