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I use an agent-based model (ABM) to study how consumer’s behavior influences prices and how common simplifying assumptions constraints the explanatory power of classical models. I simulate an ABM in which two multi-sided platforms compete for attracting buyers and sellers. I use as a framework a theoretical market model in which the difference among behavioral rules is overestimated because of the “market covered” assumption that is necessary to make the model tractable. Making realistic assumptions about the adoption process point out that the difference among behavioral rules is not so extreme as theory says. I find that assumptions regarding the spread of information, such as the network topology, are more relevant in accounting for price differences than behavioral rules.
Juan Manuel Sánchez-Cartas. Platform Competition and Consumer’s Decisions: An ABM Simulation of Pricing with Different Behavioral Rules. Studies in Computational Intelligence 2021, 189 -198.
AMA StyleJuan Manuel Sánchez-Cartas. Platform Competition and Consumer’s Decisions: An ABM Simulation of Pricing with Different Behavioral Rules. Studies in Computational Intelligence. 2021; ():189-198.
Chicago/Turabian StyleJuan Manuel Sánchez-Cartas. 2021. "Platform Competition and Consumer’s Decisions: An ABM Simulation of Pricing with Different Behavioral Rules." Studies in Computational Intelligence , no. : 189-198.
Algorithmic pricing may lead to more efficient and contestable markets, but high-impact, low-probability events such as terror attacks or heavy storms may lead to price gouging, which may trigger injunctions or get sellers banned from platforms such as Amazon or eBay. This work addresses how such events may impact prices when set by an algorithm and how different markets may be affected. We analyze how to mitigate these high-impact events by paying attention to external (market conditions) and internal (algorithm design) features surrounding the algorithms. We find that both forces may help in partially mitigating price gouging, but it remains unknown which forces or features may lead to complete mitigation.
Juan Sánchez-Cartas; Alberto Tejero; Gonzalo León. Algorithmic Pricing and Price Gouging. Consequences of High-Impact, Low Probability Events. Sustainability 2021, 13, 2542 .
AMA StyleJuan Sánchez-Cartas, Alberto Tejero, Gonzalo León. Algorithmic Pricing and Price Gouging. Consequences of High-Impact, Low Probability Events. Sustainability. 2021; 13 (5):2542.
Chicago/Turabian StyleJuan Sánchez-Cartas; Alberto Tejero; Gonzalo León. 2021. "Algorithmic Pricing and Price Gouging. Consequences of High-Impact, Low Probability Events." Sustainability 13, no. 5: 2542.
Platforms are everywhere. The rise of Uber, Netflix, and Facebook has attracted a lot of attention to this business model. However, despite its relevance and presence in the digital economy, the definition of platforms, their main characteristics, the intuitions about how they set prices, solve coordination issues, or choose their ownership structure seem to be scattered in many papers. This review attempts to organize the last two decades of research on multisided platforms around three essential elements of platforms: price structure, network effects, and control rights. We highlight which definitions are used in the literature, how they are related to the defining characteristics of platforms, and what research has been made on those characteristics. We pay special attention to the research done on pricing, coordination problems, and ownership structure. We conclude by reviewing the theoretical evidence around monopolization and competition policy in multisided markets.
Juan Manuel Sanchez‐Cartas; Gonzalo León. MULTISIDED PLATFORMS AND MARKETS: A SURVEY OF THE THEORETICAL LITERATURE. Journal of Economic Surveys 2021, 35, 452 -487.
AMA StyleJuan Manuel Sanchez‐Cartas, Gonzalo León. MULTISIDED PLATFORMS AND MARKETS: A SURVEY OF THE THEORETICAL LITERATURE. Journal of Economic Surveys. 2021; 35 (2):452-487.
Chicago/Turabian StyleJuan Manuel Sanchez‐Cartas; Gonzalo León. 2021. "MULTISIDED PLATFORMS AND MARKETS: A SURVEY OF THE THEORETICAL LITERATURE." Journal of Economic Surveys 35, no. 2: 452-487.
I study the impact of ad-valorem and unit taxes on the intellectual property policies of two-sided digital platforms. First, I address the monopoly case, in which I show that the effects of taxes depend on which side they are levied on. If developers are taxed, I find that ad-valorem taxes reduce the platform openness and the exclusivity period granted to developers to exploit their innovations. The opposite is true when taxes are levied on users. On the other hand, the effect of unit taxes is ambiguous in general. Then, I extend the model to address the duopoly case, and I find that competition may increase welfare, but it is not guaranteed. The effects of taxes on welfare are similar in both regimes. In general, they are ambiguous, but I characterize those cases which are welfare-enhancing unambiguously. I conclude highlighting the potential impact of the Digital Service Tax (DST) proposed by the European Commission on platform openness and digital innovation in Europe.
Juan Manuel Sánchez-Cartas. Intellectual property and taxation of digital platforms. Journal of Economics 2020, 132, 197 -221.
AMA StyleJuan Manuel Sánchez-Cartas. Intellectual property and taxation of digital platforms. Journal of Economics. 2020; 132 (3):197-221.
Chicago/Turabian StyleJuan Manuel Sánchez-Cartas. 2020. "Intellectual property and taxation of digital platforms." Journal of Economics 132, no. 3: 197-221.
We study the impact of data sharing agreements between two platforms with vertically differentiated consumers. We assume several utility functions to address the impact of those agreements under different market configurations. The results show that the follower always wants to share its network with the leader, while the leader has no incentive to share its network. We also prove that vertical two‐sided markets are quite prone to monopolies. Lastly, we show that regimes in which the leader shares its network are worse than not sharing at all.
Juan-Manuel Sánchez-Cartas; Gonzalo León. Data sharing agreements in vertically differentiated two‐sided markets. International Journal of Economic Theory 2018, 16, 260 -281.
AMA StyleJuan-Manuel Sánchez-Cartas, Gonzalo León. Data sharing agreements in vertically differentiated two‐sided markets. International Journal of Economic Theory. 2018; 16 (3):260-281.
Chicago/Turabian StyleJuan-Manuel Sánchez-Cartas; Gonzalo León. 2018. "Data sharing agreements in vertically differentiated two‐sided markets." International Journal of Economic Theory 16, no. 3: 260-281.
Purpose Simulating markets using agent-based models must consider pricing. However, the strategic nature of prices limits the development of agent-based models with endogenous price competition. Methods I propose an agent-based algorithm based on Game Theory that allows us to simulate the pricing in different markets. I test the algorithm in five theoretical economic models from the industrial organization literature. Results In all cases, the algorithm is capable of simulating the optimal pricing of those markets. It is also tested in two more cases: one in which the original work fails to predict the optimal outcome, and another one that is quite complex to solve analytically. Lastly, I present two potential extensions of this algorithm: one dynamic, and another one based on quantity competition. Conclusions This algorithm opens the door to the extensive inclusion of pricing in agent-based models, but also, it helps to establish a link between the industrial organization literature and the agent-based modeling.
Juan Manuel Sanchez-Cartas. Agent-based models and industrial organization theory. A price-competition algorithm for agent-based models based on Game Theory. Complex Adaptive Systems Modeling 2018, 6, 2 .
AMA StyleJuan Manuel Sanchez-Cartas. Agent-based models and industrial organization theory. A price-competition algorithm for agent-based models based on Game Theory. Complex Adaptive Systems Modeling. 2018; 6 (1):2.
Chicago/Turabian StyleJuan Manuel Sanchez-Cartas. 2018. "Agent-based models and industrial organization theory. A price-competition algorithm for agent-based models based on Game Theory." Complex Adaptive Systems Modeling 6, no. 1: 2.
We simulate the diffusion of products and technologies using an agent-based model that considers rational users and companies. We simulate two theoretical markets that represent the launching of a digital device and the launching of a digital platform. We find that consumers’ heterogeneity and information spread are key in determining prices and the adoption of technologies/products. We find highly differentiated markets reach lower adoption levels. Also, when companies cooperate in spreading information, markets reach higher adoption levels. Lastly, we find that highly differentiated markets are prone to failure.
Juan Manuel Sanchez-Cartas; Gonzalo Leon. On Simulating the Adoption of New Products in Markets with Rational Users and Companies. Communications in Computer and Information Science 2017, 83 -94.
AMA StyleJuan Manuel Sanchez-Cartas, Gonzalo Leon. On Simulating the Adoption of New Products in Markets with Rational Users and Companies. Communications in Computer and Information Science. 2017; ():83-94.
Chicago/Turabian StyleJuan Manuel Sanchez-Cartas; Gonzalo Leon. 2017. "On Simulating the Adoption of New Products in Markets with Rational Users and Companies." Communications in Computer and Information Science , no. : 83-94.