Working Papers
An Aggregative Game Approach to Oligopoly and Cross-Market Interactions [draft]
Abstract: I develop an aggregative game framework in which asymmetric oligopolists from two sectors compete. The equilibrium is characterized by sector-level reaction functions, which describe how each sector’s aggregate action responds strategically to the other sector and, in turn, determine each firm’s equilibrium action. Focusing on pricing competition, I analyze how market equilibrium shifts after a within-sector shock or a cross-sector merger, depending on the strategic and demand relationships between the sectors. I also characterize the long-run equilibrium where oligopolistic and monopolistically competitive firms coexist, in which case strategic relationships depend solely on cross-sector demand externalities. To substantiate our results, I examine canonical demand models, including nested CES, and logit with joint consumption.
Cross-Category Interdependence and Product Variety:
Evidence from the Yogurt and Granola Market [draft]
Abstract: Product complementarity shapes equilibrium product variety and pricing across categories. I develop a theoretical model with two categories where consumers can purchase products individually or in bundles. On the supply side, symmetric single-product firms in each category set prices and make free entry decisions in the long-run. The model demonstrates that complementarity between categories leads to strategic substitutability in prices but strategic complementarity in variety. Moreover, the entry of a new product type with stronger complementarity reduces variety in its own category while expanding variety in the complementary category. I link these cross-category effects to data from the U.S. yogurt and granola markets, exploiting the Greek yogurt boom that began in 2007. Using store-level panel data and an instrumental variable approach, I find that Chobani's entry led to a 7.3% decrease in traditional yogurt variety while increasing granola variety by 33%. Chobani's presence decreased mean yogurt prices by 6.7% and granola prices by 4.4%.
Work in Progress
Multi-homing Consumers and Bundling of Contents
Abstract: In this paper, I analyze how platforms compose and price their content bundles in the subscription-based video-on-demand industry. I propose a duopoly model, each platform with a single program, with bargaining over licensing one’s content to the other. On the demand side, consumers choose one (single-homing) or several platforms (multi-homing) considering the composition of contents and subscription fees. When the two contents are in a composite bundle, positive or negative interaction effects arise in utility, and this is a key driver of consumer choices and thus the bargaining outcome. I begin with a Hotelling model with multi-homing. I show that as the ``complementarity'' between the contents increases, platforms do not trade, pushing consumers who wish to enjoy both contents to multi-home. This way, platforms get more profits by increasing subscription prices, motored by incremental value pricing, and pushing more consumers to multi-home at the same time. This results in Pareto inefficiency under symmetric qualities of contents. I extend the model using a random utility discrete choice framework with individual taste “shocks” and time shares for cross-platform contents. Then I determine sufficient conditions under which this latter model is identified. Using a Monte Carlo simulation, I find that even in this general model, larger “complementarity” leads to no-trade with some reasonable parameters and individual taste shocks with small variances.
Product Selection in the Presence of Complementarity
Joint Consumption and Portfolio Selection: Evidence from Streaming Platforms,
with Jenna Blochowicz