While artificial intelligence (AI) and machine learning (ML) have been increasingly used for decision-making, issues related to discrimination in AI/ML have become prominent. While several fair algorithms are proposed to alleviate these discrimination issues, most of them provide fairness by imposing constraints to eliminate disparity in prediction results. However, the use of these fair algorithms may change the behavior of prediction subjects. As such, even though the disparity in prediction results might be removed by fair algorithms, behavioral responses to the use of fair algorithms can still create disparity in behavior which may persist across different groups of prediction subjects. To study this issue, we define a notion called "strategic best-response fairness" (SBR-fair). It is defined in a context that includes different groups of prediction subjects who are ex-ante identical in terms of abilities and conditional payoffs. We utilize a game-theoretic model to investigate whether different types of fair algorithms lead to identical equilibrium behaviors among different groups of prediction subjects. If yes, such an algorithm is considered SBR-fair. We then demonstrate that many existing fair algorithms are not SBR-fair. As a result, implementing these algorithms may impose fairness on prediction results but actually induce disparity between privileged and unprivileged individuals in the long run.

We provide new evidence that short-term rental (STR) platforms like Airbnb incentivize residential real estate investment. We exploit two complementary identification strategies. First, we use variation in the timing of STR regulations to estimate the effect of regulation on both Airbnb listings and residential permits. We find that over the first 12 months following the start of the regulation, STR regulations reduce Airbnb listings by 8.9% and residential permits by 10.8%. Second, we show that residential permits decline discontinuously across jurisdictional boundaries in which one side of the boundary has a STR regulation and the other side does not. The effect is especially striking for accessory dwelling units, which decline by 16.5% across regulatory boundaries. Our results imply that STRs incentivize residential investment, and especially so for housing units that are well suited for short-term renting.

We consider the problem faced by a firm that receives highly differentiated products in an online fashion and needs to price them in order to sell them to its customer base. Products are described by vectors of features and the market value of each product is linear in the values of the features. The firm does not initially know the values of the different features, but it can learn the values of the features based on whether products were sold at the posted prices in the past. This model is motivated by a question in online advertising, where impressions arrive over time and can be described by vectors of features. We first consider a multi-dimensional version of binary search over polyhedral sets, and show that it has exponential worst-case regret. We then propose a modification of the prior algorithm where uncertainty sets are replaced by their Lowner-John ellipsoids. We show that this algorithm has a worst-case regret that is quadratic in the dimensionality of the feature space and logarithmic in the time horizon.

How should a firm price a new product for which little is known about demand? We propose a pricing rule that can be used if the firm can estimate (even roughly) the maximum price it can charge and still expect to sell some units, and the firm need not know in advance the quantity it will sell. The rule is simple: Set price as though the demand curve were linear. We show that if the true demand curve is one of many commonly used demand functions, or even a more complex function, and if marginal cost is known and constant, the firm can expect its profit to be close to what it would earn if it knew the true demand curve. We derive analytical performance bounds for a variety of demand functions, calculate expected profit performance for randomly generated demand curves, and evaluate the welfare implications of our pricing rule.