Department of Economics
301 Rockefeller Hall
Hanover, NH 03755
NBER Program Affiliations:
NBER Affiliation: Research Associate
Information about this author at RePEc
NBER Working Papers and Publications
|May 2016||Communication in Vertical Markets: Experimental Evidence|
with Claudia Möllers, Hans-Theo Normann: w22219
When an upstream monopolist supplies several competing downstream firms, it may fail to monopolize the market because it is unable to commit not to behave opportunistically. We build on previous experimental studies of this well-known commitment problem by introducing communication. Allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the Cournot level (observed in the absence of communication) halfway toward the monopoly level. Allowing all three firms to chat together openly results in complete monopolization. Downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them. A simple structural model of Nash bargaining fits the pattern of shifting sur...
Published: Claudia Möllers & Hans-Theo Normann & Christopher M. Snyder, 2016. "Communication in Vertical Markets: Experimental Evidence," International Journal of Industrial Organization, .
|Open Access as a Crude Solution to a Hold-up Problem in the Two-Sided Market for Academic Journals|
with Mark J. McCabe: w22220
The move from traditional to open-access journals—which charge no subscription fees, only submission fees—is gaining support in academia. We analyze a two-sided-market model in which journals cannot commit to subscription fees when authors (who prefer low subscription fees because this boosts readership) make submission decisions. This leads to a hold-up problem, manifested as excessive subscription fees. Open access is a crude attempt to avoid hold up by eliminating subscription fees. We compare the efficiency and profitability of traditional versus open access under various market structures (monopoly, Bertrand competition) and extensions (non-profit journals, bundling, hybrid pricing), using our theoretical findings to understand the evolution of the market for academic journals in th...
|March 2015||Preventives Versus Treatments|
with Michael Kremer: w21012
Preventives are sold ex ante, before disease status is realized, while treatments are sold ex post. Even if the mean of the ex ante distribution of consumer values is the same as that ex post, the shape of the distributions may differ, generating a difference between the surplus each product can extract. If, for example, consumers differ only in ex ante disease risk, then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers, having contracted the disease, no longer differ in disease risk. We show that the ratio of preventive to treatment producer surplus can be arbitrarily small, in particular when the distribution of consumer values has a Zipf shape and the disease is rare. The firm's bias toward treatments can be r...
Published: Michael Kremer & Christopher M. Snyder, 2015. "Preventives Versus Treatments," The Quarterly Journal of Economics, vol 130(3), pages 1167-1239.
|March 2013||When Is Prevention More Profitable than Cure? The Impact of Time-Varying Consumer Heterogeneity|
with Michael Kremer: w18862
We argue that in pharmaceutical markets, variation in the arrival time of consumer heterogeneity creates differences between a producer's ability to extract consumer surplus with preventives and treatments, potentially distorting R&D decisions. If consumers vary only in disease risk, revenue from treatments--sold after the disease is contracted, when disease risk is no longer a source of private information--always exceeds revenue from preventives. The revenue ratio can be arbitrarily high for sufficiently skewed distributions of disease risk. Under some circumstances, heterogeneity in harm from a disease, learned after a disease is contracted, can lead revenue from a treatment to exceed revenue from a preventative. Calibrations suggest that skewness in the U.S. distribution of HIV risk wo...
Published: Preventives Versus Treatments* Michael Kremer and Christopher M. Snyder The Quarterly Journal of Economics (2015) 130 (3): 1167-1239. doi: 10.1093/qje/qjv012