osaka2022_sales

Economics of Sales Strategy | Special Lectures in Economics

販売戦略の経済学 | 経済学特論

1st semester, Wednesdays 5th (16:50-18:20), Online（via Zoom）
Office Hours: by appointment
E-mail: yosuke.yasuda <at> gmail.com
Website: https://sites.google.com/site/yosukeyasuda2/home/lectures/osaka2022_sales

Last Update: June 13, 2022

Announcement | お知らせ

[July 13, 2022] --- This lecture is over. Reports are due on July 31.
[May 25, 2022] --- The class scheduled on June 8 will be moved to June 6, 18:30 - 20:00.
[April 25, 2022] --- There will be no class on May 4. The next one, Lecture 4, will be on May 11.
[April 6, 2022] --- The link for Zoom regular meetings is posted in CLE. If you just want to attend the class without registration (i.e., you don't need a credit), please fill out this form. <= Important!!
Please send me an e-mail [yosuke.yasuda@gmail.com] if you cannot have an access to CLE for some reason.
[Feb 6, 2022] --- The first lecture will be on April 13 (Wed). Lectures will be given in English, but your questions and presentations can be made in Japanese.

Course Objective and Content | 講義概要・目的

We study theoretical research on sales strategies with a primary focus on pricing.
This course is mainly based on students' presentations of selective academic articles.

Learning Goals | 学習目標

To acquire analytical skills on the economics of sales strategy from theoretical perspectives.
To understand how theoretical ideas on sales strategy are applied to real-life business issues such as price discrimination, bundling, advertising, and advance selling.

Requirement / Prerequisite | 履修条件・受講条件

Economics of information at the intermediate undergraduate level.

Grading Policy | 成績評価

Based on your presentation and final report.
Auditing students SHOULD also make presentations but need NOT submit the final report.
- You can give a talk in either English or Japanese, but you should prepare SLIDES typed in ENGLISH. (so that everyone can understand the contents)
  - Your presentation should be about 20 to 30 minutes long. After each talk, we will invite questions and comments from other participants.
- You can write the final report in either Japanese or English. The suggested length is 2 - 5 pages. Your report should be either
  - 1) an original research paper/idea on the economics of sales strategy,
  - 2) a referee report on a paper (which is not directly covered in class), or
  - 3) a survey on a specific issue of sales strategy or pricing.

Textbooks | 講義テキスト

There is NO textbook in this course.
Related Books
- Borgers, An Introduction to the Theory of Mechanism Design, 2015. Amazon
  - The relevant parts will be posted in CLE, so you need NOT purchase this book.
- <Other Reference Books>
- Vohra and Krishnamurthi, Principles of Pricing: An Analytical Approach, 2012. Amazon
- Vohra, Prices and Quantities: Fundamentals of Microeconomics, 2020. Amazon

Course Schedule | 講義日程

(Lectures 1 through 4 will be given by the instructor. All the rest consists of students' presentations.)

BASIC THEORY

Lecture 1. Introduction April 13

Lec1_Slide

Lecture 2. Price Discrimination April 20

Lec2-4_Slide
References
- <Survey>
- Elmaghraby, W., & Keskinocak, P. (2003). Dynamic pricing in the presence of inventory considerations: Research overview, current practices, and future directions. Management science, 49(10), 1287-1309.
- Stole, L. A. (2007). Price discrimination and competition. Handbook of industrial organization, 3, 2221-2299.
- Varian, H. R. (1989). Price discrimination. Handbook of industrial organization, 1, 597-654.
- <Textbook>
- Phlips, L. (1983). The economics of price discrimination. Cambridge University Press.
- Shapiro, C., Varian, H. R., & Carl, S. (1998). Information rules: A strategic guide to the network economy. Harvard Business Press.
- Tirole, J. (1988). The theory of industrial organization. MIT press.

Lecture 3. Auction April 27

References
- Bulow, J., & Roberts, J. (1989). The simple economics of optimal auctions. Journal of political economy, 97(5), 1060-1090.
- McMillan, J. (1994). Selling spectrum rights. Journal of Economic Perspectives, 8(3), 145-162.
- McAfee, R. P., & McMillan, J. (1996). Analyzing the airwaves auction. Journal of Economic perspectives, 10(1), 159-175.
- McAfee, R. P., & McMillan, J. (1992). Bidding rings. The American Economic Review, 579-599.
- Milgrom, P. R., & Weber, R. J. (1982). A theory of auctions and competitive bidding. Econometrica: Journal of the Econometric Society, 1089-1122.
- Newbery, D. M. (1998). Competition, contracts, and entry in the electricity spot market. The RAND Journal of Economics, 726-749.
- Rothkopf, M. H., Teisberg, T. J., & Kahn, E. P. (1990). Why are Vickrey auctions rare?. Journal of Political Economy, 98(1), 94-109.
- Thaler, R. H. (1988). Anomalies: The winner's curse. Journal of economic perspectives, 2(1), 191-202.
- <Survey>
- Bajari, P., & Hortaçsu, A. (2004). Economic insights from internet auctions. Journal of Economic Literature, 42(2), 457-486.
- Klemperer, P. (1999). Auction theory: A guide to the literature. Journal of economic surveys, 13(3), 227-286.
- McAfee, R. P., & McMillan, J. (1987). Auctions and bidding. Journal of economic literature, 25(2), 699-738.
- Milgrom, P. (1989). Auctions and bidding: A primer. Journal of economic perspectives, 3(3), 3-22.
- <Textbook>
- Krishna, V. (2009). Auction theory, 2nd. Academic Press. Amazon
- Milgrom, P., & Milgrom, P. R. (2004). Putting auction theory to work. Cambridge University Press. Amazon

Lecture 4. Mechanism Design May 11

References
- Ausubel, L. M. (2004). An efficient ascending-bid auction for multiple objects. American Economic Review, 94(5), 1452-1475.
- Bulow, J., & Klemperer, P. (1996). Auctions Versus Negotiations. The American Economic Review, 86(1), 180-194.
- Bajari, P., McMillan, R., & Tadelis, S. (2009). Auctions versus negotiations in procurement: an empirical analysis. The Journal of Law, Economics, & Organization, 25(2), 372-399.
- Che, Y. K. (1993). Design competition through multidimensional auctions. The RAND Journal of Economics, 668-680.
- Branco, F. (1997). The design of multidimensional auctions. The RAND Journal of Economics, 63-81.
- Che, Y. K., & Gale, I. (2003). Optimal design of research contests. American Economic Review, 93(3), 646-671.
- Lucking-Reiley, D. (1999). Using field experiments to test equivalence between auction formats: Magic on the Internet. American Economic Review, 89(5), 1063-1080.
- McAfee, R. P. (1993). Mechanism design by competing sellers. Econometrica: Journal of the econometric society, 1281-1312.
- Myerson, R. B. (1981). Optimal auction design. Mathematics of operations research, 6(1), 58-73.
- Myerson, R. B., & Satterthwaite, M. A. (1983). Efficient mechanisms for bilateral trading. Journal of economic theory, 29(2), 265-281.
- Riley, J. G., & Samuelson, W. F. (1981). Optimal auctions. The American Economic Review, 71(3), 381-392.
- <Textbook>
- Vohra, R. V. (2011). Mechanism design: a linear programming approach (Vol. 47). Cambridge University Press. Amazon

The following lectures are based on students' presentations.

For each "TBA" slot, you can choose a paper from the references (or you could pick some other related paper if you wish). In any case, please send me an email and let me know which paper/slot you would like to present.

MONOPOLY

Lecture 5. Information May 18

Presentation
- Lewis, T. R., & Sappington, D. E. (1994) --- Yunzhi LIU
- Johnson (2013) --- Ruihan WANG
References
- Ellison, G., & Ellison, S. F. (2009). Search, obfuscation, and price elasticities on the internet. Econometrica, 77(2), 427-452.
- Fay, S., & Xie, J. (2008). Probabilistic goods: A creative way of selling products and services. Marketing Science, 27(4), 674-690.
- Lewis, T. R., & Sappington, D. E. (1994). Supplying information to facilitate price discrimination. International Economic Review, 309-327.
- Johnson, J. P. (2013). Targeted advertising and advertising avoidance. The RAND Journal of Economics, 44(1), 128-144.
- Johnson, J. P., & Myatt, D. P. (2006). On the simple economics of advertising, marketing, and product design. American Economic Review, 96(3), 756-784.
- Kamenica, E., & Gentzkow, M. (2011). Bayesian persuasion. American Economic Review, 101(6), 2590-2615.
- Chen, Y., & Xie, J. (2008). Online consumer review: Word-of-mouth as a new element of marketing communication mix. Management science, 54(3), 477-491.
- <Survey>
- Bagwell, K. (2007). The economic analysis of advertising. Handbook of industrial organization, 3, 1701-1844.
- Evans, D. S. (2009). The online advertising industry: Economics, evolution, and privacy. Journal of economic perspectives, 23(3), 37-60.
- Kamenica, E. (2019). Bayesian persuasion and information design. Annual Review of Economics, 11, 249-272.

Lecture 6. Market and Resale May 25

Presentation
- Che, Gale, & Kim (2013) --- Kohei IZUMI
- Cui, Duenyas, & Şahin (2014) --- Jing JING
References
- Bukhchandani, S., & Huang, C. F. (1989). Auctions with resale markets: An exploratory model of treasury bill markets. The Review of Financial Studies, 2(3), 311-339.
- Cui, Y., Duenyas, I., & Şahin, Ö. (2014). Should event organizers prevent resale of tickets?. Management Science, 60(9), 2160-2179.
- Che, Y. K., Gale, I., & Kim, J. (2013). Assigning resources to budget-constrained agents. Review of Economic Studies, 80(1), 73-107.
- Dworczak, P., Kominers, S. D., & Akbarpour, M. (2021). Redistribution through markets. Econometrica, 89(4), 1665-1698.
- Jullien, B., & Rey, P. (2007). Resale price maintenance and collusion. The RAND Journal of Economics, 38(4), 983-1001.
- Mathewson, F., & Winter, R. (1998). The law and economics of resale price maintenance. Review of industrial organization, 57-84.
- Leslie, P., & Sorensen, A. (2014). Resale and rent-seeking: An application to ticket markets. Review of Economic Studies, 81(1), 266-300.

Lecture 7. Advance Selling June 1

Presentation
- Xie & Shugan (2001) --- Ganzorig ZOLZAYA
- Fay & Xie (2010) --- He WANG
References
- Fay, S., & Xie, J. (2010). The economics of buyer uncertainty: Advance selling vs. probabilistic selling. Marketing Science, 29(6), 1040-1057.
- Lim, W. S., & Tang, C. S. (2013). Advance selling in the presence of speculators and forward‐looking consumers. Production and Operations Management, 22(3), 571-587.
- Möller, M., & Watanabe, M. (2010). Advance purchase discounts versus clearance sales. The Economic Journal, 120(547), 1125-1148.
- Möller, M., & Watanabe, M. (2016). Competition in the presence of individual demand uncertainty. The RAND Journal of Economics, 47(2), 273-292.
- Nasiry, J., & Popescu, I. (2012). Advance selling when consumers regret. Management Science, 58(6), 1160-1177.
- Prasad, A., Stecke, K. E., & Zhao, X. (2011). Advance selling by a newsvendor retailer. Production and Operations Management, 20(1), 129-142.
- Shugan, S. M., & Xie, J. (2005). Advance-selling as a competitive marketing tool. International Journal of Research in Marketing, 22(3), 351-373.
- Xie, J., & Shugan, S. M. (2001). Electronic tickets, smart cards, and online prepayments: When and how to advance sell. Marketing Science, 20(3), 219-243.
- <Survey>
- Xie, J., & Shugan, S. M. (2009). Advance selling theory. In Handbook of pricing research in marketing. Edward Elgar Publishing.

Lecture 8. Boundedly Rational Consumers June 6 (18:30- 20:00)

Presentation
- Ellison (2005) --- Yuichi OKADA
- Sandroni & Squintani (2007) --- Qingyang LI
References
- Chioveanu, I., & Zhou, J. (2013). Price competition with consumer confusion. Management Science, 59(11), 2450-2469.
- Ellison, G. (2005). A model of add-on pricing. The Quarterly Journal of Economics, 120(2), 585-637.
- Ellison, G., & Wolitzky, A. (2012). A search cost model of obfuscation. The RAND Journal of Economics, 43(3), 417-441.
- Eliaz, K., & Spiegler, R. (2006). Contracting with diversely naive agents. The Review of Economic Studies, 73(3), 689-714.
- Heidhues, P., Kőszegi, B., & Murooka, T. (2016). Exploitative innovation. American Economic Journal: Microeconomics, 8(1), 1-23.
- Sandroni, A., & Squintani, F. (2007). Overconfidence, insurance, and paternalism. American Economic Review, 97(5), 1994-2004.
- Spiegler, R. (2006). Competition over agents with boundedly rational expectations. Theoretical Economics, 1(2), 207-231.
- <Survey>
- Armstrong, M., & Vickers, J. (2012). Consumer protection and contingent charges. Journal of Economic Literature, 50(2), 477-93.
- Ellison, G. (2006). Bounded rationality in industrial organization. Econometric Society Monographs, 42, 142.
- Heidhues, P., & Kőszegi, B. (2018). Behavioral industrial organization. Handbook of Behavioral Economics: Applications and Foundations 1, 1, 517-612.
- Koszegi, B. (2014). Behavioral contract theory. Journal of Economic Literature, 52(4), 1075-1118.
- Spiegler, R. (2016). Choice complexity and market competition. Annual Review of Economics, 8, 1-25.
- <Textbook>
- Spiegler, Bounded Rationality and Industrial Organization, 2011. Amazon

COMPETITON

Lecture 9. Ad Auction -- Theory June 15

Presentation
- Varian (2007) --- Kohei IZUMI
- Varian & Harris (2014) --- Ruihan WANG
References
- Athey, S., & Ellison, G. (2011). Position auctions with consumer search. The Quarterly Journal of Economics, 126(3), 1213-1270.
- Chen, Y., & He, C. (2011). Paid placement: Advertising and search on the internet. The Economic Journal, 121(556), F309-F328.
- Edelman, B., Ostrovsky, M., & Schwarz, M. (2007). Internet advertising and the generalized second-price auction: Selling billions of dollars worth of keywords. American economic review, 97(1), 242-259.
- Varian, H. R. (2007). Position auctions. international Journal of industrial Organization, 25(6), 1163-1178.
- Varian, H. R., & Harris, C. (2014). The VCG auction in theory and practice. American Economic Review, 104(5), 442-45.
- <Survey>
- Goldfarb, A., & Tucker, C. (2019). Digital economics. Journal of Economic Literature, 57(1), 3-43.

Lecture 10. Ad Auction -- Applications June 22

Presentation
- Blake, T., Nosko, C., & Tadelis, S. (2015) --- Jing JING
- Decarolis, Goldmanis, & Penta, A. (2020) --- He WANG
References
- Blake, T., Nosko, C., & Tadelis, S. (2015). Consumer heterogeneity and paid search effectiveness: A large‐scale field experiment. Econometrica, 83(1), 155-174.
- Brown, J., Hossain, T., & Morgan, J. (2010). Shrouded attributes and information suppression: Evidence from the field. The Quarterly Journal of Economics, 125(2), 859-876.
- Decarolis, F., Goldmanis, M., & Penta, A. (2020). Marketing agencies and collusive bidding in online ad auctions. Management Science, 66(10), 4433-4454.
- Ghose, A., & Yang, S. (2009). An empirical analysis of search engine advertising: Sponsored search in electronic markets. Management science, 55(10), 1605-1622.
- Yang, S., & Ghose, A. (2010). Analyzing the relationship between organic and sponsored search advertising: Positive, negative, or zero interdependence?. Marketing science, 29(4), 602-623.

Lecture 11. Mixed Oligopoly

Presentation
- Matsumura (1998) --- Yun YANG June 29
References
- Bárcena-Ruiz, J. C., & Garzón, M. B. (2006). Mixed oligopoly and environmental policy. Spanish Economic Review, 8(2), 139-160.
- Casadesus-Masanell, R., & Ghemawat, P. (2006). Dynamic mixed duopoly: A model motivated by Linux vs. Windows. Management Science, 52(7), 1072-1084.
- Chen, T. L. (2017). Privatization and efficiency: a mixed oligopoly approach. Journal of Economics, 120(3), 251-268.
- Ishibashi, I., & Matsumura, T. (2006). R&D competition between public and private sectors. European Economic Review, 50(6), 1347-1366.
- Matsumura, T. (1998). Partial privatization in mixed duopoly. Journal of Public Economics, 70(3), 473-483.
- Matsumura, T., & Ogawa, A. (2012). Price versus quantity in a mixed duopoly. Economics Letters, 116(2), 174-177.
- <Survey>
- De Fraja, G., & Delbono, F. (1990). Game theoretic models of mixed oligopoly. Journal of Economic Surveys, 4(1), 1-17.

Lectures 12. Applications

Presentation
- Capponi, Corrocher, & Zirulia (2021) --- Ganzorig ZOLZAYA June 29
References
- Capponi, G., Corrocher, N., & Zirulia, L. (2021). Personalized pricing for customer retention: Theory and evidence from mobile communication. Telecommunications Policy, 45(1), 102069.

TWO-SIDED MARKET

Lectures 13. Two-sided Market July 6

Presentation
- Rochet & Tirole (2003) --- Yunzhi LIU
- Armstrong & Wright (2007) --- Qingyang LI
References
- Armstrong, M. (2006). Competition in two‐sided markets. The RAND journal of economics, 37(3), 668-691.
- Armstrong, M., & Wright, J. (2007). Two-sided markets, competitive bottlenecks and exclusive contracts. Economic Theory, 32(2), 353-380.
- Caillaud, B., & Jullien, B. (2003). Chicken & egg: Competition among intermediation service providers. RAND journal of Economics, 309-328.
- Hagiu, A. (2006). Pricing and commitment by two‐sided platforms. The RAND Journal of Economics, 37(3), 720-737.
- Hagiu, A. (2009). Two‐sided platforms: Product variety and pricing structures. Journal of Economics & Management Strategy, 18(4), 1011-1043.
- Rochet, J. C., & Tirole, J. (2003). Platform competition in two-sided markets. Journal of the european economic association, 1(4), 990-1029.
- Rochet, J. C., & Tirole, J. (2006). Two‐sided markets: a progress report. The RAND journal of economics, 37(3), 645-667.
- Rysman, M. (2009). The economics of two-sided markets. Journal of economic perspectives, 23(3), 125-43.
- Wright, J. (2004). One-sided logic in two-sided markets. Review of Network Economics, 3(1).
- <Textbook>
- Belleflamme, P., & Peitz, M. (2021). The Economics of Platforms. Cambridge University Press. Amazon

Lectures 14. Advanced Topics July 13

Presentation
- Parker & Van Alstyne (2018) --- Yuichi OKADA
- Choi (2010) --- Yun YANG
References
- Choi, J. P. (2010). Tying in two‐sided markets with multi‐homing. The Journal of Industrial Economics, 58(3), 607-626.
- Economides, N., & Tåg, J. (2012). Network neutrality on the Internet: A two-sided market analysis. Information Economics and Policy, 24(2), 91-104.
- Hagiu, A., & Wright, J. (2015). Multi-sided platforms. International Journal of Industrial Organization, 43, 162-174.
- McIntyre, D. P., & Srinivasan, A. (2017). Networks, platforms, and strategy: Emerging views and next steps. Strategic management journal, 38(1), 141-160.
- Parker, G., & Van Alstyne, M. (2018). Innovation, openness, and platform control. Management Science, 64(7), 3015-3032.
- Weyl, E. G. (2010). A price theory of multi-sided platforms. American Economic Review, 100(4), 1642-72.