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Volume 28, Issue 1, Spring 2018 – SPECIAL ISSUE on Platforms

Friends or foes? Examining platform owners’ entry into complementors’ spaces

Feng Zhu

As platform owners continue to expand their ecosystems, many of them have started to provide consumers with their own complementary applications. These moves position the platform owners as direct competitors to their complementors. This paper surveys empirical studies that examine the direct entry of platform owners into complementors’ product spaces. It finds that both the motivation and impact of such entries on complementors are multifaceted. The motivation behind platform owners’ direct entry goes beyond value capture, and the impact of platform entry on complementors varies across empirical settings. It identifies several future research directions that can help advance our understanding of the relationships between platform owners and complementors.

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Feng Zhu

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Recently Published Articles

Volume 28, Issue 1, Spring 2019 – Special Issue on Platforms (current issue)

The economics of markets and platforms

Daniel F. Spulber
Advances in the study of both markets and platforms contribute to economics. Platforms are typically digital markets, although platforms can designate markets generally. So, the economics of markets and the economics of platforms are one and the same.

The reflection problem in network effect estimation

Marc Rysman
This paper discusses the empirical identification of network effects in light of the reflection problem of Manski. I argue that models of indirect network effects present reasonable exclusion restrictions to address the challenges of the reflection problem.

Platform economics and antitrust enforcement: A little knowledge is a dangerous thing

Michael L. Katz
Although the economics of multisided platforms has developed important insights for antitrust policy, there are critical respects in which the body of academic knowledge falls short of providing useful advice to enforcement agencies and the courts. In this note, I identify several areas in which economics research could potentially make significant contributions to the practical antitrust treatment of platforms.

The importance of consumer multihoming (joint purchases) for market performance: Mergers and entry in media markets

Simon P. Anderson, Øystein Foros, and Hans Jarle Kind
Consumer “multihoming” (watching two TV channels, or buying two news magazines) has surprisingly important effects on market equilibrium and performance in (two‐sided) media markets. We show this by introducing consumer multihoming and advertising finance into the classic circle model of product differentiation.

Horizontal mergers between multisided platforms: Insights from Cournot competition

Joao Correia‐da‐Silva Bruno Jullien Yassine Lefouili Joana Pinho
This paper discusses the literature on horizontal mergers between multisided platforms and argues that the Cournot model can provide useful insights into the welfare effects of such mergers.

The status of workers and platforms in the sharing economy

Andrei Hagiu and Julian Wright
We consider whether workers who provide their services through online platforms, such as Handy and Uber, should be classified as independent contractors or employees.

A theory of multihoming in rideshare competition

Kevin A. Bryan and Joshua S. Gans
We examine competition among ridesharing platforms, where firms compete on both price and the wait time induced with idled drivers. We show that when consumers are the only agents who multihome, idleness is lower in duopoly than when consumers face a monopoly ridesharing platform. When drivers and consumers multihome, idleness further falls to zero as it involves costs for each platform that are appropriated, in part, by their rival.

Platform market competition with endogenous side decisions

Jay Pil Choi and Yusuke Zennyo
This paper develops a framework to analyze platform competition in two‐sided markets in which agents endogenously decide on which side of a platform to join. We characterize the equilibrium pricing structure and perform a comparative statics analysis on how the distribution of agents’ preferences affects the platforms’ profits.

Towards a theory of platform dynamics

Luís Cabral
I introduce a dynamic framework to analyze platforms. The (single) platform owner sets prices at the beginning of each period. Agents (buyers, sellers, readers, consumers, merchants, etc.) make platform membership decisions occasionally. I show that an optimal platform pricing addresses two externalities: across sides and across time periods. This results in optimal prices which depend on platform size in a nontrivial way

Volume 27, Issue 4, Winter 2018

Economic influence activities

Davin Raiha
Firms frequently make operational and strategy decisions to gain political influence. They locate plants, expand workforces, or choose suppliers, with the aim of affecting the economy and the electoral success of politicians. This behavior constitutes a nontraditional form of influence, which I refer to as economic influence activities (EIA). In this paper, I show how such activities influence policymaking and why firms may prefer it to more traditional influence activities such as campaign contributions.

Corporate social responsibility and product quality

Aleix Calveras and Juan‐José Ganuza
We study both theoretically and empirically the relationship between different types of corporate social responsibility (CSR) and a firm's product quality. We show that CSR may serve as a tool for a firm's product differentiation strategy, finding that both internal and external CSR enhance a firm's product quality.

On the role of outside options in wage renegotiation

Fengjiao Chen, Chiu Yu Ko, and Duozhe Li
We study a game‐theoretic model of wage renegotiation. A worker, after receiving a superior outside offer, initiates a wage renegotiation with his current employer. During the renegotiation, whenever a proposal is rejected, the worker decides whether to opt out. When the two parties are sufficiently patient, any wage level between the outside offer and the entire net surplus can be sustained in equilibrium. Opting out may also arise in equilibrium.

Contract contingency in vertically related markets

Emanuele Bacchiega, Olivier Bonroy, and Emmanuel Petrakis
We study the optimal precontractual arrangement offers of an upstream monopolist producing an essential input that may sell to two vertically differentiated downstream firms. A powerful supplier always opts for an exclusive contract. By contrast, a weaker supplier offers nonexclusive contracts and makes each of them contingent or noncontingent such as to guarantee the most favorable outside option in its negotiations.

Managerial turnover and entrenchment

Zenan Wu and Xi Weng
We consider a two‐period model in which the success of the firm depends on the effort of a first‐period manager (the incumbent) as well as the effort and ability of a second‐period manager. Our model predicts that it is optimal for the board to design a contract to induce entrenchment (respectively, anti‐entrenchment) if the signal regarding the incumbent manager's ability becomes sufficiently uninformative (respectively, informative).

On the determinants and consequences of informal contracting

Ricard Gil and Giorgio Zanarone
As documented by Macauley and others, informal contracts are pervasive in modern economies. Yet, systematic empirical evidence on them is still limited. In this paper, we provide a framework to investigate the determinants and consequences of informal contracting.

Platform pricing and consumer foresight: The case of airports

Ricardo Flores‐Fillol, Alberto Iozzi, and Tommaso Valletti
We analyze the optimal behavior of a platform providing essential inputs to downstream firms selling a primary and a second complementary good. Final demand is affected by consumer foresight, that is, consumers may not anticipate the ex post surplus from the secondary good when purchasing the primary good.

Peer‐to‐peer sharing in the lodging market: Evaluating implications for social welfare and profitability

Esther Gal‐Or
With a focus on the lodging market, we investigate the nature of competition between a peer‐to‐peer platform and a traditional lodging provider (hotel), in an environment where both possess the market power to affect the final lodging price established in the market.

Selling through referrals

Daniele Condorelli, Andrea Galeotti, and Vasiliki Skreta
We endogenize intermediaries' choice to operate as agents or merchants in a market where there are frictions due to asymmetric information about consumption values.

Volume 27, Issue 3, Fall 2018

Special Issue: Innovation Economics III: Patents, Trademarks, and Technology Standards Datasets

Micro Moments Database for cross‐country analysis of ICT, innovation, and economic outcomes

Eric Bartelsman, Eva Hagsten, and Michael Polder
This paper provides technical documentation to a database built up from firm‐level sources titled Micro Moments Database (MMD) that is made available for researchers through Eurostat. The MMD is an internationally harmonized research database of statistical moments collected from linked longitudinal firm‐level data in a large selection of EU national statistical offices. 

Making the patent scope consistent with the invention: Evidence from Japan

Yoshimi Okada, Yusuke Naito, and Sadao Nagaoka
It is a crucial function of patent examination to make the patent scope consistent with the contribution of the invention to the state of the art. We assess this function using newly developed data on the scope of Japanese patent applications and grants.

Constructing a Chinese patent database of listed firms in China: Descriptions, lessons, and insights

Zi-Lin He, Tony W. Tong, Yuchen Zhang, Wenlong He
Although China is now the largest patent filing country in the world, there is little firm-level research using Chinese patents due to difficulties in integrating Chinese patent data with firm data. To partially address this gap, we construct a Patent Database linking State Intellectual Property Office (SIPO) patents to all listed firms and their subsidiaries in China, and we are making the database publicly available to the research community.

The USPTO Patent Examination Research Dataset: A window on patent processing

Stuart J.H. Graham, Alan C. Marco, and Richard Miller
This article describes the “USPTO Patent Examination Research Dataset” (PatEx) and explores possible selection issues and the representativeness of the nearly 9.2 million US patent application records it contains.

Machine learning and natural language processing on the patent corpus: Data, tools, and new measures

Benjamin Balsmeier, Mohamad Assaf, Tyler Chesebro, Gabe Fierro, Kevin Johnson, Scott Johnson, Guan‐Cheng Li, Sonja Lück, Doug O'Reagan, Bill Yeh, Guangzheng Zang, and Lee Fleming
Drawing upon recent advances in machine learning and natural language processing, we introduce new tools that automatically ingest, parse, disambiguate, and build an updated database using U.S. patent data. 

Mapping standards to patents using declarations of standard‐essential patents

Justus Baron and Tim Pohlmann
This paper describes a new database of declared standard‐essential patents (SEPs), discusses methods for matching declared SEPs to specific standard documents, and presents empirical evidence on technology standards subject to declared SEPs. It discusses opportunities for new empirical research using databases of declared SEPs and data on patenting in standard‐related technology classes.

Technology Standards and Standard Setting Organizations: Introduction to the Searle Center Database

Justus Baron and Daniel F. Spulber
This paper describes the Searle Center Database on Technology Standards and Standard Setting Organizations (SSOs). This database combines comprehensive information on technology standards, SSO membership, and SSO characteristics in a format designed for economic research. The paper describes how to combine these data with other new databases on standard‐related patents and standardization processes at 3GPP; and sketches avenues for empirical research.

Unpacking 3GPP standards

Justus Baron and Kirti Gupta
This paper describes a new database with detailed information on standardization procedures at the 3rd Generation Partnership Project (3GPP). 3GPP is the most relevant standard‐setting organization (SSO) in the field of mobile telecommunications.  The present database contains information on membership, meeting attendance, chairmanship, work items, contributions, and votes at 3GPP. These data shed light on the technical complexity of standard development and illustrate the importance of voluntary contributions from SSO members.

Monetizing marks: Insights from the USPTO Trademark Assignment Dataset

Stuart J. H. Graham, Alan C. Marco, and Amanda F. Myers
This article describes the USPTO Trademark Assignment Dataset, a database of over 785,000 transactions recorded during 1952–2013 affecting almost 4.2 million trademark registrations and applications. We provide a comprehensive description and present key trends.

Volume 27, Issue 2, Summer 2018

Multibrand pricing as a strategy for consumer search obfuscation in online markets

Stephen McDonald and Colin Wren
This paper argues that a firm with multiple brands can obfuscate consumer search by excluding the brands of other firms from a consumer's consideration set. This is examined empirically by regressing price data for a leading U.K. motor insurance price comparison site (or “shopbot”).

Contractual structures and consumer misperceptions

Christian Michel
We analyze how firms can design contracts to strategically induce consumer misperceptions. A fraction of consumers is naive and underestimates the costs of claiming a warranty payment in the event of product breakdown. This leads to an inference error that makes consumers prone to overpredict product quality, which a firm can profitably exploit.

Inefficient NGO labels: Strategic proliferation and fragmentation in the market for certification

Anthony Heyes and Steve Martin
Nongovernmental organization (NGO) certification is a prerequisite for corporate engagement in enhanced social behaviors in many settings. Labels with broad scope (like “sustainability”) coexist with niche competitors much narrower in scope (like “bird-friendliness”). Modeling multi-issue competition between NGOs allows us to be the first to analyze label fragmentation and provide a novel perspective on proliferation that has frustrated practitioners.

Poaching in media: Harm to subscribers?

Elias Carroni
Two media platforms compete for heterogeneous users bothered by commercials and sell advertising spaces to firms. Within-group price discrimination intensifies media competition on the firms' side, as some firms advertise only on one media outlet (single-home), where they can meet early users and switchers. However, price discrimination also induces stronger within-group competition to poach the rival's users. Depending on the balance between these two forces, conditioning subscription prices on past behavior might be beneficial or detrimental to users, whereas it is always detrimental to platforms.

Behavior‐ and characteristic‐based price discrimination

Stefano Colombo
We develop a model of behavior‐ and characteristic‐based discriminatory pricing where consumers are heterogeneous both in tastes and in price sensitivity.

The role of performance appraisals in motivating employees

Jurjen J.A. Kamphorst Otto H. Swank
Workers' rewards and career perspectives often depend on how their supervisors perceive their performance. However, evaluating a worker's performance is often difficult. Supervisors give, on average, “too” positive appraisals, and both positive and negative feedback can (de)motivate workers.

Skill development, bargaining power, and a theory of job design

Seongwuk Moon
We examine the job design decision in the context of skill development and bargaining power. The choice between specialization and multitasking requires employees to develop either specialized or varied task‐specific skills. Employees' (i.e., the owners of the acquired skills) bargaining power depends on their skill sets, which differentiate their ability to hold up production and threaten to leave a firm.

Licensing and innovation with imperfect contract enforcement

Richard Gilbert and Eirik Gaard Kristiansen
Licensing promotes technology transfer and innovation, but enforcement of licensing contracts is often imperfect. We model contract enforcement as a game with perfect information but probabilistic enforcement and explore the implications of weak enforcement on the design of licensing contracts, the conduct of firms, and market performance.

Asymmetric sequential search under incomplete information

Yizhaq Minchuk Aner Sela
We study a multistage sequential search model with n agents who compete for one job. We also investigate the relation between the optimal ability thresholds as well as the optimal order of agents in all stages according to the agents' distributions of abilities.