Research & Projects

This work develops a competition model between two asymmetrical platforms where consumers transact between each other. Consumers exhibit circles of transactions, derive utility by initiating transactions but also by receiving transactions. Unlike the traditional literature predictions, in equilibrium firms have strategies to charge off-net transactions below on-net ones. In markets where consumers display strongly concentrated circles, firms can only extract limited surplus from off-net transactions. This is reinforced if consumers display weak transaction externalities, languishing the price strategies to discourage off-net transactions. Furthermore, regulating price differential of the large firm can lead consumers to face higher fees compared to discriminatory setting. Therefore, regulators should broaden efforts to measure transaction externalities and circles strength before making decisions on retail tariff regulation.

Permanence clauses are a widespread tool used by mobile operators to keep consumers subscribed to their network. This type of contracts enact a switching cost for consumers translated into a minimum period length before the subscriber can leave the network or a penalty to be paid by the user if leaving before the minimum permanence expires. A ban on permanence clauses was ruled by 2014-Q3 by the regulator in Colombia, which effect in the mobile services market is yet to be assessed. This paper proposes a difference in differences approach to gather reduced form evidence about the effect of the ban on the Colombian mobile voice market. Evidence shows average revenue per user declines due to the ban.

This paper empirically examines the role of nonlinear contracts between manufacturers and retail stores, and Resale Price Maintenance (RPM) on the observed nominal rigidity of retail prices. It is widely accepted in the literature that the incomplete transmission of costs shocks into retail prices is explained by the existence of markup adjustment and price adjustment costs. The vertical conduct of the industry and the existence of vertical restraints such as RPM might introduce further price stickiness or reinforce it.

Policymakers often use labels to address important informational asymmetries about products’ quality. In the context of Internet adoption, speed labels (e.g., high vs low speed) help consumers to make informed choices, increasing the adoption of high speed services. This is particularly important in countries where the digital gap is still a first-order concern. These speed labels, however, may also give Internet providers incentives to adjust the portfolio of Internet plans, changing the competitive conditions in the market. Whether speed labels are good for consumers and for addressing the digital divide depends on the equilibrium effects of such policies. We analyze a regulation in Colombia that mandates high-speed labels (broadband) on Internet plans that exceed certain speed thresholds. Preliminary evidence suggests that Internet providers change plans such that there is bunching at the speed threshold. This change, in turn, intensifies price competition for plans at the threshold, drawing consumers from both low-speed and very-high speed segments. To evaluate the welfare effects of the regulation, we estimate a structural model with endogenous speed and price decisions. We find that while consumers value high-speed plans, this valuation increases substantially with the speed labels. On the supply side, the provision of speed is costly for firms. (In progress) We use the model to study alternative policies: no speed label, implementation of multiple speed labels (e.g., low, high and very-high speed labels), and the design of optimal label.