The Design of Monopoly Information Broker

Abstract: An information broker incentivizes consumers to share their information, while designing an information structure to shape the market segmentation. The information broker is a metaphor for an Internet platform that matches consumers with retailers. We are interested in a market with heterogeneous retailers and heterogeneous consumers. The optimal broking mechanism consists of a simple threshold-based structure where consumers with strong preferences are assigned to the efficient retailer while consumers with weaker preferences are assigned to the inefficient retailer stochastically. Our analysis suggests that the privacy protection policy may have a stronger impact on less competitive retail markets.