×

zbMATH — the first resource for mathematics

On the optimality of privacy in sequential contracting. (English) Zbl 1141.91391
Summary: The exchange of information between two principals who contract sequentially with the same agent, as in the case of a buyer who purchases from multiple sellers. We show that when (a) the upstream principal is not personally interested in the downstream level of trade, (b) the agent’s valuations are positively correlated, and (c) preferences in the downstream relationship are separable, then it is optimal for the upstream principal to offer the agent full privacy. On the contrary, when any of these conditions is violated, there exist preferences for which disclosure is strictly optimal, even if the downstream principal does not pay for the information. We also examine the effects of disclosure on welfare and show that it does not necessarily reduce the agent’s surplus in the two relationships and in some cases may even yield a Pareto improvement.

MSC:
91B26 Auctions, bargaining, bidding and selling, and other market models
PDF BibTeX XML Cite
Full Text: DOI
References:
[1] A. Acquisti, H.R. Varian, Conditioning prices on purchase history, Mimeo, SIMS, UC Berkeley, Marketing Science (2005), forthcoming.
[2] Baron, D., Non-cooperative regulation of a non-localized externality, Rand J. econ., 16, 553-568, (1985)
[3] Baron, D.; Besanko, D., Regulation and information in a continuing relationship, Info. econ. Pol., 1, 447-470, (1984)
[4] D. Bergemann, J. Välimäki, Dynamic common agency, J. Econ. Theory 111 (1) (2003) 23-48. · Zbl 1052.91028
[5] Bester, H.; Strausz, R., Contracting with imperfect commitment and the revelation principle: the single agent case, Econometrica, 69, 4, 1077-1098, (2001) · Zbl 1021.91013
[6] Calzolari, G.; Pavan, A., Monopoly with resale, (2003), Mimeo Northwestern University
[7] Cho, I.; Kreps, D., Signaling games and stable equilibria, Quart. J. econ., 102, 2, 179-221, (1987) · Zbl 0626.90098
[8] Daughety, A.; Reinganum, J., Informational externalities in settlement bargaining: confidentiality and correlated culpability, Rand J. econ., 33, 4, 587-604, (2002)
[9] Dodds, S., Economic aspects of individual privacy and confidentiality, (2003), Department of Economics Queen’s University, Canada
[10] Epstein, L.; Peters, M., A revelation principle for competing mechanisms, J. econ. theory, 88, 119-160, (1999) · Zbl 0958.91015
[11] Fudenberg, D.; Tirole, J., Game theory, (1991), MIT Press Boca Raton, FL · Zbl 1339.91001
[12] Haile, P., Auctions with private uncertainty and resale opportunities, J. econ. theory, 108, 1, 72-110, (2003) · Zbl 1054.91029
[13] Laffont, J.-J.; Tirole, J., The dynamics of incentives contracts, Econometrica, 56, 1153-1175, (1988) · Zbl 0663.90014
[14] Lizzeri, A., Information revelation and certification intermediaries, Rand J. econ., 30, 214-231, (1999)
[15] Martimort, D., Multi-principaux avec anti selection, Ann. econ. statist., 28, 1-38, (1992)
[16] Martimort, D., Renegotiation design with multiple regulators, J. econ. theory, 88, 261-293, (1999) · Zbl 0939.90010
[17] Martimort, D.; Stole, L., The revelation and taxation principles in common agency games, Econometrica, 70, 1659-1674, (2002) · Zbl 1142.91613
[18] D. Martimort, L. Stole, Contractual externalities and common agency equilibria, Advances in Theoretical Economics 3 (2) (2003), http://www.bepress.com/bejte/advances/vol3/iss1/art4 · Zbl 1158.91426
[19] C. Mezzetti, Common agency with horizontally differentiated principals, Rand J. Econ. (1997) 254-275.
[20] Milgrom, P., Good news and bad news: representation theorems and applications, Bell J. econ., 12, 380-391, (1981)
[21] Padilla, A.; Pagano, M., Endogenous communication among lenders and entrepreneurial incentives, Rev. finan. stud., 10, 205-236, (1997)
[22] Pagano, M.; Jappelli, T., Information sharing in credit markets, J. finance, 48, 1693-1718, (1993)
[23] Pavan, A.; Calzolari, G., A Markovian revelation principle for common agency games, (2002), Mimeo Northwestern University
[24] Peters, M., Common agency and the revelation principle, Econometrica, 69, 1349-1372, (2001)
[25] A. Prat, A. Rustichini, Sequential common agency, Tilburg CentER for Economic Research Discussion Paper 9895, 1998.
[26] Raith, M., A general model of information sharing in oligopoly, J. econ. theory, 71, 269-288, (1996) · Zbl 0864.90037
[27] Segal, I., Contracting with externalities, Quart. J. econ., 114, 337-388, (1999) · Zbl 0953.91026
[28] Segal, I.; Whinston, M., Robust predictions for bilateral contracting with externalities, Econometrica, 71, 757-792, (2003) · Zbl 1152.91630
[29] Stole, L.A., Mechanism design under common agency, (1991), Mimeo University of Chicago
[30] C.R. Taylor, Privacy in competitive markets, Rand J. Econ. 35 (Winter) (2004) 631-651.
[31] Taylor, C.R., Privacy in competitive markets, (2003), Mimeo Duke University
[32] Zheng, C., Optimal auctions with resale, Econometrica, 70, 2197-2224, (2002) · Zbl 1141.91412
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.