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A Model of Biased Intermediation

Author

Listed:
  • de Cornière, Alexandre
  • Taylor, Greg
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.

Suggested Citation

  • de Cornière, Alexandre & Taylor, Greg, 2016. "A Model of Biased Intermediation," CEPR Discussion Papers 11457, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11457
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    References listed on IDEAS

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    More about this item

    Keywords

    Intermediary; Bias; Regulation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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