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While millions of products are sold on its retail platform, Amazon.com itself stocks and sells only a very small fraction of them. Most of these products are sold by third-party sellers who pay Amazon a fee for each unit sold. Empirical evidence clearly suggests that Amazon tends to sell high-demand products and leave long-tail products for independent sellers to offer. We investigate how a platform owner such as Amazon, facing ex ante demand uncertainty, may strategically learn from these sellers' early sales which of the \"mid-tail\" products are worthwhile for its direct selling and which are best left for others to sell. The platform owner's \"cherry-picking\" of the successful products, however, gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level (unobserved by the platform owner). We analyze this strategic interaction between a platform owner and an independent seller using a game-theoretic model with two types of sellers-one with high demand and one with low demand. We show that it may not always be optimal for the platform owner to identify the seller's demand. Interestingly, the platform owner may be worse off by retaining its option to sell the independent seller's product, whereas both types of sellers may benefit from the platform owner's threat of entry. The platform owner's entry option may reduce consumer surplus in the early period, although it increases consumer surplus in the later period. We also investigate how consumer reviews influence the market outcome.

This paper is about an Old Indian judicial institution called paṇa (“wager”). Within a court proceeding, a judicial wager is a certain sum of money that a conflicting party offers to pay if he ends up losing his case. This paper explains the rationale of judicial wagers by showing that they may signal truthfulness.

We consider the set-up of a Japanese–English auction with exogenously fixed discrete bid levels for a specific game (the wallet game with two bidders, following Gonçalves and Ray in Econ Lett 159:177–179, 2017). We show that in this auction, partition equilibria exist that may be separating or pooling. We illustrate separating and pooling equilibria in games with two and three discrete bid levels and compare the revenues of the seller from these equilibria to find the optimal bid levels for these cases.

Information concerning carbon reduction efficiency is of great significance to supply chain operations. Considering the impact of information asymmetry on the performance of low-carbon supply chain, we therefore analyze a chain system with a single product designer and a single manufacturer. The manufacturer owns information on carbon reduction efficiency, whereas the product designer only knows that the carbon reduction efficiency of the manufacturer is either high or low. To induce the manufacturer to reveal his true private information of carbon-reduction efficiency to the product designer, we devise the pooling and separating equilibrium models to compare the impacts of these two models on supply chain performance, respectively. We find that the high-efficiency manufacturer gets his first-best choice at the equilibrium decision in the separating model, and obtains the information rent in the pooling model. The information rent increases in the efficiency difference between the two emission-reduction types. Additionally, we examine how the probability of the high (or low)-efficiency manufacturer being chosen impacts on both the profits of chain members and carbon-reduction levels. The research provides a reference for companies about how to cooperate with partner who possess private information of carbon emissions.

In this article, we present a two-period model in which one firm operates in two markets: a monopoly and a duopoly. Assuming that this firm has private information on the cross-price elasticity of demand between the products sold in both markets, it limits its quantity supplied in the monopoly market in order to make its rival in the other market believe that entry into the monopolized market is unprofitable. As a result of this strategy, the average prices observed in both markets increase. This result suggests that the detrimental effects of entry deterrence on consumers' welfare are stronger than those predicted by previous literature.

Expectations play a significant role in determining customer perceptions and satisfaction. Accordingly, retailers seek to manage customers’ service expectations. However, the tangible signals of service quality that are available to brick-and-mortar retailers (such as location, store appearance, and salespersons’ behavior) may not be available in online markets. Using a signaling model, we obtain conditions when Internet retailers (e-tailers) use price to manage their customers’ service expectations. In contrast to extant theory, we find that it is possible for both low and high service e-tailers to use price in signaling their service levels. Further, we develop an appropriate deductive test of our theory based on price-ending patterns as an artifact of the signaling process. Based on this test, we find evidence that e-tailers indeed manage service expectations using price. Interestingly, we also find preliminary evidence that suggests customers implicitly associate price-ending patterns with a retailer's expected service level. We discuss several other implications of our findings for researchers and managers.

Aposematic prey use conspicuous warning signals to advertise their defenses to predators. It has long been recognized that the efficiency of a warning signal may be reduced if poorly defended prey (automimics) are present in the population. The handicap principle suggests that the use of warning signals by poorly defended prey may be kept in check if signaling is costly. Three mechanisms that involve signal costs have been proposed to facilitate honest warning signals in prey: go-slow behavior in predators, resource allocation trade-offs, and costs of detection alone. We study all three in a unified game-theoretical framework. We find that the go-slow mechanism and the resource allocation mechanism can introduce differential benefits and differential costs of signaling, respectively, and can support honest signaling in accordance with the handicap principle. When honest signaling is maintained by the go-slow mechanism, conspicuous prey will necessarily suffer more attacks on average than cryptic prey. In contrast, when honest signaling is maintained by the resource allocation mechanism, cryptic prey will suffer more attacks. The detection cost mechanism lacks differential costs and benefits, and its potential for maintaining honest signaling equilibria is limited. We relate our results to intra- and interspecific correlations between conspicuousness and defense.

En este artículo exploramos un enfoque diferente para el modelado de una cadena de suministro desde la perspectiva de la teoría de juegos. En particular, explicamos una cadena de suministro de dos escalones y un solo canal bajo supuestos comunes a través de un juego de señales con la estructura clásica. Probamos que, en nuestro primer enfoque, existen varias maneras racionales de actuar que conducen a los agentes a equilibrios del juego, sin embargo, la mayoría de estas estrategias no implican necesariamente un comportamiento de cooperación entre los agentes. Posteriormente, proponemos algunas modificaciones a los supuestos originales que nos permiten obtener un equilibrio único que además garantiza la cooperación entre los agentes favoreciendo la calidad en el intercambio de información

Purpose The purpose of this paper is to show that outsourcing can occur as outcome of a separating or pooling perfect Bayesian equilibrium although it is not profitable under complete information. Therefore, asymmetric information can itself be a reason for outsourcing. Design/methodology/approach The present paper constructs a model of two firms interacting in the product market under asymmetric information where one firm has private information about its technological capability, and it has the option to produce inputs in-house or buy inputs from an input market. However, using outsourced inputs involves a fixed cost at the plant level. The model solves for perfect Bayesian equilibrium. Findings There are situations when under complete information, outsourcing of the input will not occur, but, under incomplete information, either only the low-cost type or both high and low-cost types will go for outsourcing, and there always exist reasonable beliefs supporting these equilibria. In particular, when the fixed cost is neither too small not too large, a separating equilibrium occurs in which the low-cost type outsources inputs from the input market but the high-cost type produces in-house; hence, outsourcing signals the firm’s type. Outsourcing by only the high-cost type firm will never occur in equilibrium. Originality/value That incomplete or asymmetric information can itself be a reason for strategic outsourcing is never identified in the literature. The present paper is an attempt to fill this gap and raise the issue of outsourcing in an incomplete information environment.

Baldenius and Meng (Rev Account Stud, 2010 ) use a signaling model to study the economic effects of active investors to whom the founder of a firm wants to sell shares. This discussion considers the model structure, the main results and the economics behind them, and the key assumptions that drive these results. It also comments on signaling models in general, the use of additional signals, and the ability of the results to derive predictions.