Thesis (Ph. D.)--Ohio State University, 2006. / Title from first page of PDF file. Includes bibliographical references (p. 90-97).

The three chapters of my dissertation study imperfect competition, multiproduct firms, and consumer demand. Chapter 1 estimates a structural model of consumer demand and oligopolistic retail competition in order to study three mechanisms through which retailers affect allocative efficiency and consumer welfare. First, variable markups across retail stores within a location induce a misallocation of resources. The deadweight loss from this retail misallocation can be large since a significant fraction of household consumption comes from retail goods. Second, across locations, retail markups may vary with market size. This regional variation plays an important role in recent economic geography models as an agglomeration force. In the limit, models predict that the distortion from variable markups disappears in large markets, although it is an open question, How Large is Large? Third, since retail stores are differentiated, differences in the variety of retail stores available to consumers matters for consumer welfare across locations. To quantify the importance of these mechanisms, I estimate my model using retail scanner data with prices and sales at the barcode level from thousands of stores across the US. I find that the deadweight loss and consumption misallocation from variable retail markups are economically significant. I estimate that retail markups are smaller in larger cities, and that markets the size of New York City and Los Angeles are approximately at the undistorted monopolistically competitive limit. My results show that retail store variety significantly impacts the cost of living and could be an important consumption-based agglomeration force. The second chapter of my dissertation develops and structurally estimates a model of heterogeneous multiproduct firms that can be used to decompose the firm-size distribution into the contributions of costs, quality, markups, and product scope. In this joint work with Stephen J. Redding and David E. Weinstein, we find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales using Nielsen barcode data on prices and sales. We show that the imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms. Although most firms are well approximated by the monopolistic competition benchmark of constant markups, we find that the largest firms that account for most of aggregate sales depart substantially from this benchmark, and exhibit both variable markups and substantial cannibalization effects. The final chapter of my dissertation develops a new integrable demand system, called the Doubly-Translated CDES demand system, which is well suited to theoretical and empirical work. Commonly used analytically and computationally tractable demand systems severely restrict key properties of demand, which parametrically pins down the answers to many important economic questions. The Doubly-Translated CDES demand system is flexible in important ways that common demand systems are not, while maintaining effective global regularity and global consistency. Using data, I provide examples of this demand system's flexibility by calibrating different parameter values. I discuss how this demand system can be estimated with regularity imposed and correcting for the endogeneity of prices using constrained Nonlinear GMM.

Thesis (Ph.D.)--University of Nebraska-Lincoln, 2006. / Title from title screen (site viewed May 9, 2007). PDF text: vi, 70 p. ; 0.69Mb UMI publication number: AAT 3237386. Includes bibliographical references. Also available in microfilm and microfiche formats.

This thesis is a theoretical analysis of optimal pricing by firms when consumer demands are uncertain. The purpose is to extend the familiar literature on single-product nonlinear pricing in two directions: to cases where the firm is regulated and to the case where the firm produces several products. Chapter 1 embeds these problems into the general setting of models of asymmetric information and, as well as covering existing work on the pricing decisions of firms facing adverse selection, discusses other areas including repeated contracts, auctions, signalling and the uses of what is known as the 'first-order approach'. Chapter 2 analyzes nonlinear pricing by a regulated single-product firm. As an alternative to requiring the firm to offer a given linear tariff two different types of regulation which allow nonlinear pricing are considered, namely, average revenue regulation and optional tariff regulation. Chapter 3 introduces the topic of multiproduct pricing when consumers have differing tastes for the various goods. The important simplifying assumption is that consumers wish to buy either one unit of a good or none at all. There are three main results: if consumers' taste parameters are continuously distributed then the firm will not offer all goods to all consumers; in the symmetric two-good case it is shown that (subject to a kind of 'hazard rate' condition) the firm will offer the bundle of two goods at a discount compared with the charge for the two goods separately; and the pricing strategy when the number of goods becomes large is solved approximately. Chapter 4 relaxes the assumption of unit demands and uses differential methods to analyze the multiproduct nonlinear pricing problem. In the symmetric case when taste parameters are continuously distributed the firm will choose to exclude some low-demand consumers from the market. It is shown that when parameters are independently distributed the firm will wish to introduce a degree of cross-dependence into its tariff. Sufficient conditions for a tariff to be optimal are derived and any tariff which satisfies these conditions necessarily will induce 'pure bundling', so that once a consumer decides to participate in the market at all she will choose to buy all goods. A class of cases is solved explicitly using these sufficient conditions. Since other solutions may be hard to solve analytically, a procedure for numerically generating solutions for the two-good case is described and two more solutions are described.

There are two main views of advertising – the informative view and the persuasive view. This thesis studies aspects of the informative view. One aspect of interest is whether firms can benefit from collusion on advertising even though advertising is only informative. If so, will this enhance or lower welfare? There are several reasons why firms may want to collude on adver­tising. First, the legal field is tilted in favour of nonprice collusion. Second, it is not at all obvious that collusion on price is more profitable than collusion on advertising and third, the analyses of Grossman and Shapiro (1984) and others show that profits can be increased by restricting advertising. In Paper 1, we examine firms’ incentives to collude on advertising and the implications for welfare. We find that collusion on advertising and competition on price is more profitable than competition on both price and advertising. We also find that semicollusion on advertising is detrimental to welfare. This suggests a need for monitoring, especially since it is in the interest of firms to restrict price advertising. We also compare semicollusion on price to semicollusion on advertising. We find that, in general, semicollusion on price does not lead to higher profits compared to semicollusion on advertising. Hence we lend theoretical support to the empirical literature that consistently find evidence of semicollusion on advertising rather than on price. Another important issue concerns the effect, on prices and profits, of ad-vertising only a subset of the product range. Many firms, in particular those in the retail sector, sell a wide variety of products but only advertise a few. Recent empirical evidence suggests that prices of unadvertised products are higher (Milyo and Waldfogel, 1999). Theoretically, little is known. In Paper 2, we study the effects of advertising only a subset of products. We allow for both low and high differentiation and, at the same time, we explicitly model the advertising decision. We find that the extend of differentiation between competing firms plays an important role in the analysis of loss leader pricing. When firms sell products with the same reservation price, loss leader pric­ing obtains only when differentiation is low. When products are less similar however, price competition is less intense and, as a result, firms advertise prices above marginal cost. Our loss leader pricing results enable us to shed some light on the seemingly paradoxical empirical findings in the marketing literature that loss leader pricing fails to increase store traffic, loss leader sales and hence to increase profits. We also consider a different subject – price discrimination. Although it is well understood that movements in the exchange rate have a bearing on firm profitability and hence affect firm behaviour, the role of exchange rate variability in the firm’s choice of the number of varieties to produce has (to my knowledge) not been explored. This, despite the fact that the product mix is an important aspect of firm strategy. By tinkering with the number of varieties, a firm can bolster its ability to extract consumer surplus. In Paper 3, we explore this issue. We show that variability in the exchange rate induces the firm to vertically segment markets (i.e., offer two varieties in each market). This happens because exchange rate variability affects income dispersion and hence the firm’s incentives to extract consumer surplus. To better extract surplus, the firm offers two price-quality menus, high quality variant (priced high) for top-end surplus extraction and a low quality variety (priced low) to address market coverage concerns. / <p>Diss. Stockholm : Handelshögskolan, 2005 S. 3-9: sammanfattning, s. 13-95: 3 uppsatser</p>

The growth of population and business during the rapid urbanization process in the twentieth century has generated significant demand for transportation. As the demands have grown, road and air transportation are suffering from significant congestion and delays. Continuing expansion of highways and airports has become both expensive and difficult, along with not being able to provide adequate solutions to the growing congestion. One alternative, which is being pursued by many countries, is to invest in efficient high-speed rail networks to meet the pressing demand for mass passenger transportation. This alternative is also one that may have beneficial impacts by reducing energy consumption and alleviating some of the environmental concerns. But to make these infrastructure investments, governments need to make difficult decisions due to the complexity of the industry and technologies involved. This thesis examines decision making by government for such investments. In order to carefully study the industry, we use a two part approach. First, we examine the HSR industry supply-chain. We create a detailed taxonomy of the industry supply-chain and highlight various aspects of the advanced technologies being used, the sophisticated multiproduct nature of the firms, and the diverse international location of the companies. Second, we gather information on all the international HSR contracts between 2001-2011. These contracts enable us to examine business strategies pursued by the major HSR trainset suppliers and component manufacturers, insights into the size of the orders and type of trainsets being delivered, and the formation of partnerships and collaborations to meet the complex demands imposed by Governments when they invite bids for these expensive projects. A detailed examination of the supply-chain shows that the core technologies and competencies are highly concentrated in those countries which historically have had high demand for high-speed rail. Germany, Japan, France, for example, have the highest number of trainset and component suppliers. In more recent years, South Korea and China have emerged as the new frontiers of trainset and components suppliers. This implies that countries who are outside of this group are highly dependent on either importing these technologies and investments or make a concerted effort to develop them via partnerships and technology transfer agreements. Our examination of contracts shows that the size of HSR investment order is important for both business and government strategy. The order size determines the extent of domestic content and production. While many components will inevitably be imported, a larger order size may allow for various components to be manufactured domestically. Order size also appears to influence the nature of partnerships among the firms in the industry. We observe a growing number of HSR investment partnerships among trainset suppliers over time, possibly due to the need to pool risk in these highly complex and uncertain investments, as well as the changing competitive dynamic of HSR markets.