INSTRUCT SIGNED

Project "INSTRUCT" data sheet

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 Partnership

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 Project objective

Information flows are fundamental to how well markets work for consumers and firms. Consumers get different deals depending on (a) how much they know about the offerings of different firms and, conversely, (b) how much firms know about consumer preferences. The internet is transforming both (a) and (b), allowing consuInformation flows are fundamental to how well markets work for consumers and firms. Consumers get different deals depending on (a) how much they know about the offerings of different firms and, conversely, (b) how much firms know about consumer preferences. The internet is transforming both (a) and (b), allowing consumers to discover and evaluate products with greater ease and enabling firms to personalise prices and target their advertising. Economic understanding currently lags behind what is needed for robust policy formulation in the areas of consumer privacy, price discrimination, and the costs of search and advertising. This project aims to fill that gap. How does the structure of information in consumer markets affect market performance, and which kinds of information should be stimulated or controlled? I propose four lines of enquiry to address this over-arching theme: (1) to develop innovative modeling techniques to understand how the structure of information about consumer preferences (possessed by firms and by consumers themselves) affects overall surplus and how that surplus is divided between firms and consumers; (2) to develop methods to study how the structure of consideration sets (i.e., the set of firms a consumer is able or willing to consider for her purchase) affects market outcomes; (3) to analyse how the information channels of advertising by firms and search by consumers interact and which is more important for the efficient functioning of markets, and (4) to investigate which aspects of their preferences consumers are willing to share with firms and thereby understand better how to solve difficult but important pricing problems.