Working papers
Fee Optimality in a Two-Sided Market
Revision resubmitted to the Journal of Political Economy
Coverage: Chamber of Progress, QSR.com
Note: an earlier version of this paper entitled "Price Controls in a Multi-Sided Market" is available here [online appendix]
The fees that platforms charge to consumers and merchants may be inefficient due to market power, network externalities, and business-stealing externalities. Using a structural model of platform competition estimated on data covering all major US food delivery platforms, I quantify distortions in platform fees. Consumer fees are nearly optimal due to offsetting market power and offline business stealing distortions. Restaurant commissions, by contrast, are nearly twice their socially optimal levels, primarily because platforms do not fully account for consumer benefits from increased restaurant variety on platforms. I also consider whether platform competition corrects inefficiency in platform fees.
Sources of Limited Consideration and Market Power in E-Commerce
Accepted at American Economic Journal: Microeconomics
This article develops techniques for the empirical analysis of repeated sequential search over unordered alternatives using data on consumer search processes. I use these techniques to assess why consumers conduct little search in e-commerce and often pay significantly above the minimum available price for a product. Search costs could explain these facts, as could pre-search seller differentiation: consumers with low search costs may not visit stores they dislike based on information known before search. I find that seller differentiation is primarily responsible for limited consideration and market power.
Cross-Channel Competition and Complementarities in US Retail
with Hiroki Saruya
We estimate the effects of offline stores on online spending using data on US store locations and on internet browsing and transactions. The direct effect of a multi-channel retailer’s offline stores on its online sales depends on two opposing forces: (i) a negative cannibalization effect and (ii) a positive cross-channel complementarity, which may reflect offline customer service for items purchased online or brand awareness effects of offline stores. The direct effects of an offline store on rival retailers’ online sales similarly depend on (i) a negative business-stealing effect and (ii) a positive showrooming effect, which arises when offline stores bolster consumer interest in a product category. Our empirical approach captures consumer heterogeneity through variables characterizing the categories of websites that consumers visit, which proxy for unobserved tastes, as well as the demographic profiles of consumers' neighbourhoods. Our estimates for 2007–2008 imply that a multichannel retailer's online sales fall by 1.1–3.8% on average when a rival adds an offline store. These sales increase by 7.1–32.3% when the retailer adds an offline store of its own, suggesting that cross-channel complementarities exceed cannibalization effects. Additionally, our estimated effects of offline stores on rivals' online sales vary across retailers and categories. Notably, offline stores often boost Amazon's sales, suggesting the relevance of showrooming effects.
Demand with Network Externalities: Identification and an Application to the Dating Websites Industry
This paper characterizes the identifiability of demand models with network externalities. Guided by my identification analysis, I empirically evaluate how network externalities shape the welfare effects of consolidation in the US dating websites industry. Network externalities often arise in differentiated products markets, and especially in platform markets. I show that demand models with network externalities are generally not identified with market-level data alone. This result reflects the impossibility of independently varying product characteristics and market shares at the market level. However, an extension of results in Berry and Haile (2022) establishes that demand models with network externalities are identified under reasonable conditions with microdata linking consumers' decisions and characteristics. I estimate demand for dating websites using online browsing microdata. Under my preferred estimates, a user of a site values a 10% increase in the site's usership at $6.34/month. I find that welfare losses from increased prices outweigh the gains from network externalities associated with monopolization. Additionally, I find that—due to platform differentiation—a firm earns higher profits from joint ownership of the two largest dating websites when it does not integrate these sites.
Selected works in progress
Labour Regulation in a Multi-Sided Market
Approaches to Encouraging Health Exchange Participation
with Soheil Ghili, Igal Hendel, and Michael Whinston
Publications
Market Design for Personal Data
with Dirk Bergemann, Jacques Crémer, David Dinielli, Carl-Christian Groh, Paul Heidhues, Maximilian Schaefer, Monika Schnitzer, Fiona M. Scott Morton, and Katja Seim
Yale Journal on Regulation (Volume 40, Issue 3)