We envision a future in which the global economy and the Internet will merge and evolve together into an information economy bustling with billions of economically motivated software agents that exchange information goods and services with humans and other agents. Economic software agents will differ in important ways from their human counterparts, and these differences may have significant beneficial or harmful effects upon the global economy. It is therefore important to consider the economic incentives and behaviors of economic software agents, and to use every available means to anticipate their collective interactions. We survey research conducted by the Information Economies group at IBM Research aimed at understanding collective interactions among agents that dynamically price information goods or services. In particular, we study the potential impact of widespread shopbot usage on prices, the price dynamics that may ensue from various mixtures of automated pricing ...

The Internet has the potential to significantly reduce search costs by allowing consumers to engage in low-cost price comparisons online. This paper provides empirical evidence that the rise of Internet comparison sites for life insurance has had a major impact on prices in the 1990s. Using micro data on life insurance policies, the results indicate that, controlling for individual and policy characteristics, a 10 percent increase in the share of individuals using the Internet reduced average prices for the group by up to 5 percent. Rising Internet usage does not lower prices for policies types that are not covered by the websites nor does it appear to lower prices in the period before the insurance sites came online. Overall growth of the Internet has reduced term life prices by 8 to 15 percent and increased consumer surplus by at least $115-215 million per year and perhaps as much as $1 billion. The results also show that the introduction of the Internet search sites is associated with an increase in price dispersion within demographic groups but that as the share of people using the technology rises further, dispersion falls.

We survey the literature on search-theoretic models of the labor market. We show how this approach addresses many issues, including the following: Why do workers sometimes choose to remain unemployed? What determines the lengths of employment and unemployment spells? How can there simultaneously exist unemployed workers and unfilled vacancies? What determines aggregate unemployment and vacancies? How can homogeneous workers earn different wages? What are the tradeoffs firms face from different wages? How do wages and turnover interact? What determines efficient turnover? We discuss various modeling choices concerning wage determination and the meeting process, including recent models of directed search.

We examine the equilibrium interaction between a market for price infor-mation (controlled by a gatekeeper) and the homogenous product market it serves. The gatekeeper charges fees to …rms that advertise prices on its Internet site and to consumers who access the list of advertised prices. Gatekeeper pro…ts are maximized in an equilibrium where (a) the prod-uct market exhibits price dispersion; (b) access fees are su¢ciently low that all consumers subscribe; (c) advertising fees exceed socially optimal levels, thus inducing partial …rm participation; and (d) advertised prices are below unadvertised prices. Introducing the market for information has ambiguous social welfare e¤ects.

. Shopbots are agents that search the Internet for information pertaining to the price and quality of goods or services. With the advent of shopbots, a dramatic reduction in search costs is imminent, which promises (or threatens) to radically alter market behavior. This research includes the proposal and theoretical analysis of a simple economic model which is intended to capture some of the essence of shopbots, and attempts to shed light on their potential impact on markets. Moreover, experimental simulations of an economy of software agents are described, which are designed to model the dynamic interaction of electronic buyers, sellers, and shopbots. This study forms part of a larger research program that aims to provide new insights on the impact of agent and information technology on the nascent information economy. 1 Introduction Shopbots, agents that automatically search the Internet for goods and services on behalf of consumers, herald a future in which autonomous agents become...

We present an agent-based computational economics (ACE) model of the wholesale "sh market in Marseille. Two of the stylized facts of that market are high loyalty of buyers to sellers, and persistent price dispersion, although it is every day the same population of sellers and buyers that meets in the same market hall. In our ACE model, sellers decide on quantities to supply, prices to ask, and how to treat loyal customers, while buyers decide which sellers to visit, and which prices to accept. Learning takes place through reinforcement. The model explains both stylized facts price dispersion and high loyalty. In a coevolutionary process, buyers learn to become loyal as sellers learn to o!er higher utility to loyal buyers, while these sellers, in turn, learn to o!er higher utility to loyal buyers as they happen to realize higher gross revenues from loyal buyers. The model also explains the e!ect of heterogeneity of the buyers. We analyze how this leads to subtle di!erences in the shopping patterns of the di!erent types of buyers, and how this is

A natural holdup problem arises in a market with search frictions: firms have to make a range of investments before finding their employees and larger investments translate into higher wages. In particular, when wages are determined by ex post bargaining, the equilibrium is always ine#cient: recognizing that capital intensive production relations have to pay higher wages, firms reduce their investments. This can only be prevented by removing all the bargaining power from the workers, but this in turn depresses wages below their social product, and creates excessive entry of firms. In contrast to this benchmark, we show that e#ciency is achieved when firms post wages and workers can direct their search towards more attractive o#ers. This e#ciency result generalizes to an environment with imperfect information where workers only observe a few of the equilibrium wage o#ers. We show that the underlying reason for e#ciency is not wage posting per se, but the ability of workers to direct their search towards more capital intensive jobs. Keywords: E#ciency, Holdup, Search, Wage Posting. JEL Classification: 83 # We thank two anonymous referees, Jonathan Levin, and seminar participants at MIT, NBER and Society for Economic Dynamics Conference. 1

This study examines how much, if any, of the differences in retail gasoline prices between markets is attributable to differences in the composition of vertical contract types at gasoline stations in each market. The purchase of the independent retail gasoline chain, Thrifty, by ARCO provides a unique opportunity to examine the effects of changes in different vertical contract types on local retail prices. This event caused sharp changes in the market share of i) fully vertically integrated stations, and ii) independent stations; differentially affecting local markets in the Los Angeles and San Diego Metropolitan areas. Using unique and detailed station-level data, this study examines how these sharp changes affected local retail prices. The detailed data and the research design based on the Thrifty station conversions allow for credible estimation of the effects of the market share of independent retailers and vertically integrated retailers on local market prices, controlling for any omitted factors at the station level, and the city level over time. Results indicate that a decrease in the market share of independent stations has a significant positive impact on local retail price. However, a change in the market share of refiner owned and operated branded stations does not have a significant impact on local market price. These results have important implications as policy makers consider the regulation of vertical contracts as a means to increase competition in gasoline markets. The research design and detailed data also allow for inference on the underlying nature of retail gasoline competition.

The language of game theory—coalitions, payo¤s, markets, votes— suggests that it is not a branch of abstract mathematics; that it is motivated by and related to the world around us; and that it should be able to

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