Skip to main content
Working papers
Working Paper
CEPR Discussion Paper No. DP16243
Simon P. Anderson, Özlem Bedre-Defolie (2021)
Subject(s)
Economics, politics and business environment
Keyword(s)
Trade platform, hybrid business model, antitrust policy, tax policy
JEL Code(s)
D42, L12, L13, L40, H25
We provide a canonical and tractable model of a trade platform enabling buyers and sellers to transact. The platform charges a percentage fee on third-party product sales and decides whether to be "hybrid", like Amazon, by selling its own product. It thereby controls the number of differentiated products (variety) it hosts and their prices. Using the mixed market demand system, we capture interactions between monopolistically competitive sellers and a sizeable platform product. Using long-run aggregative games with free entry, we endogenize seller participation through an aggregate variable manipulated by the platform's fee. We show that a higher quality (or lower cost) of the platform's product increases its market share and the seller fee, and lowers consumer surplus. Banning hybrid mode benefits consumers. The hybrid platform might favor its product and debase third-party products if the own product advantage is sufficiently high. We also provide some tax policy implications.
With permission of CEPR
Working Paper
SSRN Working Paper
Daniel Grodzicki, Alexei Alexandrov, Özlem Bedre-Defolie, Sergei Koulayev (2021)
Subject(s)
Economics, politics and business environment; Finance, accounting and corporate governance
Keyword(s)
Credit card demand reactions to fees, late fee regulation, limited attention
JEL Code(s)
D12, D90, G50
We introduce a model of a rational credit card user's rather complex usage choices and develop an empirical framework to test its predictions. Employing a large national database of U.S. card accounts, we estimate how prices impact card usage and find that price effects are mostly well explained within our model. An exception is less borrowing in response to declining late-fees among low credit-score (subprime) users. Extension of our model based on "focusing theory" predicts this behavior. It also implies substantial indirect benefits of the CARD Act's late-fee cap due to subprime users re-focusing toward reducing their debt.
Pages
46
Subject(s)
Economics, politics and business environment
Keyword(s)
Multiproduct monopoly, variety provision, taste distributions
JEL Code(s)
D42, L12, L15
We investigate a multiproduct monopolist's provision of variety and identify conditions of consumer preferences (demand structure) under which the monopolist over-provides or under-provides variety compared to the second-best, that is, the total welfare maximizing variety constrained by the firm's price/quantity choice. We then illustrate how the previous conditions of under-/over-provision of variety differ if consumers face intrinsic (search) costs to learn their tastes for products. We discuss important applications of this analysis, such as variety provision of retailers and variety provision on e-commerce platforms, like eBay. We also link variety provision to quality provision and illustrate how the monopolist's quality provision compares to the second-best optimal quality, which, for instance, can be used to set minimum quality standards.
Working Paper
Özlem Bedre-Defolie, Minjae Song, Hannes Ullrich (2018)
Subject(s)
Economics, politics and business environment; Finance, accounting and corporate governance
Keyword(s)
Debit cards, merchants and consumers bank choices, card fee regulation
JEL Code(s)
G21, C13, L11, L51
Working Paper
Konkurrensverket Working Paper No. 2015:1
Özlem Bedre-Defolie, Linda Gratz (2015)
Subject(s)
Economics, politics and business environment
Keyword(s)
Payment card networks, interchange fees, two-sided markets
JEL Code(s)
L11, G21, L42, L51, K21
Pages
34
Subject(s)
Economics, politics and business environment
Keyword(s)
buyer power, asymmetric retailers, waterbed effects
JEL Code(s)
L11, L13, L42
ESMT Working Paper
ESMT Working Paper No. 11-07
Özlem Bedre-Defolie, Stéphane Caprice (2011)
Subject(s)
Economics, politics and business environment
Keyword(s)
buyer mergers, non-linear supply contracts, merger efficiencies, size discounts, waterbed effects
JEL Code(s)
D43, K21, L42
This paper analyzes the welfare implications of buyer mergers, which are mergers between downstream firms from different markets. We focus on the interaction between the merger's effects on downstream efficiency and on buyer power in a setup where one manufacturer with a non-linear cost function sells to two locally competitive retail markets. We show that size discounts for the merged entity has no impact on consumer prices or on smaller retailers, unless the merger affects the downstream efficiency of the merging parties. When the upstream cost function is convex, we find that there are "waterbed effects," that is, each small retailer pays a higher average tariff if a buyer merger improves downstream efficiency. We obtain the opposite results, "anti-waterbed effects," if the merger is inefficient. When the cost function is concave, there are only anti-waterbed effects. In each retail market, the merger decreases the final price if and only if it improves the efficiency of the merging parties, regardless of its impact on the average tariff of small retailers.
Pages
26
ISSN (Print)
1866–3494
ESMT Working Paper
ESMT Working Paper No. 11-01
Alexei Alexandrov, Özlem Bedre-Defolie (2011)
Subject(s)
Economics, politics and business environment
Keyword(s)
tax competition, sales taxes, multinationals, decreasing marginal cost, economies of scale
JEL Code(s)
F12, F23, H25, H71
We examine a multinational firm which has a decreasing marginal cost, and the optimal sales tax policies of the regions where that firm operates. We show that the regions set higher sales taxes than those given by a cooperative equilibrium. Each region fails to fully internalize the effects of its tax level on another region's welfare and the incentives for that region's authority. Exponential cost functions which exhibit economies of scale (for example Cobb-Douglas) and linear demand functions satisfy our assumptions. Our results suggest the need to coordinate sales tax levels between countries and between smaller entities, like states in the United States. Smaller regions benefit more from such coordination. Lowering sales taxes in each region increases welfare for all regions, profits for firms, and consumer welfare.
Pages
22
ISSN (Print)
1866–3494