Liad Wagman

Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases

When a firm can recognize its previous customers, it may use information about their past purchases to price discriminate. We study a model with a monopolist and a continuum of heterogeneous consumers, where consumers have the ability to maintain their anonymity and avoid being identified as past customers, possibly at a cost. When consumers can freely maintain their anonymity, they all individually choose to do so, which results in the highest profit for the monopolist. Increasing the cost of anonymity can benefit consumers but only up to a point, after which the effect is reversed. We show that if the monopolist or an independent third party controls the cost of anonymity, it often works to the detriment of consumers.

False-name-proofness in social networks

In mechanism design, the goal is to create rules for making a decision based on the preferences of multiple parties (agents), while taking into account that agents may behave strategically. An emerging phenomenon is to run such mechanisms on a social network; for example, Facebook recently allowed its users to vote on its future terms of use. One significant complication for such mechanisms is that it may be possible for a user to participate multiple times by creating multiple identities. Prior work has investigated the design of false-nameproof mechanisms, which guarantee that there is no incentive to use additional identifiers. Arguably, this work has produced mostly negative results. In this paper, we show that it is in fact possible to create good mechanisms that are robust to false-name-manipulation, by taking the social network structure into account. The basic idea is to exclude agents that are separated from trusted nodes by small vertex cuts. We provide key results on the correctness, optimality, and computational tractability of this approach.

Portfolio Size and Information Disclosure: An Analysis of Startup Accelerators

We study the information-gathering role of a startup accelerator and consider the accelerators incentives to choose a portfolio size and disclose information about participating ventures. We show that in a rational-expectations equilibrium, the resultant portfolio size is smaller than the first-best (efficient) level, consistent with some real-world observations. We further show that when some signals are uninformative and the portfolio consists of mostly high-quality ventures, the accelerator may choose to disclose only positive signals (and conceal negative signals) about its portfolio firms — a strategy we refer to as partial disclosure. Moreover, coupled with pursuing this strategy of partial disclosure, we demonstrate that the accelerator may possess incentives to exit its portfolio firms early.

Information Acquisition in Competitive Markets: An Application to the US Mortgage Market

How do price commitments impact the amount of information firms acquire about potential customers? We examine this question in the context of a competitive market where firms search for information that may disqualify applicants. Contracts are incomplete because the amount of information acquired cannot be observed. Despite competition, we find that firms search for too much information in equilibrium. If price discrimination is prohibited, members of high-risk groups suffer disproportionately high rejection rates. If rejected applicants remain in the market, the resulting adverse selection can be severe. We apply the results to the US mortgage market. (JEL D82, D83, D86, G21)

Early-Stage Entrepreneurial Financing: A Signaling Perspective

We analyze an entrepreneur’s choice between angel and venture capital (VC) financing in a competitive investment market, where the entrepreneur seeks to maintain his ownership share as well as equity value. The key to our analysis is the idea that a negative signal is inferred by the market if an inside investor chooses not to follow on a subsequent investment. We first show that when ventures are ex-ante identical, entrepreneurs retain higher ownership shares by financing with angel investors who commit to not participate in a future round. When entrepreneurs are ex-ante heterogeneous, there is a separating equilibrium where entrepreneurs with higher (lower) likelihoods of success choose VC financing (angel financing) in the first round.

Choosing fair lotteries to defeat the competition

We study the following game: each agent i chooses a lottery over nonnegative numbers whose expectation is equal to his budget b_i. The agent with the highest realized outcome wins (and agents only care about winning). This game is motivated by various real-world settings where agents each choose a gamble and the primary goal is to come out ahead. Such settings include patent races, stock market competitions, and R&D tournaments. We show that there is a unique symmetric equilibrium when budgets are equal. We proceed to study and solve extensions, including settings where agents choose their budgets (at a cost) and where budgets are private information.

Online Privacy and Price Discrimination

When a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the firm. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed.

Outsourcing in Place: Should a Retailer Sell Its Store-Brand Factory?

ABSTRACTSeveral major grocery chains in the United States own factories that produce some of their store-brand products. Historically, these store-brand products have been the low-price, lower-quality alternatives to higher-priced national brands, but the quality and consumer acceptance of store brands have increased markedly in recent years. Although demand for store-brand products has grown, managing the associated factories can be costly for retailers, leading some to consider selling the factories to third parties.We study the impact of selling a retailer’s existing capacity-limited factory to a third party when a store-brand product competes with a similar national-brand product. We examine the equilibrium dynamics between two external suppliers and show how the outcome changes with respect to prices, capacity limitations, the distribution of profits, and the sequencing of pricing decisions. Among other things, we show that, surprisingly, the national brand’s equilibrium wholesale price may fall when...

Marketing educational improvements via international partnerships under brain drain constraints

We study the dynamics in an educational partnership between a university and a developing region. We examine how the university achieves its goals to improve and advertise its offerings while recruiting a cohort of students from the developing region and maintaining a sustainable relationship with the region and its students. We show that mutually beneficial partnerships can arise, particularly when both the university and the region exhibit strong preferences toward cohort students returning to work at home. We further show that such partnerships can induce developing regions to invest in domestic opportunities for returning students.

Can Restricting Property Use Be Value Enhancing? Evidence from Short-Term Rental Regulation

Short-term rentals, private residences where tourists stay, have become ubiquitous over the past decade. Many communities are divided over the trade-offs between a property owner’s rights and nuisance problems created by transient populations in residential neighborhoods. This paper empirically examines the effects of regulation restricting short-term rentals on property sales prices, using a unique data set and policy experiment from Anna Maria Island, Florida. We show that nonresident ownership of properties on the island decreased following the rental regulation and that the regulation decreased property values except in areas where the density of non-resident-owned properties in a neighborhood was quite high.