Nonlinear Pricing in Yellow Pages
Open Access
- Author:
- Huang, Yao
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- June 09, 2010
- Committee Members:
- Isabelle Perrigne And Quang Vuong, Dissertation Advisor/Co-Advisor
Isabelle Perrigne, Committee Chair/Co-Chair
Quang Vuong, Committee Chair/Co-Chair
Edward James Green, Committee Member
Mark John Roberts, Committee Member
Duncan Fong, Committee Member - Keywords:
- nonlinear pricing
- Abstract:
- CHAPTER 1: Nonlinear Pricing in Yellow Pages (with Isabelle Perrigne and Quang Vuong) This paper analyzes nonlinear pricing in yellow page advertising. First, we develop a monopoly model that incorporates some features of the industry such as a minimal advertisement size offered to all businesses. The model structure is then defined by the distribution of businesses’ types, the inverse demand function and the publisher’s cost function. Under the assumption of a multiplicative inverse demand function, we show that the structure is nonparametrically identified up to the cost function, which is identified through its marginal cost at the total amount produced. Next, we propose a simple nonparametric procedure to estimate the type distribution and the inverse demand function. We establish the asymptotic properties of our two-step nonparametric estimator, whose first step converges at the parametric rate. The method is applied to analyze nonlinear pricing data in yellow page advertising. The empirical results show an important heterogeneity in businesses’ tastes for advertising. Some counterfactuals assess the cost of asymmetric information and the benefits of nonlinear pricing in presence of asymmetric information over other pricing rules. CHAPTER 2: Competition and Nonlinear Pricing in Yellow Pages (with Gaurab Aryal) This paper proposes a structural framework to analyze the nonlinear pricing strategies of two yellow page-advertising publishers. The data collected from the Yellow Page Association and the phone books suggest that the utility publisher is a leader in the market. Therefore, we consider a Stackelberg duopoly model of nonlinear pricing in which firms buying advertising are characterized by a bi-dimensional vector of tastes for the two directories. The model and the econometric specification incorporate the features observed in the data such as the quadratic price schedules and a basic free advertisement offered to all firms by both publishers. Empirical results show substantial heterogeneity among firms’ willingness to pay. The estimated model is used to assess the welfare loss due to (i) asymmetric information, (ii) a merger between the two publishers and (iii) withdrawal of the non-utility publisher from the market.