Browsing by Subject "Economics, Commerce-Business"
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Item Open Access Essays in Industrial Organization(2014) Lee, ChungYingThe dissertation consists of three chapters relating to pricing strategies. Chapter 1 studies coupons for prescription drugs and their impacts on consumer welfare, firm profits, and insurance payments. Chapter 2 examines consumer brand loyalty and learning in pharmaceutical demand and discusses implications for marketing and health care policy. Chapter 3 develops a framework for estimating demand and supply in an online market with many competing sellers and frequent price changes and proposes optimal pricing strategies for a large seller.
The first chapter studies an innovative price strategy in pharmaceuticals. Branded drug manufacturers have recently started to issue copay coupons as part of their strategy to compete with generics when their branded drugs are coming off patent. To explore the welfare implications of copay coupons, I estimate a model of demand and supply using pharmaceutical data on sales, prices, advertising, and copayments for cholesterol-lowering drugs and perform a counterfactual analysis where a branded manufacturer introduces coupons. The model allows flexible substitution patterns and consumer heterogeneity in price sensitivities and preferences for branded drugs. The counterfactuals quantify the effects of copay coupons for different assumptions about the take-up of coupons and the ability of the branded manufacturer to direct them to the most price-sensitive types of consumers. The results show that the agency problem between insurers and patients gives a branded manufacturer a strong incentive to issue copay coupons. Introducing copay coupons benefits the coupon issuer and consumers but raises insurance payments. In equilibrium, insurer spending can increase by as much as 25% even when just 5% of consumers have a coupon, with social welfare falling significantly.
Medicines for chronic conditions like high cholesterol, heart disease, and diabetes are repeatedly used for a long period of time. Consumer dynamics thus plays an important role in the demand for those drugs. In the second chapter, I estimate a demand model with brand loyalty and learning using micro-level data from cholesterol lowering drug markets in the United States. The estimates suggest high switching costs and strong learning effects at the molecule level in the markets. Switching costs raise the predicted probability of choosing the same drugs in a row and learning largely increases patient stickiness to a molecule in the long run. I discuss pricing implications of the estimation results for drug manufacturers, insurance companies, and policy makers.
The last chapter, coauthored with Dr. Andrew Sweeting and Dr. James W. Roberts, looks at pricing in a different context. We estimate a model of entry, exit and pricing decisions in an online market for event tickets where there are many competing sellers and prices change frequently. We use the estimates from our model to analyze the optimality of the pricing policy used by the largest seller (broker) in the market. We show that the broker's pricing policies substantially affect the prices set by his competitors. When we compare the broker's pricing policy with the prices that our model predicts are optimal we find that the broker sets approximately correct prices close to the game, when his pricing problem resembles a static one, but that he might be able to gain from using different pricing rules and updating prices more frequently further from the game.
Item Open Access Essays in Industrial Organization(2015) Mazur, Lawrence JosephThis dissertation extends the economics literature in industrial organization with three empirical essays on the strategic decisions of firms in imperfectly competitive markets. Using data from the U.S. airline industry, I combine reduced-form analysis with recent econometric advances in the estimation of dynamic games to examine the market-level and industry-level behavior of oligopolistic firms. The first essay presents a framework for sensitivity analysis in merger simulation. The second essay continues the market-level analysis of merger effects by examining how airline mergers influence price dispersion. The third essay shifts focus to industry-level investment behavior, examining the role played by bankruptcy policy in disciplining capital investment.
Item Open Access Essays on Privacy, Information, and Anonymous Transactions(2009) Wagman, LiadThis 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.