A Model of Biased Intermediation

55 Pages Posted: 30 Aug 2016 Last revised: 19 Aug 2019

See all articles by Alexandre de Corniere

Alexandre de Corniere

Toulouse School of Economics

Greg Taylor

University of Oxford - Oxford Internet Institute

Date Written: August 2016

Abstract

We study situations in which consumers rely on a biased intermediary's advice when choosing among sellers. We introduce the notion that sellers' and consumers' payoffs can be \textit{congruent} or \textit{conflicting}, and show that this has important implications for the effects of bias. Under congruence, the firm benefiting from bias has an incentive to offer a better deal than its rival and consumers can be better-off than under no bias. Under conflict, the favored firm offers lower utility and bias harms consumers. We study various policies for dealing with bias and show that their efficacy also depends on whether the payoffs exhibit congruence or conflict.

Keywords: bias, intermediary, regulation

JEL Classification: D21, L15, L40

Suggested Citation

de Corniere, Alexandre and Taylor, Greg, A Model of Biased Intermediation (August 2016). CEPR Discussion Paper No. DP11457. Available at SSRN: https://ssrn.com/abstract=2831961

Alexandre De Corniere (Contact Author)

Toulouse School of Economics ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Greg Taylor

University of Oxford - Oxford Internet Institute ( email )

1 St. Giles
University of Oxford
Oxford OX1 3PG Oxfordshire, Oxfordshire OX1 3JS
United Kingdom

HOME PAGE: http://www.greg-taylor.co.uk

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