Informative Advertising in Directed Search

Gomis‐Porqueras, Pedro; Julien, Benoı̂t; Wang, Chengsi

doi:10.2139/ssrn.2040983

Cited by 1 publication

(1 citation statement)

References 38 publications

(53 reference statements)

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“…As it can be seen the direct effect of number of similar business units on the willingness to pay is positive but insignificant while the effect decreases significantly as shown by the coefficient of the Square number of firms. This suggests that the effect of competition decreases with the level of competitors, and has inverse-U shape effect which has been suggested by [Porqueras, Julien, and Chengsi, 2012]. An interesting implication of the regression is that whether or not a firm has national presence affectsq 1 negatively butq 2 positively.…”

Section: Estimation Resultssupporting

confidence: 58%

An empirical analysis of competitive nonlinear pricing

Aryal

Gabrielli

2020

International Journal of Industrial Organization

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In this paper I estimate a model of competitive nonlinear pricing with multidimensional adverse selection. I model competition using a Stackelberg duopoly and solve the multidimensional screening problem by aggregating the multidimensional type into a single dimensional type. I study identification and estimation of the utility and cost parameters and the joint density of consumer types. The truncated marginal densities of the aggregated types can be nonparametrically identified but not the joint density. I use the classic Cramér-von Mises and Vuong's test to select one parametric family of copula to estimate the joint density from the unspecified marginals. Using a unique data for advertisements collected from two Yellow Pages Directories in Central Pennsylvania I find that: (a) Joe copula characterizes the joint density of adverse selection; (b) there is a substantial heterogeneity among advertisers; (c)the estimated density rationalizes why there is more competition at the lower end of the ads than at the upper end; (d) consumers treat the ads as substitutes; and (e) a counterfactual exercise suggests that there is a substantial (3.8% of the sales) loss of welfare due to asymmetric information.

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Section: Estimation Resultssupporting

confidence: 58%