Competition, Alignment, and Equilibria in Digital Marketplaces

by   Meena Jagadeesan, et al.

Competition between traditional platforms is known to improve user utility by aligning the platform's actions with user preferences. But to what extent is alignment exhibited in data-driven marketplaces? To study this question from a theoretical perspective, we introduce a duopoly market where platform actions are bandit algorithms and the two platforms compete for user participation. A salient feature of this market is that the quality of recommendations depends on both the bandit algorithm and the amount of data provided by interactions from users. This interdependency between the algorithm performance and the actions of users complicates the structure of market equilibria and their quality in terms of user utility. Our main finding is that competition in this market does not perfectly align market outcomes with user utility. Interestingly, market outcomes exhibit misalignment not only when the platforms have separate data repositories, but also when the platforms have a shared data repository. Nonetheless, the data sharing assumptions impact what mechanism drives misalignment and also affect the specific form of misalignment (e.g. the quality of the best-case and worst-case market outcomes). More broadly, our work illustrates that competition in digital marketplaces has subtle consequences for user utility that merit further investigation.


page 1

page 2

page 3

page 4


Learning Equilibria in Matching Markets from Bandit Feedback

Large-scale, two-sided matching platforms must find market outcomes that...

Competing AI: How does competition feedback affect machine learning?

This papers studies how competition affects machine learning (ML) predic...

Performative Power

We introduce the notion of performative power, which measures the abilit...

Bandit based centralized matching in two-sided markets for peer to peer lending

Sequential fundraising in two sided online platforms enable peer to peer...

Bandit Market Makers

We introduce a modular framework for market making. It combines cost-fun...

Reputation-based Persuasion Platforms

In this paper, we introduce a two-stage Bayesian persuasion model in whi...

Kinetic Market Model: An Evolutionary Algorithm

This research proposes the econophysics kinetic market model as an evolu...

Please sign up or login with your details

Forgot password? Click here to reset