Wiley: The RAND Journal of Economics: Table of Contents

Buyer‐Optimal Platform Design

Daniele Condorelli, Balazs Szentes — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

A platform matches a unit mass of sellers, each owning a single product of heterogeneous quality, to a unit mass of buyers with differing valuations for unit-quality. After matching, sellers make take-it-or-leave-it price-offers to buyers. Initially, valuations of buyers are only known to them and the platform, but sellers make inferences from the matching algorithm. The efficient matching is positive assortative, but buyer-optimal matchings are stochastically negative assortative when there are few low-value buyers (i.e., compared to lower-quality sellers, high-quality ones are matched to buyers with lower expected valuation). Although everyone trades, generating rents for the side lacking bargaining power results in inefficient matching.

The Political Economy of Patent Buyouts

Amal Ahmad, Dominik Naeher, Sebastian Vollmer — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

Incentivizing innovation through buyouts may alleviate the social costs associated with patent power, but the political economy and feasibility of this potentially important financing mechanism have been understudied. We study an international setting of countries with different innovation and financing capabilities, and where financing governments rely on taxes to fund buyouts and care about the electoral popularity of their decisions. Subsequent distributional conflict arises between countries as some may benefit from the now-public knowledge without contributing equally to financing, whereas taxpayers within a country may disagree over the desired extent of tax financing for buyouts. We show that these conflicts reduce the feasibility of buyouts relative to patents, identify the conditions under which this harms global welfare, and discuss possibilities for overcoming these constraints. The international public good and public financing dimensions of buyouts emerge as essential for understanding their potential to supplant patents and to improve social welfare.

Why Is Exclusivity in Broadcasting Rights Prevalent and Why Does Simple Regulation Fail?

David Martimort, Jerome Pouyet — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

Pay-TV firms compete both downstream to attract viewers and upstream to acquire broadcasting rights. Because profits inherited from downstream competition satisfy a convexity property, allocating rights to the dominant firm maximizes the industry profit. Such an exclusive allocation of rights emerges as a robust equilibrium outcome but may fail to maximize welfare. We analyze whether a ban on resale and a ban on package bidding may improve welfare. These corrective policies have no impact on the final allocation but lead to profit redistribution along the value chain.

Strategic Trading and Blockholder Dynamics

Iván Marinovic, Felipe Varas — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

We study strategic trading by a privately informed blockholder who monitors a company and trades its shares. Private information results in larger block sizes in good states, but by increasing the speed of the blockholder's selling, it can result in lower block sizes in bad states. Despite the heterogeneous impact on expected block size, we show that asymmetric information leads to Pareto improvements: it raises stock prices, benefits small uninformed shareholders, and benefits the block owner, despite the negative impact on liquidity.

Dynamic Pricing With Recommendation and Consumer Feedback

Wenji Xu, Shuoguang Yang — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

A long-lived seller sells a new product of unknown value by offering prices and recommendations to short-lived consumers in continuous time. The seller receives consumer feedback about the product at a rate that increases with the instantaneous sales volume. The optimal selling mechanism features episodes of price discounts, during which the seller discontinuously lowers the price and offers unwarranted recommendations to consumers. The optimal pricing strategy depends on the nature of consumer feedback and may involve early or late discounts, dynamic price backtracking, and below-cost pricing.

Acquisitions, Innovation and the Entrenchment of Monopoly

Vincenzo Denicolò, Michele Polo — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

We analyze a dynamic model of repeated innovation where inventors may either be acquired by an incumbent or else resist takeover and challenge for leadership. In the short run, acquisitions always spur innovation because of the invention-for-buyout effect. In the longer run, however, they may stifle it because of a countervailing effect, the entrenchment of monopoly. The latter occurs when the incumbent's dominance depends on past levels of activity and is therefore reinforced by recurrent acquisitions. We show that if the entrenchment effect is sufficiently strong, forward-looking policymakers should prohibit acquisitions in anticipation of the long-run negative impact on innovation. This argument sets out a new theory of harm that can be used to block acquisitions that could otherwise go unchallenged.

Strategic Influencers and the Shaping of Beliefs

Akhil Vohra — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

Influencers, from propagandists to sellers, expend vast resources targeting agents who amplify their message through word-of-mouth communication. While agents differ in network position, they also differ in their bias: Agents may naturally read articles with a particular slant or buy products from a certain seller. Absent competition, an influencer prefers targeting central agents and those biased against it. If agents are unbiased, competition leads to influencers targeting more central agents. However, when agents have heterogeneous biases and competition is intense, the incentive to deter one's rival dominates. Influencers protect their base, targeting those with similar beliefs in equilibrium.

On the Optimality of Full Disclosure

Emiliano Catonini, Sergey Stepanov — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

A privately informed sender can commit to any disclosure policy toward a receiver, whose actions affect the utility of the sender. We show that full disclosure is optimal under a sufficient condition with some desirable properties. First, it speaks directly to the parties' utility functions, as opposed to the sender's indirect utility function; this makes it easily interpretable and verifiable. Second, it does not require the sender's payoff to be a function of the posterior mean state. Third, it is weaker than the conditions obtained in the literature for some specific settings.

Storage games

Sergei Balakin, Guillaume Roger — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

We study a long-horizon, oligopolistic market with random shocks to demand that can be arbitraged by two storage operators with finite capacity. This problem applies to any storable commodity—that is, most commodities. Because the arbitrage spread is so sensitive to market power, storage operators face strong incentives to restrain quantities by tacitly colluding. This cooperation takes new forms thanks to the multiplicity of actions they must take: selling, buying, or both. We construct payoff-maximizing equilibria of this stochastic game, and uncover a new form of Partial Cooperation that trades off quantities and delay. While collusive, Partial Cooperation delivers higher consumer surplus thanks to the market power effect. Head-on competition is not always an equilibrium of the long-horizon game when market power becomes large enough. We draw implications for policy and suggest poorly competitive storage is a negative externality to the development of the underlying commodity—for example, renewable energy.

Inflated Recommendations

Martin Peitz, Anton Sobolev — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

Biased recommendations arise naturally in markets with heterogeneous consumers. We study a model in which a monopolist offers an experience good to a population of consumers with heterogeneous tastes and makes personalized purchase recommendations. We provide conditions under which a firm makes welfare-reducing purchase recommendations with positive probability, resulting in inflated recommendations. We extend this insight to a setting in which an intermediary makes the recommendations, whereas a seller sets the retail price. Regulatory interventions that forbid inflated recommendations may lead to higher social welfare or may backfire.

Physicians as Persuaders: Evidence from Hospitals in China

Jia Xiang — Tue, 12 May 2026 22:15:16 -0700

ABSTRACT

I estimate a Bayesian persuasion model to examine how financial incentives and asymmetric information shape physician–patient interactions. This approach offers new insights into the role of insurance. First, the model predicts that patients' coinsurance moderates physicians' responsiveness to increases in service fees. This prediction is supported by a difference-in-differences analysis using Chinese health insurance claims data with random variation in physicians' reimbursement and patients' coinsurance rates. Second, the model implies that lower coinsurance rates reduce both patient price elasticity and skepticism, increasing the likelihood of physicians misdirecting patients toward unnecessary treatments. Using structural model estimates, I show that for a diagnosis where surgical treatment is discretionary, nearly half of the patients who received surgery would not have done so were they fully informed. Such misdirection from physicians is greater when coinsurance rates decrease, highlighting a new inefficiency channel beyond moral hazard. I decompose the effect of lowering coinsurance into moral hazard and the novel greater misdirection effect. Counterfactual analysis shows that, while patients benefit from lower out-of-pocket costs, greater misdirection nearly offsets these welfare gains.

Issue Information

Tue, 12 May 2026 22:15:16 -0700

The RAND Journal of Economics, Volume 57, Issue 2, Page 269-270, Summer 2026.

Demand Estimation with Text and Image Data

Giovanni Compiani, Ilya Morozov, Stephan Seiler — Mon, 23 Mar 2026 21:44:55 -0700

ABSTRACT

We propose a demand estimation approach that leverages unstructured data to infer substitution patterns. Using pre-trained deep learning models, we extract embeddings from product images and textual descriptions and incorporate them into a mixed logit demand model. This approach enables demand estimation even when researchers lack data on product attributes or when consumers value hard-to-quantify attributes such as visual design. Using a choice experiment, we show this approach substantially outperforms standard attribute-based models at counterfactual predictions of second choices. We also apply it to 40 product categories offered on Amazon.com and consistently find that unstructured data are informative about substitution patterns.

Consumer‐Minded Informational Intermediary and Welfare Losses

Wenji Xu, Kai Hao Yang — Tue, 17 Mar 2026 22:01:04 -0700

ABSTRACT

This article examines the welfare implications of third-party informational intermediation. A seller sets the price of a product that is sold through an intermediary, who discloses information about the product to consumers. In a model where the intermediary is consumer-minded—has a payoff that depends on both the seller's revenue and the consumer surplus, we show that total welfare may decrease in the Pareto sense, as the intermediary's consumer-mindedness increases. Furthermore, we show that consumer-mindedness emerges endogenously when a revenue-maximizing intermediary is forward-looking and the consumer base is increasing in past consumer surplus.

Full Discretion is Inevitable

Wenhao Li — Tue, 17 Mar 2026 21:56:10 -0700

ABSTRACT

This article studies a dynamic project-selection game between a Principal and an Agent with conflicting interests. Only the Agent knows what projects are feasible. In each period before a project is selected, the Principal imposes a restriction set. The Agent can select any feasible project within this set, thereby ending the game. The Agent can also stay silent, in which case the game will proceed to the next period. Importantly, the Principal cannot commit to her future restriction sets. I show that when the Agent is sufficiently patient, the Principal fully delegates to the Agent in the unique equilibrium.

Network Structure and the Efficiency Gains from Mergers: Evidence from U.S. Freight Railroads

Yanyou Chen — Tue, 17 Mar 2026 21:52:03 -0700

ABSTRACT

The trade-off between market power and efficiency gains is central to antitrust analyses of mergers, but empirical evidence quantifying efficiencies remains limited. Using transaction-level data from U.S. freight railroads (1985–2005), this article quantifies merger-induced cost efficiencies, driven mainly by eliminating inter-railroad interchange costs and reoptimization of routing and resource allocation within integrated networks. I develop a spatial equilibrium model with oligopolistic competition to assess equilibrium merger effects. Counterfactual analyses show mergers reduce shipment costs by 12.9% and prices by 8.8%. Markups increase by 7.2%, driven primarily by non-merging firms reallocating resources away from regions where merged firms achieve large cost reductions.