Three Essays on How Product or Social Information Increases Efficiency
Song, Zhewei
2023
Abstract
This dissertation includes three essays on how product or social information increases efficiency. Chapter 1 is an overview. Chapter 2 and Chapter 3 investigate how information about product or service quality affects market efficiency. Chapter 4 discusses how information about an individual’s social position influences her tendency to maximize the welfare of her social group. Chapter 5 concludes. Chapter 2 examines the inefficiency problem in credence goods markets caused by sellers’ provision of service with unnecessarily high costs and buyers’ excessive requests for compensation after service failure. I investigate whether this market inefficiency can be alleviated through a reputation system and/or a behavioral nudge. I show that when there is a reputation system which makes sellers’ action history and buyers’ reactions publicly visible, there exists a perfect public equilibrium in which the seller and buyer frequently play the Pareto-efficient strategy profile. I also predict that a behavioral nudge, which makes salient the Pareto-efficient outcome, encourages them to play the Pareto-efficient strategy profile. My laboratory experiment results show that buyers are significantly less likely to request compensation when the reputation system is introduced. When both the reputation system and the nudge are present, sellers are significantly less likely to provide service with excessively high costs in the late stage of the game, and market efficiency is weakly improved. Chapter 3 focuses on markets where reliable information about product qualities is not available to buyers. In such markets, only a product quality testing organization has expertise in finding out and revealing true qualities of products to buyers. However, the testing organization often has a limited testing capacity, and many existing testing mechanisms are unable to provide quality information of products that are most preferred by buyers. We design a product testing mechanism which not only makes full use of the limited testing capacity to only provide quality information of the best and cheapest products in the market, but also incentivizes enough sellers to produce products with high qualities and at a price equal to the marginal cost. Our experimental results show that the consumer surplus is significantly improved when the testing organization uses our proposed mechanism. In Chapter 4, we test whether “we-thinking”, group-regarding behavior in the presence of an individual-group tradeoff, is predicted by a specific relationship between group- and self-esteem. We define group- and self-esteem as having positive feelings about the relative performance of one’s group and self. We proxy for group-esteem and self-esteem using rank-based measures and self-reported measures. We find that subjects’ self-reported group-esteem (self-reported self-esteem) is significantly positively (negatively) correlated with engagement in “we-thinking”. We also find that individual rank is significantly negatively correlated with engagement in “we-thinking” when group rank is high.Deep Blue DOI
Subjects
product information social information efficiency
Types
Thesis
Metadata
Show full item recordCollections
Remediation of Harmful Language
The University of Michigan Library aims to describe library materials in a way that respects the people and communities who create, use, and are represented in our collections. Report harmful or offensive language in catalog records, finding aids, or elsewhere in our collections anonymously through our metadata feedback form. More information at Remediation of Harmful Language.
Accessibility
If you are unable to use this file in its current format, please select the Contact Us link and we can modify it to make it more accessible to you.