This dissertation consists of three essays examining how and why firms set prices in markets. In particular, this dissertation shows how firms may utilize nonlinear pricing to price discriminate, how firms may experiment with the prices they set to learn about the demand function in the market they serve in later periods and the effects of these pricing strategies on consumer welfare. In Essay 1, I show how firms in the milk market use nonlinear price schedules -- quantity discounts -- to price discriminate and increase profits. I find that firms have a greater ability to price discriminate on their own ``private label'' products rather than regional branded that they sell alongside their own. Though some consumers benefit from a lower price as a result of the price discrimination, total consumer surplus is lower than if the store had to offer a fixed price per unit. Additionally, I compare my structural demand estimates, which using the Nielsen household panel data include consumer demographic information and actual household choices, to the standard approach in the literature on price discrimination that uses only market level data. By doing so I find that ignoring demographic information and actual consumer choices leads to biased parameter estimates. In the case of the milk market, the biased parameter estimates due to ignoring household demographic information and actual consumer choices lead to underestimating welfare harm to consumers on average. After finding that price discrimination harms consumers overall in this market, I quantify which consumer demographic are better off and which are worse off. I find that households with children and low income households with children are the only households to benefit from the price discriminatory practices of firms in this market. Since these groups are particularly vulnerable, I suggest that policymakers take no action to correct this market, as any action will directly hurt these consumer groups. In Essay 2, I study how firms learn about the demand in a new market by exploiting a significant change in Washington's state's liquor laws. In 2012, the state of Washington switched from a price-controlled state-store system of selling liquor to one in which private sellers could sell liquor with minimal restrictions on price and range of products. As a result, a heterogeneous group of firms entered the liquor market across the state with little knowledge of the regional demand for alcohol in the state of Washington across heterogeneous localities. Using the Nielsen retail scanner data I am able to observe the variation in pricing and offerings seasonally and over time to see if there is convergence in offerings and prices, and how quickly that convergence occurs across different localities depending on local demographics and competition. I also investigate the extent to which the variation is "experimentation'' by the firms, i.e., the firms purposely experimenting to learn more about demand and the extent that local demographics and competition can affect the experimentation and whether there are spill-overs from local competition (i.e. do firms learn from each other and does this effect how much they experiment and how quickly they learn). My main findings are that over time, firms within this market have learned better how to price discriminate over the holiday season; firms experiment more with prices for the pint sized products than the larger sizes; and that menu of options that firms have offered has been expanding but at a slower rate, suggesting that they are approaching a long-run steady state for the optimal menu of options.

<p>Svensk musikindustri har under de senaste årtiondena åtnjutit stora framgångar på den internationella marknaden. Export Music Sweden grundades för att stötta och marknadsföra svensk populärmusik utomlands. VD Christer Lundblad sade 2003 att intäkter från konserter ökar kraftigt. Anledningar till detta kan vara att den ökande illegala nedladdningen av musik ger ett ökat ekonomiskt utrymme för konserter, samt att människor idag värderar upplevelser högre än tidigare. Eftersom mer pengar spenderas på konserter blir prissättningen mer betydelsefull. Ur ett rent ekonomiskt perspektiv borde konsertbiljetter prissättas för att maximera vinsten. Ett sätt att göra detta är att prisdiskriminera. Vi har funnit att detta inte görs i så stor utsträckning inom kon-sertindustrin, vilket har lett oss till att ta reda på varför så inte är fallet.</p><p>För att ta reda på varför inte prisdiskriminering sker i större utsträckning har vi intervjuat sju personer inom de grupper, i konsertindustrin, som påverkar prissättningen. Dessa grupper är artister, management, turnéproduktionsbolag och skivbolag. Vi har även studerat litteratur rörande prisdiskriminering och konsertindustrin, i form av ve-tenskapliga artiklar, böcker och rapporter.</p><p>Uppsatsen diskuterar hur prisdiskriminering av konserter går till, vilka som är inblandade i prissättningsbeslutet, samt deras syn på prisdiskriminering. Den tar även upp andra faktorer som påverkar prissättningen av konserter.</p><p>I uppsatsen kommer vi fram till att det finns två anledningar till att konserter inte prisdiskrimineras i större utsträckning. En anledning är praktisk och innebär att konsertplatsens attribut inte tillåter platsindelning och således prisdiskriminering. Den andra anledningen bygger på konsertarrangörers lättja samt artisters invändningar mot pris-diskriminering. Vi redogör även, utifrån undersökningens resultat, för att utvecklingen pekar på att konserter kommer att prisdiskrimineras i större utsträckning i framtiden.</p> / <p>Swedish music industry has, during the latest decades, been highly successful interna-tionally. Export Music Sweden, ExMS was founded to support and market Swedish music abroad. ExMS Managing Director Christer Lundblad said in 2003 that the income made from concerts is growing rapidly. The reason for that development might be that the illegal downloading of music leave people more money left to spend on concerts. Furthermore, the development might spawn from the fact that people value experiences higher than before. Moreover, when more money is spent on concerts the pricing becomes more important than ever. Concert tickets should, if seen in an economical perspective, be priced to maximize revenue. One way of doing that is to price discriminate. We have, through a pre-study on the subject, established that concerts are not price discriminated as extensively as they could. That fact has made us curious as to why that is.</p><p>In order to find out why concerts are not price discriminated more extensively we have interviewed seven people belonging to groups involved in the pricing process of concerts. These groups are artists, managers, concert arrangement agencies and record labels. Furthermore, we have studied literature on price discrimination and the concert industry.</p><p>The thesis discusses the pricing of concerts; which people who is involved in the decisions concerning the pricing of concerts and their views on the subject. In addition, the thesis also contains other factors influencing the pricing of concerts.</p><p>In conclusion, we find that there are two reasons explaining why concerts are not price discriminated more extensively. One is practical and involves the fact that some concert venue attributes does not allow price discrimination, since the crowd cannot be divided into different sections. The other reason is the fact that concert arrangement agencies are to comfortable to price discriminate, and that artists are unwilling to price discriminate for different reasons. Furthermore, the thesis’s results indicate that concerts will be price discriminated more extensively in the future.</p>

Svensk musikindustri har under de senaste årtiondena åtnjutit stora framgångar på den internationella marknaden. Export Music Sweden grundades för att stötta och marknadsföra svensk populärmusik utomlands. VD Christer Lundblad sade 2003 att intäkter från konserter ökar kraftigt. Anledningar till detta kan vara att den ökande illegala nedladdningen av musik ger ett ökat ekonomiskt utrymme för konserter, samt att människor idag värderar upplevelser högre än tidigare. Eftersom mer pengar spenderas på konserter blir prissättningen mer betydelsefull. Ur ett rent ekonomiskt perspektiv borde konsertbiljetter prissättas för att maximera vinsten. Ett sätt att göra detta är att prisdiskriminera. Vi har funnit att detta inte görs i så stor utsträckning inom kon-sertindustrin, vilket har lett oss till att ta reda på varför så inte är fallet. För att ta reda på varför inte prisdiskriminering sker i större utsträckning har vi intervjuat sju personer inom de grupper, i konsertindustrin, som påverkar prissättningen. Dessa grupper är artister, management, turnéproduktionsbolag och skivbolag. Vi har även studerat litteratur rörande prisdiskriminering och konsertindustrin, i form av ve-tenskapliga artiklar, böcker och rapporter. Uppsatsen diskuterar hur prisdiskriminering av konserter går till, vilka som är inblandade i prissättningsbeslutet, samt deras syn på prisdiskriminering. Den tar även upp andra faktorer som påverkar prissättningen av konserter. I uppsatsen kommer vi fram till att det finns två anledningar till att konserter inte prisdiskrimineras i större utsträckning. En anledning är praktisk och innebär att konsertplatsens attribut inte tillåter platsindelning och således prisdiskriminering. Den andra anledningen bygger på konsertarrangörers lättja samt artisters invändningar mot pris-diskriminering. Vi redogör även, utifrån undersökningens resultat, för att utvecklingen pekar på att konserter kommer att prisdiskrimineras i större utsträckning i framtiden. / Swedish music industry has, during the latest decades, been highly successful interna-tionally. Export Music Sweden, ExMS was founded to support and market Swedish music abroad. ExMS Managing Director Christer Lundblad said in 2003 that the income made from concerts is growing rapidly. The reason for that development might be that the illegal downloading of music leave people more money left to spend on concerts. Furthermore, the development might spawn from the fact that people value experiences higher than before. Moreover, when more money is spent on concerts the pricing becomes more important than ever. Concert tickets should, if seen in an economical perspective, be priced to maximize revenue. One way of doing that is to price discriminate. We have, through a pre-study on the subject, established that concerts are not price discriminated as extensively as they could. That fact has made us curious as to why that is. In order to find out why concerts are not price discriminated more extensively we have interviewed seven people belonging to groups involved in the pricing process of concerts. These groups are artists, managers, concert arrangement agencies and record labels. Furthermore, we have studied literature on price discrimination and the concert industry. The thesis discusses the pricing of concerts; which people who is involved in the decisions concerning the pricing of concerts and their views on the subject. In addition, the thesis also contains other factors influencing the pricing of concerts. In conclusion, we find that there are two reasons explaining why concerts are not price discriminated more extensively. One is practical and involves the fact that some concert venue attributes does not allow price discrimination, since the crowd cannot be divided into different sections. The other reason is the fact that concert arrangement agencies are to comfortable to price discriminate, and that artists are unwilling to price discriminate for different reasons. Furthermore, the thesis’s results indicate that concerts will be price discriminated more extensively in the future.

Purpose: The purpose of this Bachelor is to analyze how the organizers of a Major event price their tickets and how these strategies consistent and differs from dynamic pricing. The study also aims to analyze whether there are conditions for dynamic pricing in Major events in the future. Theories: Dynamic pricing - Kimes model, Segmentation, price discrimination, variable ticket pricing. Method: The study used a triangulation where a qualitative interview was combined with quantitative data collection. Primary data was collected through a qualitative approach through an interview with General Secretary Tony Wiréhn and Marketing Director Malin Eldh in the local organization of the IIHF World Championship in Sweden. The quantitative data collection was to collect price information from the games played in the Swedish side of the World Championship organization arrangements. Conclusion: The conclusions that can be drawn are that the organizer of Ice Hockey World Championships today largely applies segmentation and also the second and third degree price discrimination. World Cup organization believes that it has something they call "semi-dynamic pricing", which according to this study involves a variable pricing with dynamic tendencies, then prices on some games adapted based on supply and demand during the sales period. The investigation has revealed that changes in pricing almost exclusively done by time-limited campaigns and not through a continuous influence of variables that control supply and demand. According to analysis by Kimes model revealed that future use of dynamic pricing in Major events are very possible, but there are some obstacles that must first be overcome.

This thesis will compare and examine three different chainsaw models with re-spect to price, elasticity, price discrimination, product differentiation and durabili-ty. The three different saws are all aiming at different customer groups; hobby users, leisure users and professional users. The demands and needs of this groups differs a lot. The hobby users have the largest amount of different saws to choose from, this is a field with many different brands and the quality varies a lot, this implies that here is a fierce competition with respect to price. This indirect affects the elastic-ity and possibilities to price discriminate and product differentiation. I found that this model has the highest elasticity which is perfectly inline with the theory. Here is also a low possibility to price discriminate and the durability is the low-est. The other two models examined, the leisure and professional, are located in less competitive segments and from this follows that the professional model which has the smallest amount of competitors also has the lowest elasticity. Here was also the possibility to price discriminate the highest, durability the best and the product were viewed as differentiated.

<p>This dissertation uses game theoretic models to examine the effects of agent anonymity on markets for goods and for information. In open, anonymous settings, such as the Internet, anonymity is relatively easy to obtain --- oftentimes another email address is sufficient. By becoming anonymous, agents can participate in various mechanisms (such as elections, opinion polls, auctions, etc.) multiple times. The first chapter (joint work with Vincent Conitzer) studies elections that disincentivize voters from voting multiple times. A voting rule is false-name-proof if no agent ever benefits from casting additional votes. In elections with two alternatives, it is shown that there is a unique false-name-proof voting rule that is most responsive to votes. The probability that this rule selects the majority winner converges to 1 as the population grows large. Methods to design analogous rules for elections with 3 or more alternatives are proposed. The second chapter (also joint work with Vincent Conitzer) extends the analysis in the first chapter to broader mechanism design settings, where the goal is to disincentivize agents from participating multiple times. The cost model from the first chapter is generalized and revelation principles are proven. The third chapter studies a setting where firms are able to recognize their previous customers, and may use information about consumers' purchase histories to price discriminate (which may incentivize consumers to be anonymous). The formal model considers a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity at some cost. It is shown that when consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the monopolist. Increasing the cost of anonymity can benefit consumers, but only up to a point; at that point, the effect is reversed. Some of the results are extended to a setting with two competing firms selling differentiated products. Finally, the cost of maintaining anonymity is endogenized by considering a third party that can make consumers anonymous for a fee of its choosing. It is shown that this third party would prefer to be paid by the firm for allowing consumers to costlessly maintain their anonymity.</p> / Dissertation

<p>The ability to digitize information goods such as music and movies and the growing accessibility of the Internet has led to online piracy and the emergence of a new class of retailers that specialize in digital downloads. Both online piracy and digital retailers have changed the dynamics of the information goods distribution channel. In my dissertation I focus on issues related to this change.</p><p>In the first chapter, "Digital music set free: the flip side of DRM," I study the effect of Digital Rights Management (DRM) mechanisms on the competition between traditional and digital retailers and on online piracy. DRM refers to technologies designed to control how end users may access, copy, or convert digital media. In the context of music downloads, DRM makes piracy of digital music more difficult, and until recently, most legal outlets for downloadable music only sold songs with DRM protection. Recently download retailers have convinced record companies to allow them to sell DRM-free music. The introduction of DRM-free music raises several important questions: Will music piracy increase as the opponents of DRM-free music predict? Will the music industry profits go up or down? How will CD retailers be affected? Will all labels start selling the unprotected (DRM-free) content? </p><p>I address these and related questions by developing a model of a music distribution channel that allows a record label to sell through both traditional CD retailers and iTunes-like download services at different wholesale prices. Among the interesting results, the analysis indicates that the level of piracy may decline when DRM protection is removed and that the traditional retailers much prefer to compete with distributors of pirated digital music rather than with legal music download services.</p><p>The competition between online and traditional retailers has led to interesting pricing policies on which I focus in the second chapter, "Digital movies at one simple price: the effect on competition." Online retailers tend to prefer uniform pricing (e.g. iTunes Store) where all "products" carry a single price, while traditional retailers do not have a policy of uniform prices. It is important to understand why one retailer should choose a single, uniform price and what impact it has on the competing retailer who chooses multiple prices. I focus specifically on the impact that single price policy adopted by digital retailer has on the traditional retailer. I also analyze the choice of uniform vs. differentiated pricing by modeling the competition between online and traditional retailers for vertically differentiated information goods. Importantly, I demonstrate how the asymmetric equilibrium we observe in the market today can change systematically with the nature of competition between the retailers.</p> / Dissertation

This dissertation analyzes pricing under uncertainty focusing on the U.S. airline industry. It sets to test theories of price dispersion driven by uncertainty in the demand by taking advantage of very detailed information about the dynamics of airline prices and inventory levels as the flight date approaches. Such detailed information about inventories at a ticket level to analyze airline pricing has been used previously by the author to show the importance of capacity constraints in airline pricing. This dissertation proposes and implements many new ideas to analyze airline pricing. Among the most important are: (1) It uses information about inventories at a ticket level. (2) It is the first to note that fare changes can be explained by adding dummy variables representing ticket characteristics. Therefore, the load factor at a ticket level will lose its explanatory power on fares if all ticket characteristics are included in a pricing equation. (3) It is the first to propose and implement a measure of Expected Load Factor as a tool to identify which flights are peak and which ones are not. (4) It introduces a novel idea of comparing actual sales with average sales at various points prior departure. Using these deviations of actual sales from sales under average conditions, it presents is the first study to show empirical evidence of peak load pricing in airlines. (5) It controls for potential endogeneity of sales using dynamic panels. The first essay tests the empirical importance of theories that explain price dispersion under costly capacity and demand uncertainty. The essay calculates a measure of an Expected Load Factor, that is used to calibrate the distribution of demand uncertainty and to identify which flights are peak and which ones are off-peak. It shows that different prices can be explained by the different selling probabilities. The second essay is the first study to provide formal evidence of stochastic peak-load pricing in airlines. It shows that airlines learn about the demand and respond to early sales setting higher prices when expected demand is high and more likely to exceed capacity.

I study the impact of the used goods market on pricing and profits in the video game industry and the implications of resale restrictions. I develop a modeling framework that incorporates (a) heterogeneous consumers who are forward looking in their buying an selling behaviors, (b) a strategic game producer who prices its products considering both inter-temporal price discrimination and price competition with used goods, (c) rational expectations on future prices by both consumers and the firm, and (d) market equilibria for both new and used-goods markets. Without observing sales data, I use equilibrium pricing solutions in my model and the varying rate of price decrease after a game's release to identify the sales volume of a game in every period as a percentage of its total demand. I develop a computationally tractable utility specification to solve the computational challenge comes with modeling the supply side equilibrium. I construct the demand function for a game from heterogeneous consumers whose valuations distribute on an interval, and partially characterize the consumers' decisions and reduce the dimensionality of the state space. Applying the model to a unique dataset of game prices collected from the Internet, I estimate the game-specific demand for multiple games released in the U.S. market. The results show significant variation across games in terms of shapes of valuation distributions, expected play time, degrees of consumers' preference for new over used games, and price sensitivities. Policy simulations show that the effects of prohibiting resale largely depend on the shape of a game's demand distribution, because most of the profits are gained from higher-valuation consumers who purchase the game when the price is high. Prohibiting resale does not dampen their willingness to pay for the game because their high utility from playing it. Moreover, higher expected future prices in the absence of the used-game market further reduces their incentives to wait. I find the predicted profit increase is significant for most games when reselling is prohibited. However, games with demand consisting mostly of low valuation consumers benefit less from this structural change, because (a) early sales increase only slightly given a much smaller proportion of high valuation consumers and (b) losing the option to resell significantly decreases the willingness to pay for low valuation consumers, forcing the firm to slash its prices dramatically over time. I find empirical evidence that a firm can be better off with the used game market. This suggests that though eliminating the resale market is generally optimal for popular games, retaining it can be more profitable for some games. / text

This dissertation consists of three essays that study mergers and consolidation in the Canadian cable television industry. The first essay provides a historical overview of regulatory and technical change in the industry, and presents the dataset that I constructed for this study. The basic pattern of interest in the data is regional consolidation, where dominant cable companies grow over time by acquiring the cablesystems of small cable operators. I perform a reduced-form empirical analysis that formally studies the determinants of mergers, and the effect that acquisitions have on cable bundles offered to consumers. The remaining essays develop and estimate structural econometric models to further study the determinants and welfare consequences of mergers in the industry. The second essay estimates an empirical analogue of the Farrell and Scotchmer (1988) coalition- formation game. I use the estimated model to measure the equilibrium impact that economies of scale and agglomeration has on firms’ acquisition incentives. I also study the impact entry and merger subsidies have on consolidation and long-run market structure. The final chapter estimates a variant of the Rochet and Stole (2002) model of multi-product monopoly with endogenous quality and prices. Using the estimated model I compute the impact mergers have on welfare. I find that both consumer and producer surplus rise with acquisitions. I also show that accounting for changes both in prices and products (i.e., cable bundle quality) is important for measuring the welfare impact of mergers. / Thesis (Ph.D, Economics) -- Queen's University, 2010-12-09 14:39:15.431