We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers' ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer's attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions -a quality or a participation distortion -can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition per se, we show that these constraints can be socially desirable if salience effects are taken into account. JEL-Codes: D210, K210, L420.Keywords: salience, online sales, antitrust, vertical restraints, distribution channels. Markus Dertwinkel-KaltUniversity IntroductionThanks to digitalization e-commerce is on the rise. Online sales have been steadily increasing, amounting in 2016 to $395 billion (11.7% of overall sales) in the United States and $1.9 trillion (8.7% of total retail spending) worldwide. 1 Many retailers offer their products both offline in brick-and-mortar stores and online via own online stores or platforms such as Amazon, ebay, Newegg, Alibaba, or Mercado Libre. Online sales offer two main advantages. First, they allow a reduction in retail costs for service and personnel. Second, they reduce shopping time and allow geographical distance to be overcome, both of which may enlarge the customer base. Therefore, online sales should have a positive impact both on a manufacturer's profit and on social welfare.Nevertheless, manufacturers have gone to great lengths to restrain internet sales, often claiming that low internet prices harm their brand's image. Along these lines, "protecting my company's brand image" was mentioned as the "biggest e-commerce-related challenge" in a 2015 survey on 347 brand manufacturers which ranged in size from more than $10 billion in annual sales to less than $100 million. protect a brand's image should be assessed is a key question (Bundeskartellamt, 2013, p. 27).We show that this widespread puzzle can be explained by the psychologically founded contrast effect (e.g., Schkade and Kahneman, 1998; Dunn et al., 2003) whereby consumers focus on that choice dimension (e.g., quality or price) along which available offers differ the most. Accordingly, if a product's price varies across distribution channels, consumers focus more on its price and less on its quality. The relevance of contrast effects for similar purchase decisions has been supported both in the lab (Dertwinkel-Kalt et al., 2017b) ...
Based on a cross-section of the Norwegian population and a comprehensive set of characteristics MOSART is one of the longest running and actively used models in the family of dynamic microsimulation models. The first version was operative in 1990, and its main use has been projections and policy analyses regarding the design and evaluation of the Norwegian pension system. The aim of the paper is to provide an updated overview of the model with technical platform, comparison with other dynamic microsimulation models, the main events included and its main use.
In Sen's capability approach well-being is evaluated not only in terms of functionings (what they do and who they are) but also in terms of capabilities (what people are free to do and to be). It implies that individuals with the same observed functionings may have different well-being because their choice sets (i.e. capabilities) are different. We utilise a Random Scale Model to measure the latent capability of Italian women to move based on observations of their realized choices. We demonstrate that such models can offer a suitable framework for measuring how individuals are restricted in their capabilities. Our estimations show that the percentage of women predicted to be restricted in their freedom of movement (have restricted capability sets) is 23-25 per cent. If all women were unconstrained, our model predicts that 15-17 per cent of them would choose to do more activities.
A longitudinal analysis of married physicians labor supply is carried out on Norwegian data from 1997 to 1999. The model utilized for estimation implies that physicians can choose among 10 different job packages which are a combination of part time/full time, hospital/primary care, private/public sector, and not working. Their current choice is influenced by past available options due to a taste persistence parameter in the utility function.In the estimation we take into account the budget constraint, including all features of the tax system. Our results imply that an overall wage increase or a tax cut moves married physicians towards full time job packages, in particular to full time jobs in the private sector. But the overall and aggregate labor supply elasticities in the population of employed doctors are rather low compared to previous estimates.
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