The seminar will be held digitally on Tuesday April 27, 2021.
Abstract: A third party developer designs and sells a pricing algorithm that enhances a firm's ability to tailor prices to a source of demand variation, whether high-frequency demand shocks or market segmentation. The equilibrium pricing algorithm is characterized that maximizes the third party's profit given firms' optimal adoption decisions. Outsourcing the pricing algorithm makes price more sensitive to this demand variation, and this is shown to decrease consumer welfare and increase industry profit. This effect is larger when products are more substitutable.
If you are not a member of the CBE research group but would like to attend the seminar, please send an email to the seminar organizers Mateusz Mysliwski or Øyvind Thommasen.