Naive analytics: The strategic advantage of algorithmic heuristics

• 成果类型: Article
• 署名作者: Berman, Ron; Heller, Yuval
• 署名单位: University of Pennsylvania; Bar Ilan University
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2025.08.009
• 发表日期: 2025
• 关键词: Advertising; pricing; Data analytics; Strategic complements; DELEGATION

摘要

We study interactions with uncertainty about demand sensitivity that is estimated by analytics algorithms. In our solution concept (1) firms choose seemingly optimal strategies based on estimates from possibly biased analytics algorithms, and (2) the levels of biases form best replies to one another. In equilibrium the firms' algorithms overestimate advertising effectiveness, as observed empirically, which causes advertisers to overspend. In price competitions firms also underestimate price elasticities and set prices too high. In games with strategic complements (substitutes), profits induced by such naive analytics equilibria Pareto dominate (are dominated by) those induced by the Nash equilibrium.