International Cooperation on Financial Market Regulation
Michael Abendschein (University of Osnabrueck)
Harry Gölz (University of Osnabrueck)

Abstract : We investigate the incentives of policy makers to form self-enforcing international financial regulation agreements concerning financial market supervision. We model the cooperation of national regulators in a game-theoretical framework that considers financial stability to be an impure public good. Joint national supervisory effort is supposed to increase aggregate welfare in terms of a more stable financial system both on a global and on a local level by simultaneously generating incentives to free-ride. We apply standard methods from industrial organization in order to determine the number of signatories endogenously and analyze the efficiency of multilateral agreements. Our analysis indicates that partial cooperation is always feasible in equilibrium. However, the welfare gains are relatively small compared to potential gains in the socially optimal situation. These results in general highlight the difficulty of reaching an international supervisory agreement. Further analyses show that the incentives to cooperate are particularly sensitive to the existence of additional club benefits for members of a coalition.

Certification, Reputation and Entry: an Empirical Analysis
Xiang Hui (Washington University)
Maryam Saeedi (Carnegie Mellon University)
Giancarlo Spagnolo (SITE - Stockholm School Economics)
Steven Tadelis (UC Berkeley)

Abstract : Markets often use third-party certification labels to distinguish between higher- and lower-quality sellers, yet little is known about how certification impacts the evolution of markets.We exploit a policy change on eBay to explore how more selective certification affects entryand behavior across many online markets. Entry increases after the policy change and doesso more intensely in markets where more sellers lost certification. The quality distribution ofentrants exhibits fatter tails ex-post and some incumbents increase the quality of their serviceto maintain certification. The results inform the design of certification policies in electronic andother markets.

Platform Competition, the Apple Ebooks Case and the Meaning of Agreement to Fix Prices
Dean Williamson (Economic Design LLC)

Abstract : Looking out on the devastation wrought by the English Civil Wars, political philosophers found themselves contemplating how to harness collective action to obviate problems of collective irrationality. With the advent of competition law more than two centuries later, American courts were situated to take up certain manifestations of collective action: those that obtain from “conspiracy” to restrain trade. Building on the game theory advances of 1950, economists found ways to characterize the governance of antitrust conspiracies as the mechanisms by which conspirators harness collective action among themselves to obviate, or at least mitigate, their own problems of collective irrationality (profit-diminishing competition). Making the effort to characterize the governance of conspiracies can impose structure on the meaning of “agreement” in the antitrust case law to unreasonably restrain trade. From such a governance perspective, however, the district court’s analysis of “agreement” in the Apple eBooks price-fixing case, 952 F.Supp.2d 638 (S.D.N.Y. 2013), would appear to be truncated and underdeveloped to the point of being stillborn.

Crowd-judging
Angela Zhang (University of Hong Kong)
Alex Yang (London Business School)

Abstract : Disputes over transactions on two-sided platforms are common. Traditionally, platforms rely on their customer service or third party service providers to resolve such disputes. In this paper, we study crowd-judging, a novel crowdsourcing mechanism where users (i.e., buyers and sellers) on a two-sided platform volunteer to act as jurors to resolve disputes. While this mechanism improves cost-efficiency and enhances resolution speed, there are concerns that the jurors may exhibit ingroup bias -- that is, buyer jurors favoring the buyer in the dispute and seller jurors favoring the seller. Because the vast majority of users on such platforms are buyers, the existence of such bias could systematically sway the case outcome in favor of the buyers. Using a proprietary dataset from the crowd-judging centre of Taobao, this paper provides the first empirical analysis of crowd-judging, with a focus on quantifying ingroup bias. In our dataset, buyer jurors account for 88 percent of the active jury pool and cast more than 90 percent of votes. Inexperienced jurors exhibit statistical signicant ingroup bias: the probability that seller jurors vote in favor of the seller is approximately 9 percent greater than that of buyer jurors with similar experience. However, such bias disappears among experienced jurors. Under a majority rule system where experienced jurors cast more than 75 percent of the votes, we estimate that ingroup bias could influence the outcomes of at most 12 percent of cases.