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@article{PolevoySmorodinskyTennenholtz,
	author          = {Polevoy, Gleb and Smorodinsky, Rann  and Tennenholtz, Moshe},
	title           = {Signaling Competition and Social Welfare},
	journal         = {Transactions on Economics and Computation (TEAC)},
	year            = {2014},
	abstract        = {We consider an environment where sellers compete over buyers. All
sellers are a-priori identical and strategically signal buyers about
the product they sell. In a setting motivated by on-line advertising
in display ad exchanges, where firms use second price auctions, a
firm's strategy is a decision about its signaling scheme for a
stream of goods (e.g. user impressions), and a buyer's strategy is a
selection among the firms. In this setting, a single seller will
typically provide partial information and consequently a product may
be allocated inefficiently. Intuitively, competition among sellers
may induce sellers to provide more information in order to attract
buyers and thus increase efficiency. Surprisingly, we show that such
a competition among firms may yield significant loss in consumers'
social welfare with respect to the monopolistic setting. Although we
also show that in some cases the competitive setting yields gain in
social welfare, we provide a tight bound on that gain, which is
shown to be small in respect to the above possible loss.

Our model is tightly connected with the literature on bundling in auctions.},
	group           = {ALG}
}