The Value of Intermediation

This project examines the applicability of random order values, and more specifically, the Shapley value to the problem of modeling bargaining in a setting with one indispensable player and a large number of smaller, non-indispensable players. The project is motivated by platform economies, but the results are applicable to a wide range of settings.

Papers

• The value of being indispensable: a cooperative approach to bargaining with a continuum of players
  This paper investigates the idea of using random order values, a concept from cooperative game theory, to model bargaining outcomes in games with one indispensable player and a continuum of fringe players. Two important special cases of random order values are discussed in detail: the Shapley value and the weighted value. I show that this approach proves to be very tractable, and leads to results that are in line with one's intuitive expectations about bargaining outcomes. Thus, it can be a useful tool in modelling situations where one does not want to attribute all the bargaining power to one side of the market, and at the same time would like to avoid having to deal with an explicit multi-stage bargaining game. The utility of this approach is demonstrated via a simple model of a two-sided market.
• Hybrid platforms and bargaining power
  This paper explores the effects of a platform selling their own products in addition to acting as intermediaries (hybrid platform) in a setting when bargaining takes place between the platform and the potential entrants. It highlights a so-far underappreciated aspect of hybrid platforms: having their own products increases their bargaining power over the other sellers. This change in bargaining might lead to lower entry, and thus reduced product variety which in turn can have negative welfare consequences for the consumers. The results and methods described in this paper are also applicable to other similar settings, such as vertical integration with a monopolistic upstream supplier.

Presentations

• Fourth year seminar talk (2022): A presentation for the Fourth Year Seminar at UZH (focus on theory)
• Topics in Micro presentation (2022): A talk at the Topics in Micro seminar at UZH (focus on theory)
• Topics in Micro presentation (2023): A talk at the Topics in Micro seminar at UZH (focus on application)
• Swiss IO day presentation (2023): A presentation for the Swiss IO day, 2023 (focus on application)

Source code

The source code for generating the papers and presentations are available at the stanmart/ValueOfIntermediation GitHub repository.