Malte Kornemann

I examine when robustly beneficial information can be provided to a receiver who also learns from misspecified background sources that are outside the provider’s control. In contrast to information provision for rational receivers, any source can be harmful under certain misspecifications of background sources. I show that the key aspect of the background environment enabling robustly beneficial design is the receiver’s perception rather than the true structure. For any background source structure and design of the provided source, there exists a misspecification under which harm occurs. Consequently, even complete knowledge of the true structure is insufficient and knowledge of the receiver’s perception is necessary. Under complete knowledge of the perception, I demonstrate how to design an information source that is robustly non-harmful and often strictly beneficial, regardless of the true background sources.

We study how secondary markets for durable goods interact with consumers’ social-responsibility motives to mitigate environmentally harmful new production. On the positive side, secondary markets may allow responsible consumers to acquire used goods that would otherwise be discarded, reducing premature waste. On the negative side, secondary markets introduce two major harmful forces. First, the possibility of buying used goods and thereby causing less harm can raise the demand of responsible consumers, often increasing the production necessary to serve the market. Second, said demand can increase the price of used goods, encouraging purchases of new goods. These forces imply that if used goods may have negative private consumption value, then secondary markets can enhance or erode the benefits of social responsibility. If, instead, used goods have positive private value, then secondary markets always (weakly) erode the benefits of social responsibility. Importantly, the logic underlying the harmful forces does not apply to new products sold after their production and associated externalities have been sunk. In the unique equilibrium, consumers treat such goods as having the same externality as production.