Research
Platform Competition and Consumer Foresight: The Case of Airports ( Economics of Transportation, 2022)
Abstract: This paper studies the effect of competition and consumer foresight on platform profits. The focus is on airports, which provide passengers with aeronautical and commercial services through airlines and retailers. Our results can be summarized as follows. First, we unravel the relationship between consumer foresight and the optimal pricing of the two services. When passengers are myopic, they undervalue the surplus they derive from the retail services, so the airport charges low landing fees and makes profits from the retail business. When passengers are foresighted, they better anticipate the surplus from the retail services, so the airport changes its strategy by charging higher landing fees and boosting competition in the retail sector. Second, we find that the relationship between profits and consumer foresight strictly depends on the considered market structure. When the airport has no competitors, airport profits are non-decreasing in the degree of consumer foresight. By contrast, under duopoly competition, a weakly-negative correlation between airport profits and consumer foresight is observed. These results allow deriving two main managerial implications. First, airport competition can lead to higher landing fees. Second, under competition, an airport is not necessarily interested in informing passengers about its retail facilities. However, an extension where airports decide whether to set an advertising campaign to inform passengers about their retail facilities reveals that they end up locked in a Prisoner’s Dilemma.
Self versus delegated distribution in digital platforms: the case of Amazon (Joint with Ricardo Flores Fillol and Bernd Theilen)
Abstract: Within the e-book market, the self-publishing business model that has been boosted by digitalization has become increasingly important. Although self-publishing circumvents distribution intermediaries, consequently yielding unambiguous advantages both for authors and consumers, it also raises some concerns related to Amazon's accrued market dominance. This paper analyzes the pros and the cons of this emerging business by proposing a platform model where consumers are ex-ante uncertain about their true preferences on the content, and each content provider sells a differentiated product variety and determines its price around a Salop circle under two structures: self-distribution and delegated distribution. Our results suggest that: i) self-publishing can result in higher e-book prices for consumers under certain circumstances; ii) publishing companies could be driven out of the e-book market by Amazon in the segment of non-specialized books or novels written by emerging authors; however, iii) Amazon's dominance over traditional publishing companies should not cause damage to final consumers and, consequently, does not call for regulatory action.
Selling customer information or using them? (Work in Progress, text under request)
Abstract: With the digital revolution, the increased use of AI and the new information technology has facilitated the collection of a huge amount of data which constitute a valuable asset for firms. This paper analyzes the case of two horizontally differentiated firms which are uncertain about the true degree of substitutability of a certain product and that can buy more accurate data from a data owner. The paper has two main purposes. The first one is to characterize and compare the pricing strategy and the profits of the sellers under the case of no information, asymmetric information and perfect information. The second one is to derive the optimal strategy chosen by the data owner who can either: i) sell (under exclusive agreements or not) such information to the sellers or ii) keep the information and enter the market.
We find that there is not a dominant strategy and the data owner's decision to enter the market or sell the information ultimately depends on to what extent the sellers underestimate or overestimate the true value of product differentiation.
A note on platform pricing and consumer myopia (Work in progress, text under request)
Abstract: This paper studies the effect of consumer myopia on the interplay between core and side downstream markets in monopoly and duopoly platforms. Our results highlight the relevance of consumer myopia in strategic platform decisions.