Luca Sandrini and Robert Somogyi’s project awarded a NET Institute Summer Grant

News Media Bargaining Codes, Luca Sandrini and Robert Somogyi’s joint project, was awarded a NET Institute Summer Grant.

The project investigates the welfare effects of a policy intervention that mandates digital platforms (notably Facebook and Google) to negotiate compensation with news publishers for the excessive loss in advertising revenues that the latter are experiencing. By introducing the News Media and Digital Platforms Mandatory Bargaining Code, the Australian government was the first to legislate such a policy. This research project aims to understand the effect of such regulations on consumers and news quality. The analysis distinguishes two main scenarios. First, if the news quality is insensitive to the policy (news publishers do not adjust their investments upon receiving a transfer), the codes increase welfare and never harm consumers. Second, a poorly designed transfer can be inefficient if news publishers set news quality endogenously. However, even an inefficient policy never harms consumers. Furthermore, the research provides some guidance on designing an efficient transfer scheme.

The first draft of the paper analyzing these issues will be available in the Fall as a NET Institute Working Paper. The NET Institute funds a number of scientific research projects in the area of network industries, including wired and wireless networks, “virtual networks,” electronic commerce, telecommunications, the Internet, platforms, and two-sided markets. It is expected that funded research will eventually be published in top academic research journals. The NET Institute’s board of directors consists of:

23 February: Maya Jalloul (QSMS seminar)

Presenting “Narrative adoption and strategic timing of disclosure?” at 16:00-17:30 online: Click here to join the meeting

On 23 February 2022, we have Maya Jalloul of Lebanese American University visiting us. She is going to give a seminar on “Narrative adoption and strategic timing of disclosure.” at 16:00 online Click here to join the meeting. Please help the organisers by registering in advance at Registration is free. Event can only be attended with vaccination card.

Abstract: This paper investigates a model with two strategic politicians, a proponent and an opponent, and a group of non-strategic voters. The proponent, who is the first mover, has a narrative that she aims to convey to the voters; whereas the opponent’s objective is to divert the voters away from it. The strategic decision of the proponent is when to disclose her narrative with the objective to maximise the adoption of this narrative by a deadline, and that of the opponent is when to disclose the refutation. The voters opinions updating rule follows an average-based De Groot learning concept where a voter splits his attention between the two politicians, his own opinion and his neighbours. We show that once the proponent discloses her narrative, it is optimal for the opponent to disclose her refutation, and that the proponent faces a trade-off between early and late disclosure. We determine the optimal timing of disclosure for the cases of one voter and a group of voters and we examine connections among voters over a specific set of networks, while considering two types of voters, supporters and non-supporters. We also investigate the impact of homophily on timing of disclosure and we find that with higher homophily, the narrative adoption of the supporter is higher and that of the non-supporter is lower.

22 February: Christopher P. Stapenhurst (QSMS seminar)

Presenting “Can Media Pluralism Be Harmful to News Quality?” at 16:00-17:30 QA 406

On 22 February 2022, we have Chistopher P. Stapenhurst of University of Edinburgh visiting us. He is going to give a seminar on “Lemons by design: sowing secrets that curb corruption” (with Andrew Clausen) at 16:00 in room QA406. Please help the organisers by registering in advance at Registration is free. Event can only be attended with vaccination card.

Abstract: We study a problem in which a polluting firm can bribe an inspector to conceal evidence of illegal behaviour. We find that the best way to deter bribes involves paying secret rewards and sending secret clues. The regulator promises to pay a secret reward to either the firm or the inspector when evidence is reported; it then gives them different clues about who will be rewarded. These clues are carefully constructed to engineer the worst possible lemons problem in the market for concealment: each player only wants to conceal evidence if they believe that the other player is more optimistic about being rewarded. But they cannot both be more optimistic in equilibrium, so no concealment takes place. As well as deterring bribes cheaply, this scheme demonstrates the full extent of contagious adverse selection in a bilateral trade environment.

8 February: Giovanni Andreottola (QSMS Seminar)

Presenting “Polarization and Policy Design” at 16:00-17:30 in QA406.

On 8 February 2022, we have Giovanni Andreottola of University of Naples visiting us. He is going to give a seminar on “Polarization and Policy Design” at 16:00 in room A406 in Building Q, Budapest University of Technology and Economics, Faculty of Economic and Social Sciences, Magyar tudósok körútja 2, 1117 Budapest. Please help the organisers by registering in advance at Registration is free. Event can only be attended with vaccination card.

Abstract: Voters in the U.S. and elsewhere have become highly polarized. How does this impact policymaking? We build a model to examine this question in the context of distributive politics and find that polarization can have a non-monotonic effect on equity. Political turnover and the inter-temporal resolution of policy uncertainty play key roles for this result. The implications of alternative electoral systems are also examined: contrary to conventional
wisdom, proportional systems may exacerbate partisan policymaking compared to majoritarian systems.

Számadó’s paper in Scientific Reports

The paper “Scarce and directly beneficial reputations support cooperation” by Szabolcs Számadó (joint with Flóra Samu and Károly Takács) has been published recently in Scientific Reports.

A human solution to the problem of cooperation is the maintenance of informal reputation hierarchies. Reputational information contributes to cooperation by providing guidelines about previous group-beneficial or free-rider behaviour in social dilemma interactions. How reputation information could be credible, however, remains a puzzle. We test two potential safeguards to ensure credibility: (i) reputation is a scarce resource and (ii) it is not earned for direct benefits. We test these solutions in a laboratory experiment in which participants played two-person Prisoner’s Dilemma games without partner selection, could observe some other interactions, and could communicate reputational information about possible opponents to each other. Reputational information clearly influenced cooperation decisions. Although cooperation was not sustained at a high level in any of the conditions, the possibility of exchanging third-party information was able to temporarily increase the level of strategic cooperation when reputation was a scarce resource and reputational scores were directly translated into monetary benefits. We found that competition for monetary rewards or unrestricted non-monetary reputational rewards helped the reputation system to be informative. Finally, we found that high reputational scores are reinforced further as they are rewarded with positive messages, and positive gossip was leading to higher reputations.

Somogyi’s paper in the International Journal of Industrial Organization

The paper “Prioritization vs zero-rating: Discrimination on the internet” by Robert Somogyi (joint with Axel Gautier) has been published recently in the International Journal of Industrial Organization.

Click here for free access to the article until Nov 15th.

The authors compare two business practices on the mobile internet market, paid prioritization and zero-rating. These practices are tools for the internet service provider (ISP) to alter competition on the content market. Both violate the principle of net neutrality, but the paper shows that their effects on consumer welfare are fairly different. In particular, it finds that a policy banning prioritization (a policy currently followed by the EU and also the US until 2016) can lead to zero-rating (if allowed) and a reduction in consumer surplus. Finally, the paper also shows that despite the fears of net neutrality advocates about excluding lawful content, the ISP can extract more surplus from consumers by privileging the relatively weaker content, at least when asymmetry between content types is limited.