In 2010 Spirit airlines announced that it would start charging passengers for carry-on baggage. Using a generalized diff-in-diff estimation, we examine the impact of Spirit’s policy change on its rivals’ prices. Our results show that Spirit’s rivals reduce their prices by about 5% after Spirit’s baggage fee policy. Looking further on the price distribution, we find that the policy impact is larger for prices at the 50-percentile, relative to prices at the 80-percentile and 20percentile. Next, we take into account the outsourcing status of Spirit’s rivals, i.e., whether they operate their own flights or outsource to regional airlines. Our results show that in response to Spirit’s carry-on baggage fee policy, relative to carriers which do not outsource, carriers who outsource reduce their ticket prices significantly more. Due to the common nature of the outsourcing contracts between major and regional carriers, our results suggest that major carriers, facing Spirit’s policy change, shift much of the burden of price reduction to the regional carriers they contract with.
{"title":"Competitive Response to Unbundled Services: An Empirical Look at Spirit Airlines","authors":"Lei He, Myongjin Kim, Qihong Liu","doi":"10.2139/ssrn.3193708","DOIUrl":"https://doi.org/10.2139/ssrn.3193708","url":null,"abstract":"In 2010 Spirit airlines announced that it would start charging passengers for carry-on baggage. Using a generalized diff-in-diff estimation, we examine the impact of Spirit’s policy change on its rivals’ prices. Our results show that Spirit’s rivals reduce their prices by about 5% after Spirit’s baggage fee policy. Looking further on the price distribution, we find that the policy impact is larger for prices at the 50-percentile, relative to prices at the 80-percentile and 20percentile. Next, we take into account the outsourcing status of Spirit’s rivals, i.e., whether they operate their own flights or outsource to regional airlines. Our results show that in response to Spirit’s carry-on baggage fee policy, relative to carriers which do not outsource, carriers who outsource reduce their ticket prices significantly more. Due to the common nature of the outsourcing contracts between major and regional carriers, our results suggest that major carriers, facing Spirit’s policy change, shift much of the burden of price reduction to the regional carriers they contract with.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"34 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82708500","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Firms offer a variety of products to meet different customer needs. In many horizontally differentiated markets, prices are stable, and firms make infrequent adjustments to their product lines. Although prior research focused on product line design, we investigate how firms should allocate their marketing effort when their product lines are fixed. We propose a simple model to analyze product line marketing. Our model exhibits a flagship product effect in which the firm’s optimal marketing effort is concentrated, provided that the ratio between consumer tastes dispersion and the convexity of the cost of marketing effort is below a threshold. The flagship product is selected according to a marketing effort allocation index that measures the trade-off between a product’s markup and its potential market share. This result is robust with or without competition and whether prices are exogenous or endogenous. Firms often experience shocks to their marketing cost because of technological improvement or externalities. If a monopolist’s cost of marketing effort declines, she should place more emphasis on a low-utility, high-markup product. Conversely, if the cost increases, the monopolist may find it beneficial to focus her marketing effort on a high-utility, low-markup product. When multiproduct firms compete against each other, we show that if the opponent’s cost of marketing effort decreases, there can be a spillover effect, in which the firm benefits from the opponent’s cost reduction, thereby leading to a win-win situation. This paper was accepted by Dmitri Kuksov, marketing.
{"title":"A Model of Product Line Marketing","authors":"Chuan He, Shaowei Ke, Xingtan Zhang","doi":"10.2139/ssrn.3631879","DOIUrl":"https://doi.org/10.2139/ssrn.3631879","url":null,"abstract":"Firms offer a variety of products to meet different customer needs. In many horizontally differentiated markets, prices are stable, and firms make infrequent adjustments to their product lines. Although prior research focused on product line design, we investigate how firms should allocate their marketing effort when their product lines are fixed. We propose a simple model to analyze product line marketing. Our model exhibits a flagship product effect in which the firm’s optimal marketing effort is concentrated, provided that the ratio between consumer tastes dispersion and the convexity of the cost of marketing effort is below a threshold. The flagship product is selected according to a marketing effort allocation index that measures the trade-off between a product’s markup and its potential market share. This result is robust with or without competition and whether prices are exogenous or endogenous. Firms often experience shocks to their marketing cost because of technological improvement or externalities. If a monopolist’s cost of marketing effort declines, she should place more emphasis on a low-utility, high-markup product. Conversely, if the cost increases, the monopolist may find it beneficial to focus her marketing effort on a high-utility, low-markup product. When multiproduct firms compete against each other, we show that if the opponent’s cost of marketing effort decreases, there can be a spillover effect, in which the firm benefits from the opponent’s cost reduction, thereby leading to a win-win situation. This paper was accepted by Dmitri Kuksov, marketing.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74219888","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction’s pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them.
{"title":"Do Pay-as-Bid Auctions Favor Collusion? Evidence from Germany's Market for Reserve Power","authors":"Sven Heim, G. Götz","doi":"10.2139/ssrn.2278873","DOIUrl":"https://doi.org/10.2139/ssrn.2278873","url":null,"abstract":"We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction’s pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"39 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79857220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Score auctions are used in procurement to incorporate other attributes beyond price. We establish nonparametric econometric identification of bidders' pseudotypes (a measure of bidder's private cost), when bids are evaluated using a preannounced quasi-linear score, calculated on the basis of the submitted levels of the attributes. Hence, we extend the standard nonparametric method for independent private costs sealed-bid, first price auctions, to multi-attribute quasi-linear score auctions. We illustrate the result with an application to scoring bid data.
{"title":"Nonparametric Identification and Estimation of Score Auctions in Multi-Attribute Procurement","authors":"Bernardo F. Quiroga, Felipe Aldunate","doi":"10.2139/ssrn.2352567","DOIUrl":"https://doi.org/10.2139/ssrn.2352567","url":null,"abstract":"Abstract Score auctions are used in procurement to incorporate other attributes beyond price. We establish nonparametric econometric identification of bidders' pseudotypes (a measure of bidder's private cost), when bids are evaluated using a preannounced quasi-linear score, calculated on the basis of the submitted levels of the attributes. Hence, we extend the standard nonparametric method for independent private costs sealed-bid, first price auctions, to multi-attribute quasi-linear score auctions. We illustrate the result with an application to scoring bid data.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"488 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76380420","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study contests with technological uncertainty, where contestants can invest in different technologies of uncertain value. The principal, who is also uncertain about the value of the technologies, can disclose an informative yet noisy public signal about the merit of each technology. The signal can focus contestants’ investments into more promising technologies or increase diversification. We characterize the principal’s optimal disclosure of information about the technologies, which depends on the value of diversification, the informativeness of available signals, and the ex-ante beliefs of the likelihood of success for each technology. We also find that under some conditions offering larger prizes or having more contestants decreases the extent of information disclosure.
{"title":"Diversification and Information in Contests","authors":"Jorge Lemus, Emil Temnyalov","doi":"10.2139/ssrn.3373326","DOIUrl":"https://doi.org/10.2139/ssrn.3373326","url":null,"abstract":"We study contests with technological uncertainty, where contestants can invest in different technologies of uncertain value. The principal, who is also uncertain about the value of the technologies, can disclose an informative yet noisy public signal about the merit of each technology. The signal can focus contestants’ investments into more promising technologies or increase diversification. We characterize the principal’s optimal disclosure of information about the technologies, which depends on the value of diversification, the informativeness of available signals, and the ex-ante beliefs of the likelihood of success for each technology. We also find that under some conditions offering larger prizes or having more contestants decreases the extent of information disclosure.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"19 2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90407508","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Devising well-behaved constant market share decomposition indices has been the pursuit of many researchers since the 1950s. This article proposes a new formulation of constant market share (CMS) trade analysis inspired by the statistical principles supporting revealed comparative advantages (RCA). This novel approach is methodologically consistent and rooted in information theory. It avoids also the discrete-form residuals that plague traditional CMS analysis, while remaining simple to compute. It is shown that both CMSD and RCA can be paired together in order to shed light on the dynamics of competitiveness and comparative advantages in international trade. This abridged version corresponds to the methodological sections of the publication “Revisiting constant market share analysis, an application to NAFTA” published by the Economic Commission for Latin America and the Caribbean. In the original version, the new “comparative market share analysis” decomposition (CMSD) is applied to the changes in the structure and origin of United States imports after the implementation of NAFTA.
{"title":"Revisiting Constant Market Share Analysis, An Application to NAFTA (Abridged Version)","authors":"H. Escaith","doi":"10.2139/ssrn.3916981","DOIUrl":"https://doi.org/10.2139/ssrn.3916981","url":null,"abstract":"Devising well-behaved constant market share decomposition indices has been the pursuit of many researchers since the 1950s. This article proposes a new formulation of constant market share (CMS) trade analysis inspired by the statistical principles supporting revealed comparative advantages (RCA). This novel approach is methodologically consistent and rooted in information theory. It avoids also the discrete-form residuals that plague traditional CMS analysis, while remaining simple to compute. It is shown that both CMSD and RCA can be paired together in order to shed light on the dynamics of competitiveness and comparative advantages in international trade. This abridged version corresponds to the methodological sections of the publication “Revisiting constant market share analysis, an application to NAFTA” published by the Economic Commission for Latin America and the Caribbean. In the original version, the new “comparative market share analysis” decomposition (CMSD) is applied to the changes in the structure and origin of United States imports after the implementation of NAFTA.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"25 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81039751","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the pricing strategy of retailers that promote their sales with a loyalty program.
我们研究了通过忠诚计划促进销售的零售商的定价策略。
{"title":"Consumer Loyalty Programs and Retail Prices: Evidence from Gasoline Markets","authors":"Federico M. Rossi, Pradeep K. Chintagunta","doi":"10.2139/ssrn.3852324","DOIUrl":"https://doi.org/10.2139/ssrn.3852324","url":null,"abstract":"We study the pricing strategy of retailers that promote their sales with a loyalty program.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"18 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82063950","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Central counterparties (CCPs) are systemically important. When a clearing member defaults, the CCP sells the defaulted portfolio to surviving members in an auction, and losses, if any, are partly absorbed by a cash pool prefunded by the surviving members. We propose a tractable auction model that incorporates this salient feature. We find that ``juniorization'' -- the CCP first uses prefunded cash of members who submit bad bids -- increases the auction price. Aggressive juniorization can push the auction price above the fair value and almost eliminate the need to use prefunded resources. Nonetheless, juniorization generates heterogeneous impact on members of different sizes.
{"title":"CCP Auction Design","authors":"Wenqian Huang, Haoxiang Zhu","doi":"10.2139/ssrn.3804190","DOIUrl":"https://doi.org/10.2139/ssrn.3804190","url":null,"abstract":"Central counterparties (CCPs) are systemically important. When a clearing member defaults, the CCP sells the defaulted portfolio to surviving members in an auction, and losses, if any, are partly absorbed by a cash pool prefunded by the surviving members. We propose a tractable auction model that incorporates this salient feature. We find that ``juniorization'' -- the CCP first uses prefunded cash of members who submit bad bids -- increases the auction price. Aggressive juniorization can push the auction price above the fair value and almost eliminate the need to use prefunded resources. Nonetheless, juniorization generates heterogeneous impact on members of different sizes.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"35 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86955833","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Companies that experience a disruption in their supply chain often face a difficult decision -- either accept the information that they have regarding the duration of the disruption, or invest in collecting better information. This choice is not clear since better information may not be attainable, and if it is attainable, it may not improve operational decision-making. In light of this dilemma, we collaborate with a multinational division of a Fortune 500 manufacturing firm to develop stochastic linear programming models that quantify the value of disruption duration information. Our models allow us to examine characteristics of the disrupted part that may be associated with the value of better information. We focus on characteristics that are knowable at the outset of the disruption, as those can help the firm decide whether to invest in collecting better information. Using our research partner's supply chain and production data, we find that the value of information can vary materially - from less than 1% to over 99% of the cost of the disruption, underscoring the value of identifying disruptions that are sensitive to information quality. To address this, we use the company's data to identify several part-related characteristics that influence the value of disruption duration information. These findings can help managers to identify parts in their own supply chains whose impact in a disruption is sensitive to different levels of duration information, and allow them to make informed decisions on whether or not to gather better information when a disruption strikes.
{"title":"The Value of Supply Chain Disruption Duration Information","authors":"Mili Mehrotra, W. Schmidt","doi":"10.1111/POMS.13415","DOIUrl":"https://doi.org/10.1111/POMS.13415","url":null,"abstract":"Companies that experience a disruption in their supply chain often face a difficult decision -- either accept the information that they have regarding the duration of the disruption, or invest in collecting better information. This choice is not clear since better information may not be attainable, and if it is attainable, it may not improve operational decision-making. In light of this dilemma, we collaborate with a multinational division of a Fortune 500 manufacturing firm to develop stochastic linear programming models that quantify the value of disruption duration information. Our models allow us to examine characteristics of the disrupted part that may be associated with the value of better information. We focus on characteristics that are knowable at the outset of the disruption, as those can help the firm decide whether to invest in collecting better information. Using our research partner's supply chain and production data, we find that the value of information can vary materially - from less than 1% to over 99% of the cost of the disruption, underscoring the value of identifying disruptions that are sensitive to information quality. To address this, we use the company's data to identify several part-related characteristics that influence the value of disruption duration information. These findings can help managers to identify parts in their own supply chains whose impact in a disruption is sensitive to different levels of duration information, and allow them to make informed decisions on whether or not to gather better information when a disruption strikes.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"284 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90793655","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper reviews emerging issues with respect to market power and user privacy in digital commerce, and implications for the use of personalization by providers of products and services. It argues that advances in various forms of AI, machine learning, and related software tools allow for the effective use of digitally-generated behavioral data, both live and historical, as well as addressing concerns about market power and digital privacy. The contribution of this paper is to integrate the treatment of personalization based on behavioral data with concerns about privacy and market power in digital networks, to illustrate effective solutions to these problems, and bring out the managerial implications of this approach.
{"title":"Power, Privacy and Personalization in Digital Commerce","authors":"Nirvikar Singh, Rajiv Sunkara, Simon Yencken","doi":"10.2139/ssrn.3780726","DOIUrl":"https://doi.org/10.2139/ssrn.3780726","url":null,"abstract":"This paper reviews emerging issues with respect to market power and user privacy in digital commerce, and implications for the use of personalization by providers of products and services. It argues that advances in various forms of AI, machine learning, and related software tools allow for the effective use of digitally-generated behavioral data, both live and historical, as well as addressing concerns about market power and digital privacy. The contribution of this paper is to integrate the treatment of personalization based on behavioral data with concerns about privacy and market power in digital networks, to illustrate effective solutions to these problems, and bring out the managerial implications of this approach.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"11 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82884250","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：