Objective
This proposal aims to advance our understanding of information transmission in dynamic markets by examining two specific scenarios: (i) information transmission by strategic agents and (ii) information transmission by algorithms. Its core focus revolves around the analysis of competition in dynamic markets with asymmetric information. The proposal encompasses both positive and normative analyses, offering insights into the ongoing discourse on predatory and algorithmic pricing.
The project comprises three ambitious tasks:
The first part develops a state-of-the-art theoretical workhorse model. Unlike the previous literature, it does not follow the “reputation” approach, which assumes the existence of a type committed to playing specific behavior. Instead, it adopts a fully strategic model, which, in turn, enables a thorough examination of the impact of policy and regulatory decisions on consumer welfare or market efficiency in a variety of markets since the equilibrium predictions do not depend on the endogenously specified behavioral types.
The second part showcases the applications of the tools developed in Part 1 across different environments and how the resulting insights can inform policy debates on regulation. When applied to dynamic limit pricing, the model reveals a novel tradeoff: strategic delay. Entrants may opt to delay their entry decisions to gather more information about market conditions, which potentially could lead to a decrease in consumer welfare. This suggests that antitrust policies should also consider strategic delay, rather than solely focusing on the occurrence of entry when deciding whether limit pricing negatively affects consumers or not.
The final part of the project examines decisions made by algorithms rather than strategic agents and draws comparisons with Part 2. This part holds the potential to contribute significantly to the regulation of Artificial Intelligence, particularly within the framework of the EU AI Act.
Keywords
Programme(s)
- HORIZON.1.1 - European Research Council (ERC) Main Programme
Topic(s)
Funding Scheme
HORIZON-ERC - HORIZON ERC GrantsHost institution
00198 Roma
Italy