Thesis advisor: Julie Mortimer / This dissertation estimates the impacts of a mandatory disclosure policy (the New York City grade law) on hygiene quality choices, prices, and competition.In the first and third chapters of my dissertation, I estimate a dynamic structural model to recover the implied costs underlying quality choice decisions. Though the researcher may not observe these costs in the data, they can be recovered empirically by considering how firm decision making changes depending on the conditions in play at the firm and in the market over time. Having a structural model also enables me to conduct counterfactual experiments, which show that several key parameters, such as sunk entry costs, or the value from competing in certain types of markets, can have a meaningful impact on the policy outcomes. My first chapter examines whether the grade law leads to increased product quality provision by firms selling differentiated products. I focus on Zagat rated restaurants, which prior to the grade law have many pre-existing quality characteristics valued by consumers that can differentiate them from other firms. I estimate a dynamic model of entry, exit and investment in hygiene quality, incorporating permanent firm-level unobserved heterogeneity, and find that the grade law increased payoffs from entering with, operating with, and investing in higher quality. However, I also show that underlying costs of providing quality affect firm decision making in the absence of mandatory disclosure, and that altering these costs can shift the distribution of quality types towards higher quality. I derive a counterfactual tax policy that directly targets these costs and leads to higher percentages of high quality firms across markets than the mandatory disclosure policy. My second chapter uses the same panel of Zagat restaurants as in Chapter 1, and estimates how the grade law affects the pricing decisions of restaurants with different hygiene qualities. Since the grade law introduces a new dimension of product quality, firms may be able to charge higher prices for access to high quality. However, because firms in this setting are already selling differentiated products, it is possible that prices do not change. Furthermore, prices charged by lower quality firms may fall, because consumers would not consume at a low quality firms without being compensated with a lower price, or the prices may not change or even rise, partially because consumers are still willing to pay for the firm's other quality characteristics. Controlling for firm characteristics and market conditions, I find that the introduction of the law led to a decrease in prices charged by lower quality firms relative to those charged by high quality firms. The results suggest that as quality levels increase in the market, consumers may benefit due to the decreased ability of firms to price discriminate as they would if there were asymmetric information on quality. However, I also find evidence that, as a result of the grade law, firms pass-through some of the costs of improving quality to consumers in the form of higher prices. My third chapter presents preliminary findings suggesting how the grade law impacts the hygiene quality choices of firms with few observable quality characteristics prior to mandatory disclosure. Using the same dynamic model framework as in Chapter 1, I estimate the effects of the grade law on the hygiene quality choices of bagel shops, and show how these choices relate to market competition. While most of the model results and predictions from this chapter are sensitive and should be interpreted with caution as they likely do not fully identify the parameters of interest, I do estimate a positive relationship between competition with high quality firms and choice of high quality after the grade law; however, I also find evidence that entry costs are increasing in quality. Counterfactuals show that lowering the costs of entry with high quality both before and after the grade law could increase the proportion of firms choosing high quality. Additionally, I find that the competitive interaction between firms provides an important incentive to investing in higher quality under mandatory disclosure. I interpret this finding as evidence that the effects of mandatory disclosure are primarily transmitted through competition, and that removing these effects of competition would significantly reduce the gains from mandatory disclosure. This research contributes to a growing literature on the efficacy and importance of mandatory disclosure policies. Mandatory disclosure can be a valuable policy tool used to target an inefficiency or social harm such as a high incidence of food poisoning at restaurants. However, the effect of these policies on the choices made by firms should also be considered. Firm quality choices after mandatory disclosure will be determined by consumer demand for the new dimension of product quality, competition with market rivals, and costs. Consumer demand for hygiene quality may depend on factors such as how much they pay for a meal, meaning that demand for hygiene quality may be different for limited-service restaurants than for full-service restaurants. However, allowing consumers, who may consider multiple characteristics of quality, not just hygiene, to provide the sole incentives for firms to improve their quality, may under-incentivize quality improvement of some firms. Furthermore, market conditions such as competition can be important, and may not be addressed at all by the consumer response. Policies that use cost-based incentives to firms, or target firms operating under certain market conditions, could be used as a replacement or supplement to the workings on the demand-side. My results suggest that such alternative policies which, rather than asking consumers to enforce product quality improvement via their consumption decisions, directly target the incentives faced by firms when making product quality choices, merit consideration. / Thesis (PhD) — Boston College, 2016. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

The timing of actions by firms plays an important role in industrial economics. It is key to strategic advantage in oligopoly models whether firms compete on quantity or on price. In a vertical relationship between input suppliers and final-good manufacturers, a firm which chooses a strategy first will take into account the response by those firms moving second and different sequence of play leads to different market outcomes. In my dissertation, I study the determinants and implications of the timing of firm actions in a variety of scenarios. In my first two essays, I examine how market leadership may arise endogenously in oligopoly models and focus on the effect of information about uncertain market demand. My first essay studies a quantity game and I identify the circumstance under which a perishable information asymmetry regarding stochastic demand causes market leadership. In an information acquisition game, I show that Stackelberg equilibrium in the full game is supported only when firms have different costs of information. My second essay considers a duopoly in which firms supply a differentiated product and compete on price. I find that different equilibrium outcomes arise under different information structures. Under asymmetric information, a firm’s information advantage leads to a strategic disadvantage of leading in the price game. The time value of information may well be negative, contrasting with results in the first essay. In my third essay, I consider a vertical relationship in which a supplier sets the price of an input and the firm that produces the final good must choose how much to invest in some complementary input or process. Two models with different sequence of firm actions are studied and yield different pricing strategies for the upstream monopolist. Interestingly, a change of the sequence from one model (the upstream firm commits to input prices first) to the other (the upstream firm sets input prices after investments are made) benefits all parties including the upstream monopolist, the downstream firms and the consumers.

Thesis (Ph. D.)--University of Wisconsin--Madison, 1973. / Typescript. Vita. eContent provider-neutral record in process. Description based on print version record. Includes bibliographical references.

Thesis (Ph. D.)--University of Washington, 2007. / Vita. Includes bibliographical references (p. 101-107).

Thesis (Ph. D.)--Tufts University, 1997. / Vita. Includes bibliographical references (leaves 311-332).

My dissertation examines competition, cooperation, and efficiency in three market settings in which a population of economic agents interact, either directly with each other in pairwise matches, directly with firms, or with firms via a platform. In one chapter I consider a population of customers who have different valuations for a good sold by competing merchants, as well as varying preferences over the merchant from which to purchase the good and the payment form with which to make the purchase, and examine what the effects might be if a merchant placed an additional surcharge on transactions completed with a payment form that is more costly for the merchant. The cost for the merchant can vary dramatically depending on the payment form used. For example, a credit card transaction is generally more expensive for the merchant than a debit card transaction, even if the transaction is completed using the same technology and is processed over the same network (e.g., a MasterCard signature debit transaction and a MasterCard credit card transaction). Historically, with limited exceptions, merchants have been prohibited, both by law and by the contract permitting the acceptance of that network's cards, from charging customers different prices for transactions completed using different payment cards, despite the different costs these transactions impose on them. Recent concessions made by several major payment networks in response to legal challenges raises the possibility that this paradigm might change in the future. This chapter examines what the effects might be if merchants were permitted to charge customers different prices based on the payment form and whether these effects depend on differences between the merchants, such as differences in the marginal cost of providing the good. In another chapter, I consider a population of individuals made up of more-patient and less-patient types who interact directly with each other in a repeated prisoner's dilemma embedded in a search model. A player is matched anonymously with another player to play a prisoner's dilemma game repeatedly until the match is ended, either exogenously or endogenously by one of the players, at which point each player may receive another random match. I first determine when it is feasible to achieve the best outcome in which all players cooperate. When it is not possible to achieve full cooperation, I examine how welfare can be improved over the outcome in which no players cooperate. When conditions are such that less-patient players choose not to cooperate, I first examine how separation by action within a single market can increase welfare for all players over the uncooperative equilibrium, with more-patient players choosing to cooperate in hopes of forming a cooperative relationship, despite the risk of being matched with a less-patient player who chooses not to cooperate. I then examine how full separation of the more- and less-patient players, made possible by introduction of a second market, can increase the welfare of the more-patient players without harming the less-patient players. In a third chapter, customers choose to purchase a good from one of several competing firms in a setting in which network congestion and firms' investment in capacity plays an important role in firm costs and product quality, e.g., the wireless industry. Wireless carriers (e.g., Verizon) compete not only on the price of their service but also on its quality. The quality of a carrier's service is determined in part by the quantity of customers it serves and by investment in capacity with which to serve them. While the primary effect of a carrier increasing its capacity is an increase in that carrier's service quality, there are also externality effects on other wireless carriers. For example, if carrier A increases its capacity, thereby increasing its service quality, and causes some customers to leave a competing carrier B, the service quality experienced by customers who remain with carrier B will increase as a result of the decreased congestion in carrier B's network. This chapter examines the interplay between these effects alongside traditional price competition in this oligopoly setting. / text

by Lo Wai-kwok and Mak Bing-leung, Rufin. / Bibliography: leaves 167-171 / Thesis (M.B.A.)--Chinese University of Hong Kong, 1984

My dissertation develops and applies empirical structural models to study consumers’ dynamic adoption of durable goods, and firms’ dynamic research and development (R&D) investment and pricing strategies. In Chapter 2, I study consumer purchase dynamics for a new technology good, the digital single-lens-reflex (DSLR) camera, where consumer learning and switching costs across brands are present. Using a unique dataset that tracks individual DSLR camera ownership history, I find that low-end DSLR cameras are gateway products that most consumers buy initially. When some consumers choose to repurchase, they are more likely to buy high-end DSLR cameras from the same brand as the initial purchases. Combining individual camera ownership data with aggregate sales data, I develop and estimate a dynamic demand model that incorporates consumer learning and switching costs. The estimated demand model implies a dynamic complementary relationship between high- and low-end products that are produced by the same firm. In Chapter 3, I further empirically investigate the influence of consumer purchase dynamics on forward-looking firms’ pricing strategies. Supply-side simulations imply that firms have incentives to invest in their customer bases using low-end products and to harvest the resolved uncertainty of valuation and switching costs using high-end products. In Chapter 4, I explore the nature of uncertainty in innovation production through firms’ R&D investment. Utilizing a rich dataset that tracks Spanish manufacture firms’ R&D activities and innovation outcomes for up to 17 years, I build and estimate a dynamic model of firms’ R&D investment incorporates the uncertainties in innovation.

The chapters in this thesis are each concerned with problems of coordination. The coordination issues examined here each arise in distinct situations and imply the need for a different modeling approach in each case. The first case, Chapter 2, considers gender discrimination in contemporary, competitive labour markets. It is sh9wn there that such discrimination can arise as an outcome of maximizing activities on the part of firms facing the problem of worker motivation in the light of imperfect monitorability. This is shown to lead to firms’ hiring practices (in particular discrimination) depending on the practices of other firms and consequently to labour market equilibria of discrimination and of non discrimination. It is shown that a policy of affirmative action can be useful in moving the labour market away from the discrimination equilibrium. The next chapter, Chapter 3, considers an avenue by which the structure of industries in an economy can affect the development of new technologies through its general equilibrium impact on profits relative to wages. It shows that a monopolistic structure in one industry, by increasing the share of profits in aggregate income, tends to increase the relative profitability of innovative activities elsewhere thereby leading to the creation of further monopoly rents which, in turn, feeds back into incentives for innovation thus causing a self-perpetuating cycle. This leads to the possibility of an economy exhibiting multiple steady states including a “Poverty trap” or situation of zero growth. The conditions under which multiple steady states exist are analyzed and the economy’s behaviour out of the steady state is also characterized. The role of government intervention, in the form of subsidies, direct provision of research and patent protection is also examined. Finally it is shown that the model can also explain the existence of clustering of innovations and consequent sporadic growth. The final substantive chapter, Chapter 4, centres on problems of investment coordination in the context of LDCs. These arise when the fall in the price of one good raises the demand for complementary goods, thereby implying that investment decisions leading to such price falls may not be privately undertaken whereas, when coordinated across sectors, such investments could be profitable. This chapter shows that the existence of multiple equilibria hinges upon the more restrictive Definition of complementarity between goods, namely, the Hicks definition. As a result, gross complementarity between goods (on its own), even though causing horizontal externalities, can not lead to the existence of multiple equilibria. A later section looks at gross complements in the presence of knowledge spillovers and shows, in contrast, that this can lead to multiple equilibria and coordination problems. The chapter also examines the social optimality of coordination in the Hicks complements case, showing that it is not always implied by the multiplicity of equilbria.

No description available.