We examine competition among ridesharing platforms, where firms compete on both price and the wait time induced with idled drivers. We show that when consumers are the only agents who multihome, ...idleness is lower in duopoly than when consumers face a monopoly ridesharing platform. When drivers and consumers multihome, idleness further falls to zero as it involves costs for each platform that are appropriated, in part, by their rival. Interestingly, socially superior outcomes may involve monopoly or competition under various multihoming regimes, depending on the density of the city, and the relative costs of idleness versus consumer disutility of waiting.
We propose a framework for analyzing transformations of demand. Such transformations frequently stem from changes in the dispersion of consumers' valuations, which lead to rotations of the demand ...curve. In many settings, profits are a U-shaped function of dispersion. High dispersion is complemented by niche production, and low dispersion is complemented by mass-market supply. We investigate numerous applications, including product design; advertising, marketing and sales advice; and the construction of quality-differentiated product lines. We also suggest a new taxonomy of advertising, distinguishing between hype, which shifts demand, and real information, which rotates demand.
A well-known principle in economics is that firms differentiate their product offerings in order to relax competition. However, in this paper we show that information frictions can invalidate this ...principle. We build a duopolistic competition model of second-degree price discrimination with information frictions in which (i) an equilibrium always exists with overlapping product qualities, whereas (ii) an equilibrium with nonoverlapping product qualities exists only if both information frictions and the cost of providing high quality are sufficiently small. As a consequence, reasons other than an attempt to soften competition should explain why firms in some cases carry nonoverlapping product lines.
This paper was accepted by Matthew Shum, marketing.
Can you sell multiple items by providing only prices for different sizes of bundles rather than the different possible combinations of them? In this paper, we provide a framework for understanding ...“bundle-size pricing” (or simply, BSP) where only a menu of bundle sizes and their corresponding prices are offered. Although BSP is commonly used across several industries, little is known about the optimal BSP policy in terms of sizes and prices, along with the theoretical properties of its profit. In this paper, we provide a simple and tractable theoretical framework to analyze the large-scale BSP problem where a multiproduct firm is selling a large number of products. We characterize the circumstances under which such policies perform well by studying the effect of various factors such as marginal cost or customers’ budget on the performance of BSP and identify possible causes of its inefficiency.
Bundle-size pricing (BSP) is a multidimensional selling mechanism where the firm prices the size of the bundle rather than the different possible combinations of bundles. In BSP, the firm offers the customer a menu of different sizes and prices. The customer then chooses the size that maximizes her surplus and customizes her bundle given her chosen size. Although BSP is commonly used across several industries, little is known about the optimal BSP policy in terms of sizes and prices, along with the theoretical properties of its profit. In this paper, we provide a simple and tractable theoretical framework to analyze the large-scale BSP problem where a multiproduct firm is selling a large number of products. The BSP problem is in general hard as it involves optimizing over order statistics; however, we show that for large numbers of products, the BSP problem transforms from a hard multidimensional problem to a simple multiunit pricing problem with concave and increasing utilities. Our framework allows us to identify the main source of inefficiency of BSP: the heterogeneity of marginal costs across products. For this reason, we propose two new BSP policies, “clustered BSP” and “assorted BSP,” which significantly reduce the inefficiency of regular BSP. We then utilize our framework to study richer models of BSP, such as when customers have budgets.
This paper studies whether imposing carbon costs changes the supply chain structure and social welfare. We explore the problem from a central policymaker's perspective who wants to maximize social ...welfare. We consider two stakeholders, retailers, and consumers, who optimize their own objectives (i.e., profits and net utility) and three competitive settings (i.e., monopoly, monopolistic competition with symmetric market share, and monopolistic competition with asymmetric market share). For the monopoly case, we find that when the retailer's profit is high, imposing some carbon emission charges on the retailer and the consumers does not substantially change the supply chain structure or the social welfare. However, when the retailer's profit is low, imposing carbon costs optimally can lead to a significant increase in social welfare. Moreover, the impact of imposing carbon emission charges becomes more significant when the degree of competition increases. Additionally, the quantum of benefit may depend only on factors common across industries, such as fuel and carbon costs.
I develop a multiproduct nonlinear pricing model where a firm sells both discrete and continuous services to consumers with multidimensional heterogeneity. I derive the optimal selling mechanism and ...provide primitive conditions under which different bundling strategies arise. Exploiting both the firm and the consumer's optimality conditions, I show that the model structure is nonparametrically identified and propose a semiparametric estimation procedure. An application to China Telecom data shows that mixed bundling of internet and landline phone services is more beneficial to both the firm and the consumer relative to component pricing.
Pricing Network Effects FAINMESSER, ITAY P.; GALEOTTI, ANDREA
The Review of economic studies,
01/2016, Letnik:
83, Številka:
1 (294)
Journal Article
Recenzirano
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The increase in the information that firms can collect or purchase about network effects across consumers motivates two important questions: how does a firm's pricing strategy react to detailed ...information on network effects? Are the availability and use of such information beneficial or detrimental to consumer surplus? We develop a model in which a monopoly sells a network good and price discriminates based on information about consumers' influence and consumers' susceptibility to influence. The monopoly optimally offers consumers price discounts for their influence and charges price premia for their susceptibility; the price premia and the price discounts are simple functions of the pattern of network effects. We determine under which conditions, relative to uniform price, consumer surplus increases, and we characterize the value of information on network effects for the monopoly.
An alternative to natural monopoly Carbonell-Nicolau, Oriol
Journal of regulatory economics,
12/2020, Letnik:
58, Številka:
2-3
Journal Article
Recenzirano
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We consider a shared ownership arrangement among consumers/owners as a means to organize production with an underlying decreasing average cost function typical of natural monopolies. The resulting ...output allocation yields a lower deadweight loss than the monopoly allocation, and is, in some cases, efficient.
In this paper we study the dynamic pricing strategies of a boundedly informed monopolist facing reference-dependent consumers. The monopolist is not aware of this behavioral feature of the consumers ...that is at the origin of the nonlinearity of an otherwise linear demand function. We identify the scenarios leading to a dynamic convergence to the optimizing strategy and at the same time we deepen the consequences of a failure in this process. In this way we are able to provide a behavioral explanation for the variability of prices and the high-low pricing strategy in monopolistic markets.
Abstract
I analyze a model of monopoly insurance contracting where the consumer has access to endogenous, costly evidence of his risk type. I characterize when the consumer is worse off if the ...insurer is allowed to condition contracts on evidence and when the ability to contract on evidence leads to a Pareto improvement. I compare the results to an analogous setting with perfect competition: Under perfect competition, when evidence acquisition costs are low, the ability to contract on evidence is always Pareto improving. For intermediate costs, I uncover a new source of unraveling.
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