Abstract: We propose a model of intermediated digital markets where data and heterogeneity in tastes and products are deÖning features. A monopolist platform uses superior data to match consumers and multiproduct advertisers. Consumers have heterogenous preferences for the advertisersíproduct lines and shop on- or o§-platform. The platform monetizes its data by selling targeted advertising space that allows advertisers to tailor their products to each consumerís preferences. We derive the equilibrium product lines and advertising prices. We identify search costs and informational advantages as two sources of the platformís bargaining power. We show that privacy-enhancing data-governance rules, such as those corresponding to federated learning, can lead to welfare gains for the consumers.
If you would like to be added to the distribution list or for further details regarding this seminar, please contact Erik Madsen at email@example.com
FAS Microeconomics Theory Seminar Series