nep-ind New Economics Papers
on Industrial Organization
Issue of 2023‒05‒01
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Platform Design Biases in Ad-Funded Two-Sided Markets By Jay Pil Choi; Doh-Shin Jeon
  2. Measuring Fair Competition on Digital Platforms By Lukas J\"urgensmeier; Bernd Skiera
  3. Cancel the deal? An experimental study on the exploitation of irrational consumers By Cappelen, Alexander W.; Meissner, Stefan; Tungodden, Bertil
  4. Price Competition and Endogenous Product Choice in Networks: Evidence From the US Airline Industry By Christian Bontemps; Cristina Gualdani; Kevin Remmy
  5. The Unintended Consequences of Censoring Digital Technology - Evidence from Italy's ChatGPT Ban By David H. Kreitmeir; Paul A. Raschky
  6. The Effect of Product Quality and Price Fairness through Customer Loyalty on Local Skincare in Indonesia By Sheren Lanardi

  1. By: Jay Pil Choi (Michigan State University [East Lansing] - Michigan State University System); Doh-Shin Jeon (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We investigate how platform market power affects platforms' design choices in ad-funded two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the advertising side. We consider design choices affecting both sides in opposite ways and compare private incentives with social incentives. Platforms' design biases depend crucially on whether they can charge any price on the consumer side. We apply the framework to technology adoption, privacy, and ad load choices. Our results provide a rationale for a tougher competition policy to curb market power of ad-funded platforms with free services.
    Date: 2022–02–25
  2. By: Lukas J\"urgensmeier; Bernd Skiera
    Abstract: Digital platforms use recommendations to facilitate the exchange between platform actors, such as trade between buyers and sellers. Platform actors expect, and legislators increasingly require that competition, including recommendations, are fair - especially for a market-dominating platform on which self-preferencing could occur. However, testing for fairness on platforms is challenging because offers from competing platform actors usually differ in their attributes, and many distinct fairness definitions exist. This article considers these challenges, develops a five-step approach to measure fair competition through recommendations on digital platforms, and illustrates this approach by conducting two empirical studies. These studies examine Amazon's search engine recommendations on the Amazon marketplace for more than a million daily observations from three countries. They find no consistent evidence for unfair competition through search engine recommendations. The article also discusses applying the five-step approach in other settings to ensure compliance with new regulations governing fair competition on digital platforms, such as the Digital Markets Act in the European Union or the proposed American Innovation and Choice Online Act in the United States.
    Date: 2023–03
  3. By: Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Meissner, Stefan (Factworks GmbH); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: Consumers can sometimes be exploited because they make mistakes in their valuation of products. We present the results from a large-scale experimental study that examines whether third-party spectators from the general population in the United States cancel a deal where a buyer has made a mistake in the valuation of a product and agreed to pay more for the product than the seller knows it is worth. We find that the majority of the spectators cancel such deals even when the seller’s involvement is limited to accepting a proposal made by the buyer. A substantial share of these spectators are also willing to fine the seller. However, a large minority of the spectators are willing to uphold the deal even when the seller has proposed the deal and obfuscated the information provided to the buyer. Our results shed new light on when people view market transactions as acceptable and their attitudes to government regulation of businesses.
    Keywords: Consumers; irrational behavior
    JEL: D63
    Date: 2023–04–06
  4. By: Christian Bontemps; Cristina Gualdani; Kevin Remmy
    Abstract: We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between American Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes.
    Keywords: Endogenous Market Structure, Networks, Airlines, Oligopoly, Product Repositioning, Mergers, Remedies
    JEL: D43 L14 L22 L40 L93
    Date: 2023–03
  5. By: David H. Kreitmeir (SoDa Labs, Monash University); Paul A. Raschky (Department of Economics and SoDa Laboratories, Monash University)
    Abstract: We analyse the effects of the ban of ChatGPT, a generative pre-trained transformer chatbot, on individual productivity. We first compile data on the hourly coding output of over 8, 000 professional GitHub users in Italy and other European countries to analyse the impact of the ban on individual productivity. Combining the high-frequency data with the sudden announcement of the ban in a difference-in-differences framework, we find that the output of Italian developers decreased by around 50\% in the first two business days after the ban and recovered after that. Applying a synthetic control approach to daily Google search and Tor usage data shows that the ban led to a significant increase in the use of censorship bypassing tools. Our findings show that users swiftly implement strategies to bypass Internet restrictions but this adaptation activity creates short-term disruptions and hampers productivity.
    Keywords: chatgpt, productivity, internet, censorship, italy
    JEL: D72 D83 L86 L88
    Date: 2023–04
  6. By: Sheren Lanardi (BINUS Business School Undergraduate, 11480, Jakarta, Indonesia Author-2-Name: Dony Saputra Author-2-Workplace-Name: BINUS Business School Undergraduate, 11480, Jakarta, Indonesia Author-3-Name: Vanessa Virginia Author-3-Workplace-Name: BINUS Business School Undergraduate, 11480, Jakarta, Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: "Purpose - This study discusses the emergence of various local skincare companies that manufacture high-quality products at a fair price and have successfully attracted customer loyalty through their customer engagement. This paper aims to identify the effect of Product Quality and Price Fairness on Customer Loyalty and Customer Engagement as intervening variables in local skincare products. Methodology/Technique - This study used quantitative methods. The data collection technique is questionnaires distributed to 171 skincare users. All the data is processed with Path Analysis using double-multiple linear regression SPSS. Findings - The results are that Product Quality and Price Fairness have a significant effect on Customer Engagement and Customer Loyalty, Product Quality does not have a significant effect on Customer Loyalty, and Product Quality has a significant effect on Customer Loyalty through Customer Engagement. In contrast, Price Fairness does not significantly affect Customer Loyalty through Customer Engagement. Novelty - This research novelty is filling the gap of previous research by combining the direct effects of Product Quality and Price Fairness from several studies focusing on Customer Engagement as mediation to Customer Loyalty. Type of Paper - Empirical"
    Keywords: Customer Engagement; Customer Loyalty; Price Fairness; Product Quality; Skincare.
    JEL: F44 M20 M30
    Date: 2023–03–31

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