Essays in competition and price determination in diverse markets

• Main Author: Jing, Yan
• Language: English
• Published: University of British Columbia 2013
• Online Access: http://hdl.handle.net/2429/45535

This thesis studies competition and price determination in three distinctly different markets. Chapter 2 carries out an empirical analysis of the effect of a non-uniform pricing strategy on box office revenues in the theatrical movie market. Using a rich and unique dataset of the Hong Kong market, a nested Principles of Differentiation (nested PD) demand model is estimated and the estimation results are used to simulate theaters' profits under the differential and uniform pricing strategies. The main finding is that differential pricing dominates the uniform pricing (demand effect) but gains from the differential pricing policy are limited due to intensified competition (competition effect). Chapter 3 examines the relationship between prices and market structure in geographically isolated gasoline markets that are exposed to large demand shocks. The temporal variation in market size provides instrumental variables to overcome the classical endogeneity bias in the standard price-concentration regression. There is evidence of local market power in the studied markets. Additionally, the high margins that characterize concentrated markets dissipate quickly with the increase of the number of gas stations. The results also suggest that the regression analysis that does not account for the endogeneity between entry and prices will significantly underestimate the effect of market concentration on prices. Chapter 4 studies a public sector problem in which a government faces the choice of using public-private partnerships (PPP) or more traditional public procurement approaches to procure public services. Specifically, a basic trade-off associated with PPPs is modeled: while PPPs marshal the power of competitive markets, they involve long-term contracts that may prove relatively inflexible. It is shown that the optimal choice between PPPs and public procurement depends on factors including the likelihood that changes will be necessary, the productivity of non-contractible effort exerted by private sector partners, the costs of switching, the difference between first-best and second-best projects, and the bargaining power of governments vis-à-vis private parties. It also shows that the optimal choice may depend on whether the government’s objective is to maximize “value for money” (i.e., deliver the right project at the lowest cost to taxpayers) or to maximize total social surplus. === Business, Sauder School of === Graduate