Essays on the role of information

Resumen

My Ph.D. thesis consists of three chapters on Information Economics in which I explore the consequences of the lack of information in the decision-making process of the agents. In the first Chapter, I present a monopoly model of two periods with risk-averse consumers. The quality of the product is uncertain for all the agents in the first period and the switching costs arise endogenously because of the faced risk. When the consumers learn the quality in the second period, two e ects take place: first, the uncertainty disappears and the willingness to pay increases; and second, the true quality is revealed and the willingness to pay reacts consequently (it increases for high qualities and decreases for low qualities). When the consumers do not learn the quality in the second period, the uncertainty keeps being penalized. The model predicts that the bargain-then ripo pattern of prices can be reversed for su ciently low realizations of the quality, and that the rst-period price set in the presence of switching costs is always lower than the first-period price set in a market without switching costs. In the second Chapter, I extend the previous set-up to a duopoly market. One of the fi rms is known to o ffer a product of quality zero, whereas the quality of the product supplied by the other firm is uncertain but larger than zero in expected terms. The two e ffects described in the monopoly case when the consumers learn the quality still take place. However, in this model the consumers have two pieces of information (the prices of the two fi rms) to infer the uncertain quality in the second period if they did not gather the information through direct experience. The predictions of the model di ffer from those of the monopoly case. First, the bargain-thenripoff pattern of prices can be reversed but not for the two rms simultaneously. Second, the most relevant result is that the average price in the fi rst period can be larger in the presence of switching costs than in their absence, contrary to the conventional wisdom. This result happens because, given the expected quality, the firm that off ers the riskless product has a competitive advantage in the fi rst period when consumers are su fficiently risk averse that does not exist when consumers are risk neutral. It may happen that its rival cannot compensate completely this advantage through a price decrease because negative prices are not allowed. In the third Chapter, I construct a model to analyze the e ffect of the piracy in the music industry in a situation with initial copyrights. I assume a for-proffi t platform and an open platform, two consumers who are heterogeneous in their willingness to pay for the tracks, and two artists that may be heterogeneous in their popularity (famous or unknown). The artists obtain their proffi ts from both the sale of tracks and the attendance to concerts. These two businesses are related in a very particular way if the artist is unknown: a consumer will decide about attending or not to the concert only if she has learned about the existence of the artist in advance by listening to his tracks. Then, the introduction of piracy has two e ffects: the prices charged by the for-pro fit platform decrease, but the unknown artists always obtain the maximal degree of di usion (the famous artists had it without piracy too). I find that the total surplus does not decrease with piracy if the revenues from concerts are included in the negotiation process between the artist and the for-profi t platform, but it may decrease if the parties only share the revenues from the tracks. Also, the for-profi t platform and the famous artists are always damaged by piracy, although the consumers and the unknown artists may be better off .