The role of market accessibility and entry is the central theme of this dissertation. Two theoretical models of oligopoly theory are examined in a controlled laboratory market setting. Experimental testing of Contestability Theory is extended beyond the natural monopoly case and a "safe haven" provides subjects with a viable alternative to the "contestable" market. Evidence reported supports the conclusion that the contestable market is robust to the introduction of the alternate market. The theory of Bertrand-Edgeworth duopoly is explored from a game theoretic perspective with special attention to buyer queuing rule assumptions. Experimental evidence underscores sensitivity of market outcomes to the queuing rule adopted. The presence of excess capacity relative to market demand tends to push theoretical Bertrand-Edgeworth equilibria toward competitive levels. This result is substantiated by experimental evidence and is independent of the queuing rule assumed. The similarity between the Bertrand-Edgeworth excess capacity case and a contestable natural monopoly market is investigated. The presence of excess capacity/potential entrants is shown to exert more downward pressure on observed laboratory market prices than the presence of additional competitors alone. This result is at odds with the traditional Structure-Conduct-Performance Paradigm. A herfindahl index calculated from experimental results has almost no power to predict market outcome.

by Mak Man-Kei. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1997. / Includes bibliographical references (leaves 77-78). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / Chapter / Chapter 1 --- INTRODUCTION --- p.1 / Chapter 1.1 --- Background --- p.1 / Chapter 1.2 --- Research limitations --- p.5 / Chapter 1.3 --- The organization of the paper --- p.6 / Chapter 2. --- LITERATURE REVIEW --- p.7 / Chapter 3. --- THE MODEL --- p.17 / Chapter 3.1 --- Introduction --- p.17 / Chapter 3.2 --- Description --- p.17 / Chapter 3.3 --- Definitions --- p.20 / Chapter 3.3.1 --- Hierarchy --- p.20 / Chapter 3.3.2 --- Superiority --- p.21 / Chapter 3.3.3 --- Ranks and levels --- p.22 / Chapter 3.3.4 --- Symmetric hierarchy --- p.24 / Chapter 3.3.5 --- Asymmetric hierarchy --- p.25 / Chapter 3.3.6 --- Units of time --- p.26 / Chapter 3.3.7 --- Delay cost --- p.26 / Chapter 3.3.8 --- Processing cost --- p.26 / Chapter 3.4 --- The model --- p.27 / Chapter 3.4.1 --- Total cost function --- p.27 / Chapter 3.4.2 --- Delay cost function --- p.28 / Chapter 3.4.3 --- Processing cost function --- p.30 / Chapter 3.4.4 --- Conclusion --- p.32 / Chapter 4. --- ANALYSIS --- p.34 / Chapter 4.1 --- Introduction --- p.34 / Chapter 4.2 --- Concave processing cost function --- p.35 / Chapter 4.2.1 --- Calculation example --- p.35 / Chapter 4.2.2 --- General comparison structures --- p.36 / Chapter 4.3 --- Linear processing cost function --- p.39 / Chapter 4.4 --- Convex processing cost function --- p.40 / Chapter 4.5 --- Switching costs --- p.44 / Chapter 4.6 --- Conclusion --- p.47 / Chapter 5. --- APPLICATION AND DISCUSSION --- p.49 / Chapter 5.1 --- Introduction --- p.49 / Chapter 5.2 --- Case 1: Information Gathering --- p.49 / Chapter 5.2.1 --- Presentation --- p.49 / Chapter 5.2.2 --- Discussion --- p.50 / Chapter 5.3 --- Case 2: Distribution Industry --- p.52 / Chapter 5.3.1 --- Presentation --- p.52 / Chapter 5.3.2 --- Discussion --- p.53 / Chapter 5.4 --- Case 3: Japanese Manufacturing --- p.54 / Chapter 5.4.1 --- Presentation --- p.54 / Chapter 5.4.2 --- Discussion --- p.56 / Chapter 6. --- CONCLUSION --- p.57 / APPENDIX 1 --- p.61 / APPENDIX 2 --- p.63 / APPENDIX 3 --- p.64 / BIBLIOGRAPHY --- p.73

A central tenet of industrial organization is that market concentration leads to higher prices. At the same time, there is a growing awareness that the market for health care is unique due to its complexity, and it is often difficult for consumers to make fully informed decisions. Might information frictions exacerbate market power in concentrated markets and lead to higher prices? While a growing literature seeks to address this question in a number of contexts, this dissertation focuses on the lack of price transparency in health care. I argue that the inability of consumers to compare prices is a major factor leading to high prices when health care is provided by the private market. In Chapter 1, I use a dataset covering all private medical claims in a state to examine the introduction of a state-run website providing detailed information about out-of-pocket prices for a subset of medical procedures. Exploiting plausibly exogenous variation across procedures available on the website as well as the timing of the introduction, I use a difference-in-difference approach and find significant savings for both consumers and insurers. Part of the effect is due to consumers switching to lower cost providers. However, there is a small but significant supply-side effects in the long-run, i.e. there are lower negotiated prices. These lower prices benefit all insured individuals including those that do not use the website. Supply-side effects reduce price dispersion and are especially relevant when medical providers operate in concentrated markets. A relatively small fraction of consumers actually used the price transparency website when it was available. Therefore, it is important to understand why more consumers aren't using the price transparency tool and what would happen if more consumers were informed about prices. Answering this question requires a structural model, which is the focus of Chapter 2 and Chapter 3. In Chapter 2, I study demand for health care services when at least some consumers lack full information about prices. By exploiting the variation from the introduction of the website, I am able to separately identify consumer price sensitivity and the degree of uncertainty about prices. I also explicitly model the decision to use the price transparency website when it is available. This structural approach yields two main advantages over the reduced-form approach. First, the model can be used to examine what would happen if more consumers were incentivized to use the price transparency website. Second, the model provides insight into the welfare effects of price information. Finally, the reduced-form evidence that there is a supply-side effect of the website when even a small fraction of consumers are informed motivates a more in depth analysis of the supply-side. Chapter 3 combines the demand model of Chapter 2 with a model of bargaining between medical providers and insurers to examine how price transparency affects equilibrium prices. Model estimates and difference-in-differences estimates both imply that the website reduces health care spending by 3 to 4 percent. I then use the model to examine the effects of price transparency more generally. In counterfactual simulations, I find that price transparency would generate a substantial reduction in equilibrium prices if a larger fraction of consumers in the market were informed. Combining the price transparency website with high cost sharing would give individuals more incentive to use the price transparency tool, reducing health care spending by 18 percent. My research is intended to inform the policy debate surrounding the value of health care price transparency tools. In sum, I argue that while the value of price transparency tools is modest when only a small fraction of consumers are incentivized to use the tools, the savings become quite substantial when enough consumers are informed about prices.

The motivation of this thesis is the study of markets in which consumers are under-informed concerning the quality of any given product and in which the quality of consumers also matters to producers of products. This study has resulted in a primary application paper, comprising the first chapter which focuses on the market for training lawyers, as well as a second technical chapter exploring theory which can prove useful in analyzing these markets. The first chapter is based on the observation that the number of lawyers being produced at high cost combined with the relative lack of job options has recently created significant concern. In order to partially explain this phenomenon, I propose a game of incomplete information modeling the strategic interaction between law schools as they compete for potential students. The information asymmetries come from the fact that any given law school is better informed about the quality of its education than its potential students. Using a change in market information structure generated by student placement reporting requirements, I use the model to estimate the dynamic effect of increased information on distributions of tuition rates, incoming student ability, class sizes, and the rate at which law schools open and potentially close. Using these estimates, I show that there have not necessarily been too many law schools or students, but rather an equilibrium enforced mismatch between students and their optimal schooling choices. The new information has acted as a forced collusion mechanism to partially overcome this mismatch, which has differentially decreased school welfare, strictly increased student welfare, and resulted in a positive total welfare gain of $685 million. The second chapter provides a thorough exploration of the microeconomic foundations for the multi-variate linear demand function for differentiated products that is widely used in industrial organization. A key finding is that strict concavity of the quadratic utility function is critical for the demand system to be well defined. Otherwise, the true demand function may be quite complex: Multi-valued, non-linear and income-dependent. The solution of the first order conditions for the consumer problem, which we call a local demand function, may have quite pathological properties. We uncover failures of duality relationships between substitute products and complementary products, as well as the incompatibility between high levels of complementarity and concavity. The two-good case emerges as a special case with strong but non-robust properties. A key implication is that all conclusions derived via the use of linear demand that does not satisfy the law of Demand ought to be regarded with some suspicion.

La tesis consiste en tres diferentes ensayos que analizan de forma teórica distintos temas relacionados con la organización industrial de las telecomunicaciones. El primer ensayo trata de competencia oligopólica en los mercados de telecomunicaciones, cuando las empresas cobran tarifas planas a los usuarios finales. No obstante las tarifas planas sean muy comunes en la actualidad, los economistas han prestado poca atención a esta práctica de fijación de precios. Las teorías actuales argumentan que, bajo este esquema de competencia, la regulación del mercado no afecta el bienestar social si un duopolio de operadores compite para los usuarios finales. En la tesis se demuestra que, cuando hay competencia imperfecta entre por lo menos tres operador, el bienestar social es sensible a la regulación del precio de acceso. Además se analizan los efectos de asimetrías informativas en los niveles de eficiencia en la prestación de servicios de telecomunicaciones, y se caracterizan los precios de acceso óptimos. Se incluyen también otras indicaciones de políticas económicas. El segundo ensayo es un estudio sobre cómo el precio de acceso afecta la elección de los precios minoristas. Se demuestra que, cuando el precio de acceso es alto, los proveedores cobran un precio sólo a los llamantes. Sin embargo, cuando el precio de acceso es bajo, los proveedores cobran también los receptores. Además se comparan el nivel de penetración del mercado y el bienestar total entre los dos regímenes de precios. El modelo sugiere que, para valores altos de la externalidad de las llamadas, la penetración de mercado y el bienestar total son más grandes en un régimen de donde paga también el receptor si el precio de acceso es casi cero. Diversamente, cuando la externalidad de las llamadas es baja, el equilibrio de mercado es caracterizado por un régimen donde paga sólo el llamante si el precio de acceso es alto. El resultado es que la penetración del mercado y el bienestar total son máximos. Por último, en el tercer ensayo se desarrolla un modelo de competencia en la prestación de servicios de Internet y de contenido como un mercado de dos lados y se evalúan los efectos de la neutralidad de la red sobre los incentivos de los proveedores de servicios Internet (ISP) en las inversiones en innovación. En este marco, los ISP tienen capacidades asimétricas de red y los proveedores de contenidos (PC) distribuyen contenidos asimétricos. Los consumidores deciden con qué proveedor de Internet conectarse y cuál contenido navegar. Cuando los ISP priorizan uno de los contenidos, los usuarios finales migran desde el ISP más grande al más pequeño. Si los ISP pueden cobrar una cuota relativamente alta para proveer el servicio de prioridad, ambos ISP tienen menores incentivos para expandir sus redes en comparación con el caso en el cual se impone la neutralidad de la red. / The thesis provides three different essays that theoretically analyze different topics regarding the industrial organization of telecommunications. The first essay discusses oligopolistic competition in telecommunications markets where flat tariffs are applied to the end-users. Despite fixed fees being very common at present, economists have paid little attention to this pricing practice. Current theories indicate that, under this scheme of competition, regulators cannot affect social welfare when a duopoly of telecom operators competes for end-users. In the thesis, I show that, when imperfect competition among at least three operators takes place, social welfare is sensitive to regulation of the access price. Moreover I allow for asymmetries in the efficiency of providing telecommunication services, and I characterize the optimal access prices. Further policy indications are also included. The second essay is a study on how the access price affects a network operator’s choice of the retail pricing regime. It is shown that, when the access price is high, providers decide to only charge the callers (Calling Party Pays). However, when the access price is low, providers also charge the receivers (Receiving Party Pays). Moreover, market penetration and total welfare are compared between the two pricing regimes. The model suggests that, for high values of the call externality, market penetration and total welfare are larger in a Receiving Party Pays regime when the access charge is close to zero. Conversely, when the call externality is low, a Calling Party Pays regime is the market outcome when the access charge is higher. As a result, market penetration and total welfare are maximized. Finally, in the third essay, it is developed develop a model of competition in Internet provision and content service as a two-sided market and evaluate the effects of network neutrality on the incentives of Internet Service Providers (ISPs) to invest in innovation. In this framework, ISPs have asymmetric network capacities and Content Providers (CPs) distribute asymmetric contents. Consumers decide which provider to connect to and which content to browse. When ISPs prioritize one of the contents, end-users migrate from the larger ISP to the smaller. If ISPs can charge a relatively high fee to CPs to provide the prioritized service, both ISPs have lower incentives to expand their networks compared to the case where network neutrality is imposed.

No description available.

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In chapter 1, I study how spillover effects from competitors' choices affect a firm's decision to open a store. Using panel data from the United Kingdom's fast food industry, I propose and estimate a game of entry under incomplete information that incorporates spillover effects between firms' entry decisions. A positive spillover is identified for Burger King - increasing the stock of existing McDonald's by 1 outlet increases Burger King's estimated equilibrium probability of opening a new store by approximately 18 percentage points. Chapter 2 advances our collective knowledge about the impact of learning from others in industry dynamics, and whether it can generate the clustering of rival retailers. Uncertainty about new markets provides an opportunity for learning from others, where one firm's past entry decisions signal to others the potential profitability of risky markets. The setting is Canada's hamburger fast food industry from its inception in 1970 to 2005, where I introduce a new estimable dynamic oligopoly model of entry/exit with unobserved heterogeneity, common uncertainty about demand, learning through entry, and learning from others. I find that the presence of uncertainty induces retailers to herd into markets that others have previously done well in. Finally, chapter 3 (joint with Feng Chi) studies the early adoption of Twitter in the 111th House of Representatives. Our main objective is to determine whether successes of past adopters have the tendency to speed up Twitter adoption, where past success is defined as the average followers per Tweet - a common measure of "Twitter success" - among all prior adopters. The data suggests that accelerated adoption can be associated with favorable past outcomes: increasing the average number of followers per Tweet among past adopters by a standard deviation (of 8 followers per Tweet) accelerates the adoption time by about 112 days.

In chapter 1, I study how spillover effects from competitors' choices affect a firm's decision to open a store. Using panel data from the United Kingdom's fast food industry, I propose and estimate a game of entry under incomplete information that incorporates spillover effects between firms' entry decisions. A positive spillover is identified for Burger King - increasing the stock of existing McDonald's by 1 outlet increases Burger King's estimated equilibrium probability of opening a new store by approximately 18 percentage points. Chapter 2 advances our collective knowledge about the impact of learning from others in industry dynamics, and whether it can generate the clustering of rival retailers. Uncertainty about new markets provides an opportunity for learning from others, where one firm's past entry decisions signal to others the potential profitability of risky markets. The setting is Canada's hamburger fast food industry from its inception in 1970 to 2005, where I introduce a new estimable dynamic oligopoly model of entry/exit with unobserved heterogeneity, common uncertainty about demand, learning through entry, and learning from others. I find that the presence of uncertainty induces retailers to herd into markets that others have previously done well in. Finally, chapter 3 (joint with Feng Chi) studies the early adoption of Twitter in the 111th House of Representatives. Our main objective is to determine whether successes of past adopters have the tendency to speed up Twitter adoption, where past success is defined as the average followers per Tweet - a common measure of "Twitter success" - among all prior adopters. The data suggests that accelerated adoption can be associated with favorable past outcomes: increasing the average number of followers per Tweet among past adopters by a standard deviation (of 8 followers per Tweet) accelerates the adoption time by about 112 days.

Thesis (Ph. D.)--University of Chicago, Dept. of Sociology, March 1999. / Includes bibliographical references. Also available on the Internet.