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on Industrial Organization |
| By: | Swati Singla (Department of Economics, Delhi School of Economic); Vishruti Gupta (Department of Economics, Delhi School of Economic) |
| Abstract: | We examine duopoly competition between firms with asymmetric quality, wherein firms compete sequentially in quality and price. We find that the partial shareholding of the high-quality firm in revenue (or profit) of the low-quality firm softens the competition. The market share of the high-quality firm decreases as the percentage of the share in revenue (or profit) increases. Further, we find that the improvement in quality by high-quality firm is lesser than by low-quality firms. The price charged by the high-quality firm is higher than that of the low-quality firm as the high-quality firm continues to have the quality advantage. Comparing the two scenarios, revenue sharing is more desirable than profit sharing for firms, giving higher total profits.Consumers and social planner prefer profit sharing between the firms as it leads to a higher surplus. |
| Keywords: | Revenue share, Profit share, Vertical differentiation, Hoteling line. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cde:cdewps:353 |
| By: | Ologunebi, John; Taiwo, Ebenezer; All, Kazeem |
| Abstract: | This research investigates digital consumer behavior in e-commerce through a comparative case study of Amazon and Temu's customer purchase decision-making processes in the UK and USA. As e-commerce continues to revolutionize retail landscapes, understanding the nuances of consumer behavior within digital environments is critical for businesses aiming to optimize marketing strategies and enhance user experiences. This study aims to shed light on how distinct elements such as consumer demographics, perceived value, and user experience influence purchasing decisions on these two platforms. The study utilizes a quantitative approach to gather insights from consumers who actively shop on Amazon and Temu. The survey captures demographic information and purchasing habits, while interviews provide deeper narratives about decision-making motivations and experiences. Key factors being explored include product variety, pricing strategies, brand loyalty, the impact of online reviews, and the role of personalization in the shopping experience. Preliminary findings suggest distinct consumer behavior patterns between the two platforms. Amazon functionalities such as advanced algorithms, extensive product offerings, and established brand trust appear to significantly influence customer loyalty and repeat purchases. Conversely, Temu's focus on low prices, foreign product access, and aggressive promotional strategies resonate particularly with cost-conscious shoppers, especially those in younger demographics keen on exploring new trends. These factors significantly alter how consumers engage with the brands and impact their overall satisfaction and likelihood of future purchases. This research also explores the geographic nuances of consumer behavior, highlighting how cultural differences between the UK and USA shape online shopping preferences and behaviors. The findings indicate that while both markets exhibit a reliance on price competitiveness, UK consumers may prioritize product quality and sustainability over sheer cost, whereas USA consumers display a greater inclination toward convenience and extensive product variety. The outcomes of this study have substantial implications for e-commerce businesses, suggesting tailored marketing strategies that consider the distinctive attributes of each platform and regional consumer preferences. By deepening the understanding of digital consumer behavior, this research contributes to existing literature on e-commerce and provides practical insights for enhancing customer engagement and satisfaction in an increasingly competitive digital marketplace. |
| Keywords: | Digital consumer behavior, Digital marketing strategies, E-commerce trends, Customer Purchase Decision, Digital marketing, Online shopping, Online Buying Behavior, Brand Loyalty, Understanding consumer psychology |
| JEL: | M30 M31 M37 M39 |
| Date: | 2024–12–25 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123096 |
| By: | Sumana Kundu (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | This paper studies the role of individuals' social concern in a monopoly vaccine market characterized by externalities, and the first-best public policy. Considering a voluntary vaccination environment and social concern as private information, we show the following. A `spread-preserving, mean-increasing' shift in distribution of social concern induces the monopolist to curb vaccine coverage, unless there is sufficient heterogeneity in social concern. A `mean-preserving, spread-increasing' shift enhances vaccine coverage if vaccine quality and its marginal direct health benefit are sufficiently large. If net intensity of externality is stronger or vaccine quality is higher, for the monopolist to increase vaccine coverage, it's necessary to have significant heterogeneity in social concern. Monopoly-induced downward distortion in market coverage can be corrected through alternative balanced-budget profit-neutral policy interventions. Under endogenous vaccine quality, the monopolist provides a partially-effective vaccine. A performance-linked R&D subsidy that achieves socially optimal vaccine quality depends on the distribution of social concern. |
| Keywords: | Heterogeneity in social concern, Network externality, Vaccine quality, Monopoly pricing, Social optimality, Public policy |
| JEL: | D91 D42 D62 I11 I18 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ind:igiwpp:2024-023 |
| By: | Herbert Dawid (Bielefeld University, Germany); Philipp Harting (Université Côte d'Azur, CNRS, GREDEG, France; Bielefeld University, Germany); Michal Neugart (Technical University of Darmstadt, Germany) |
| Abstract: | Artificial intelligence algorithms are increasingly used for online pricing and are seen as a major threat to competitive markets. We show that if firms use a deep Q-network (DQN) as an example of a state-of-the-art machine learning algorithm, prices are supra-competitive in duopoly but quickly move to competitive prices as the number of competitors in an oligopoly increases. This finding is very robust concerning variations of the exploration and learning rate used in the DQN algorithm. |
| Keywords: | algorithmic price setting, deep Q-network, oligopoly, supracompetitive prices |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-32 |
| By: | Markkanen, Jaakko |
| Abstract: | Abstract I study the transmission of pharmacy mark-ups to retail prices and the policy between retail markups and Value Added Tax (VAT) rates in Finland. My reduced form evidence demonstrates that pharmaceutical manufacturers respond to a decrease in the regulated pharmacy mark-ups by increasing their wholesale prices. I estimate a structural model of pharmaceutical supply and demand using data from the Finnish statin market. I show that only half of the decrease in the pharmacy-markup was transferred to retail prices. I also demonstrate that the government can address the increase in manufacturer revenues by increasing the VAT rate for pharmaceuticals. |
| Keywords: | Pharmaceuticals, Passthrough, Price regulation |
| JEL: | I11 H51 L51 C23 |
| Date: | 2024–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:123 |
| By: | Daniel Lüke (University of Giessen) |
| Abstract: | This paper examines the sales distribution and genre composition of the German book market across different retail channels—e-commerce, chain stores, and independent bookstores—over the period 2011-2018. Utilizing a unique dataset comprising weekly sales data of approximately 50, 000 top-selling book titles, the study challenges the economic relevance of the “long tail†effect, which suggests that niche products hold significant market share due to digitalization. Our findings reveal that both online and offline sales are heavily concentrated on a few best-selling titles, with the “long tail†products accounting for a negligible proportion of overall sales. However, a “middle tail†of moderately popular books, more prominent in online sales and independent bookstores, suggests diverse consumption patterns not captured by conventional models focusing on the extremes of sales distributions. We further observe significant differences in the genre composition and attributes of books sold across channels, filling a gap in the existing literature. For example, chain stores exhibit higher concentrations of bestsellers, while independent bookstores show a more diverse array of less recent titles. These findings imply that consumer preferences vary significantly by retail channel, indicating limited substitutability between channels. |
| JEL: | L81 L82 Z11 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:mar:magkse:202419 |
| By: | Po-Lin Chen (Graduate School of Economics, Waseda University) |
| Abstract: | I estimate a structural model of the Japanese bank deposit market, and evaluate the welfare impact of the mega-bank mergers in the early 2000s. Banks compete for deposits through their deposit rates to achieve profit maximization, whereas depositors choose among banks with given deposit rates. The estimation results show that depositors’ demand is insensitive to the deposit rate. Moreover, I find that the demand for deposits decreases when banks experience financial distress, even with deposit insurance coverage. Furthermore, when calculating welfare, I find that most of the mega-bank mergers lead to a reduction in consumer surplus compared with the counterfactual case of no mergers. The contributions of this study are that it quantifies the welfare effect of the mergers for the deposit market in Japan, where the financial market is heavily dominated by banks, and that it is likely to encourage future research on bank consolidation in Japan, which may contribute to verifying and resolving the long-discussed problem of overbanking in the Japanese financial market. |
| Keywords: | : : Deposit market; Discrete choice; Consumer welfare; Banking; Mergers and acquisitions |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2408 |