Friday, January 7, 2022

Two-Sided Matching between Fashion Firms and Publishers: When Firms Strategically Target Consumers for Brand Image

Two-Sided Matching between Fashion Firms and Publishers: When Firms Strategically Target Consumers for Brand Image

 

 

Alex Yao Yao

Fowler College of Business, San Diego State University

Sha Yang

University of Southern California - Marshall School of Business

K. Sudhir

Yale School of Management; Yale University-Department of Economics; Yale University - Cowles Foundation

 

Abstract

Many fashion companies strategically choose publishers for advertising to target preferred consumers, because such consumers not only generate revenue, they also influence the companies’ brand image. Meanwhile, publishers also select companies because the ads posted by companies affect publishers’ image as well. It is important to jointly model the preferences of firms and publishers in this scenario, because observed advertising is an outcome of mutual selection from both sides. We develop a two-sided matching framework to model advertising as realized from such a two-sided selection process. The preference of a third party (consumers) is embedded in this framework through a consumer product choice model. Applying the proposed model to two unique datasets of fashion brand purchases, magazine readership, and advertising record, we are able to detect magazines and watch brands’ preferences separately. More expensive magazines also prefer more luxurious fashion watch brands. Watch brands prefer magazines with a potential consumer network with more male, well-educated and wealthy readers. Advertising effect is more prominent in terms of consumers’ awareness set formation compared to the brand purchase persuasion in general, but Asian brands can benefit more from advertising at the brand choice stage instead of the awareness formation stage.

January 7, 2022 | Permalink | Comments (0)

Thursday, January 6, 2022

Common Ownership Reduces Wages and Employment

Common Ownership Reduces Wages and Employment

 

José Azar

University of Navarra, IESE Business School; CEPR

Yue Qiu

Temple University

Aaron Sojourner

University of Minnesota; IZA Institute of Labor Economics

 

Abstract

In this study, we examine the effects of common ownership on labor market outcomes. We find that an increase in common ownership in a labor market is associated with decreases in both wages per employee and the employment-to-population ratio. We conduct an event study based on the acquisition of Barclays Global Investors by BlackRock in 2009. Using a synthetic control method, we find that markets that were more affected by the acquisition experienced post-acquisition decreases in annual wages per employee and employment-to-population ratio relative to the counterfactual of no acquisition. The estimated treatment effects of the acquisition were stronger in markets with higher unemployment rates, lower personal income per capita, lower population density, and stricter enforcement of noncompete clauses.

January 6, 2022 | Permalink | Comments (0)

Wednesday, January 5, 2022

Rising Markups and the Role of Consumer Preferences

Rising Markups and the Role of Consumer Preferences

 

Hendrik Döpper

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Alexander MacKay

Harvard University - Business School (HBS)

Nathan Miller

Georgetown University - Robert Emmett McDonough School of Business

Joel Stiebale

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

 

Abstract

We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. We use detailed data on prices and quantities for products in more than 100 distinct product categories to estimate demand systems with flexible consumer preferences. We recover markups under an assumption that firms set prices to maximize profit. Within each product category, we recover separate yearly estimates for consumer preferences and marginal costs. We find that markups increase by about 25 percent on average over the sample period. The change is attributable to decreases in marginal costs that are not passed through to consumers in the form of lower prices. Our estimates indicate that consumers have become less price sensitive over time.

January 5, 2022 | Permalink | Comments (0)

Tuesday, January 4, 2022

Merger efficiencies and price effects in differentiated Cournot oligopoly

Merger efficiencies and price effects in differentiated Cournot oligopoly

Jeremy Sandford

Compass Lexecon

Abstract

Suppose differentiated firms compete in quantities. This paper derives a formula for the minimum cost savings that would offset the incentive to increase price created by a merger. The formula depends only on pre-merger information on margins and demand slopes, and is invariant to demand and cost curvature. The paper then develops an algorithm to infer demand slopes -- and thus allow calibration of parameterized demand and cost curves -- from pre-merger data. While the Cournot model of quantity competition is commonly accompanied by an assumption that rivals' products are interchangeable, the inflexibility of this assumption and its implications opens the model to criticisms. The paper examines the advantages of relaxing the assumption of interchangeability, in particular greater consistency with pre-merger data and greater scope for profitable mergers. An extended numerical example illustrates the application of a differentiated Cournot model to a hypothetical industry.

January 4, 2022 | Permalink | Comments (0)

Monday, January 3, 2022

What Should We Do About The Big Tech Monopolies?

Randy Picker (Chicago) shares his thoughts on What Should We Do About The Big Tech Monopolies?

January 3, 2022 | Permalink | Comments (0)

Towards Efficient Information Sharing in Network Markets

Towards Efficient Information Sharing in Network Markets

 

 

Bertin Martens

Joint Research Centre; Tilburg Law and Economics Center (TILEC)

Geoffrey Parker

Dartmouth College

Georgios Petropoulos

Massachusetts Institute of Technology (MIT); Bruegel; Stanford University

Marshall W. Van Alstyne

Boston University – Questrom School of Business; Massachusetts Institute of Technology (MIT) - Sloan School

Abstract

Digital platforms facilitate interactions between consumers and merchants that allow collection of profiling information which drives innovation and welfare. Private incentives, however, lead to information asymmetries resulting in market failures both on-platform, among merchants, and off-platform, among competing platforms. This paper develops two product differentiation models to study private and social incentives to share information within and between platforms. We show that there is scope for ex-ante regulation of mandatory data sharing that improves social welfare better than competing interventions such as barring entry, break-up, forced divestiture, or limiting recommendation steering. These alternate proposals do not make efficient use of information. We argue that the location of data access matters and develop a regulatory framework that introduces a new data right for platform users, the in-situ data right, which is associated with positive welfare gains. By construction, this right enables effective information sharing, together with its context, without reducing the value created by network effects. It also enables regulatory oversight but limits data privacy leakages. We discuss crucial elements of its implementation in order to achieve innovation friendly and competitive digital markets.

January 3, 2022 | Permalink | Comments (0)