Date of Award
Doctor of Philosophy (PhD)
In this dissertation, I build game-theoretic frameworks to study how new Internet-enabled technologies can change the strategies of firms and online platforms.
The first chapter studies how the integration of primary and resale concert ticket platforms can affect consumers and musicians. Consumers can buy concert tickets from primary platforms (e.g., Ticketmaster) or from resale platforms (e.g., StubHub) where tickets are resold by other consumers. Recently, Ticketmaster has also been developing its resale business and attempting to control the resale market by blocking consumers from reselling on competing resale platforms. Legislation in many states in the US requires consumers should be able to freely resell tickets on any resale sites. The rationale is that Ticketmaster’s stronger pricing power will lead to increases in its service fees and final ticket prices, making musicians and consumers worse off. In this paper, we establish a game-theoretic framework and show that the opposite can happen: if some consumers are uncertain of whether they can attend the concert when buying tickets, the primary platform’s control of the resale market can lower the prices and service fees in both the primary and the resale markets. The musician and consumers will be better off as a result. Moreover, we find that, when the primary platform controls the resale market, the presence of a small group of scalpers can counterintuitively reduce the final ticket prices and increase the musician’s profit and the consumer surplus. We also show that competition in the resale market may harm the consumers. Using data from Ticketmaster.com and StubHub.com, we provide some suggestive empirical support for the theoretical predictions.
The second chapter studies how new technologies that reduce the consumer’s search cost will affect online retail platforms, third-party sellers, and consumers. We show that a lower search cost can increase sellers’ expected profits even though it will increase price competition among sellers. A lower search cost always benefits the platform when it optimally adjusts its fee. When the search cost decreases, the platform should reduce its fee if demand elasticity increases significantly, in which case the platform, the sellers and the consumers can all be better off. By contrast, if the lowered search cost does not significantly increase demand elasticity, the platform’s optimal fee will increase, potentially leading to higher retail prices but making consumers and sellers worse off. Furthermore, when the market has a premium seller with higher base quality than non-premium sellers, a decrease in search cost will increase non-premium sellers’ profits but has a non-monotonic effect on the premium seller’s profit. When consumers can filter some product attributes on the platform, their direct benefit from searching the unfilterable attributes is reduced but the expected consumer surplus will increase.
The third chapter studies how cost transparency will impact a firm’s intertemporal pricing and innovation decisions. We show that cost transparency stymies the low-cost firm’s ability to intertemporally price-discriminate because consumers now correctly anticipate the future price drops and delay purchases, as it is no longer feasible to pool price with the high-cost firms, whose future prices drop less because of the high cost. Thus, cost transparency will benefit the high-cost firms but hurt the low-cost firms. Surprisingly, consumers can also be hurt by cost transparency if the firm has a high cost. However, cost transparency leads to an expected increase in both firm profits and consumer surplus—a win-win for both firms and consumers. This increase in expected firm profits facilitates greater investment by firms in new-product innovation.
Chair and Committee
Chakravarthi Narasimhan, Seethu Seetharaman, Raphael Thomadsen, Bo Zhou,
Zou, Tianxin, "Firms’ Strategies for Technology and Platform-based Markets" (2019). Arts & Sciences Electronic Theses and Dissertations. 1802.
Permanent URL: https://doi.org/10.7936/b7r5-f927