A Model of Biased Intermediation

Cornière (de), Alexandre and Taylor, Greg (2017) A Model of Biased Intermediation. TSE Working Paper, n. 17-753, Toulouse

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Official URL: http://tse-fr.eu/pub/31324

Abstract

This paper studies situations in which some consumers rely on a potentially biased intermediary to choose among downstream firms. We introduce the notion that firms' and consumers' payoffs can be congruent or conflicting, and show that this has important implications for the effects of bias. Under congruence, the firm towards which the intermediary is biased invests more than its rival and consumers can be better-off than under no bias. Under conflict, bias hurts consumers and the favored firm charges higher prices. We study various oft-proposed policies for dealing with a biased intermediary and show that the efficacy of each intervention depends strongly on whether the environment exhibits congruence or conflict. We discuss how the model relates to recent issues in online markets.

Item Type: Monograph (Working Paper)
Language: English
Date: January 2017
Place of Publication: Toulouse
Uncontrolled Keywords: intermediary, bias, regulation
JEL codes: D21 - Firm Behavior
L15 - Information and Product Quality; Standardization and Compatibility
L40 - General
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 17 Jan 2017 14:04
Last Modified: 24 Jul 2019 11:26
OAI ID: oai:tse-fr.eu:31324
URI: http://publications.ut-capitole.fr/id/eprint/22743

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