3,317 research outputs found
Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs
Incompatibility in market with network effects reduces consumers? ability to ?mix and match?
components offered by different sellers, but can also spur changes in product attributes that
might beneĂt consumers. In this paper, we estimate the effects of incompatibility on consumers
in a classic hardware/software market: ATM cards and machines. We Ănd that while ATM fees
ceteris paribus reduce the network beneĂt from other banks? ATMs, a surge in ATM deployment
accompanies the shift to surcharging. This is valuable to consumers and often completely offsets
the harm from higher fees. The results suggest that policy discussions of incompatibility must
consider not only its direct effect on consumers, but also its effect on product attributes.ATMs, incompatibility, compatibility, discrete choice, network effects, demand estimation
Tacit Collusion in the Presence of Cyclical Demand and Endogenous Capacity Levels
We analyze tacit collusion in an industry characterized by cyclical demand and long-run scale
decisions; âŠrms face deterministic demand cycles and choose capacity levels prior to competing
in prices. Our focus is on the nature of prices. We âŠnd that two types of price wars may exist.
In one, collusion can involve periods of mixed strategy price wars. In the other, consistent
with the Rotemberg and Saloner (1986) deâŠnition of price wars, we show that collusive prices
can also become countercyclical. We also establish pricing patterns with respect to the relative
prices in booms and recessions. If the marginal cost of capacity is high enough, holding current
demand constant, prices in the boom will be generally lower than the prices in the recession;
this reverses the results of Haltiwanger and Harrington (1991). In contrast, if the marginal cost
of capacity is low enough, then prices in the boom will be generally higher than the prices in
the recession. For costs in an intermediate range, numerical examples are calculated to show
specifc pricing patterns.industrial
Re-Assessing the U.S. Quality Adjustment to Computer Prices: The Role of Durability and Changing Software
In the second-half of the 1990s, the positive impact of information technology
on productivity growth for the United States became apparent. The measurement of this
productivity improvement depends on hedonic procedures adopted by the Bureau of
Labor Statistics (BLS) and Bureau of Economic Analysis (BEA). In this paper we
suggest a new reason why conventional hedonic methods may overstate the price decline
of personal computers. We model computers as a durable good and suppose that
software changes over time, which influences the efficiency of a computer. Anticipating
future increases in software, purchasers may âoverbuyâ characteristics, in the sense that
the purchased bundle of characteristics is not fully utilized in the first months or year that
a computer is owned. In this case, we argue that hedonic procedures do not provide valid
bounds on the true price of computer services at the time the machine is purchased with
the concurrent level of software. To assess these theoretical results we estimate the
model and find that before 2000 the hedonic price index constructed with BLS methods
overstates the fall in computer prices. After 2000, however, the BLS hedonic index falls
more slowly, reflecting the reduced marginal cost of acquiring (and therefore marginal
benefit to users) of characteristics such as RAM, hard disk space or speed.industrial
Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs
Incompatibility in markets with indirect network e€ects can a€ect prices if consumers value
?mix and match?combinations of complementary network components. In this paper, we exam-
ine the e€ects of incompatibility using data from a classic market with indirect network e€ects:
Automated Teller Machines (ATMs). Our sample covers a period during which higher ATM
fees increased incompatibility between ATM cards (which are bundled with deposit accounts)
and other banks?ATM machines. A series of hedonic regressions suggests that incompatibility
strengthens the relationship between deposit account pricing and own ATMs, and weakens the
relationship between deposit account pricing and competitors?ATMs. The e€ects of incom-
patibility are stronger in areas with high population density, suggesting that high travel costs
increase both the strength of network e€ects and the importance of incompatibility in ATM
markets.atm, network effects
The Impact of the Clean Air Act Amendments of 1990 on Electric Utilitiesand Coal Mines: Evidence from the Stock Market
If new environmental regulation imposes significant costs on firms, it should be detected in their
stock prices. We use event study methodology to analyze whether President George H. Bushâs Clean
Air Act Amendment (CAAA) proposals of June 1989, which were quite different from what had been
expected, depressed stock prices in affected electricity generating and coal mining companies. We find
that shares of 35 electric generating companies owning Phase I power plants did not noticeably fall in
value after the Bush June 1989 announcement, nor after three other possibly relevant events during the
preceding year. In fact, these shares increased in value during June and July of 1989. In contrast,
stock prices of 11 of the 12 coal mining companies fell after Bush announced his proposals, while stock
prices of a large majority of these coal companies fell after two of the other three events (although
significance levels make these results not entirely conclusive). We argue that expected profits of electric
generating companies did not fall because the regulated price of electricity was typically allowed to
increase with costs. In the electricity industry, the costs of the CAAA were expected to be borne
entirely by consumers in the form of higher prices.clean air, electric
Strategic Incompatibility in ATM Markets
We test whether firms use incompatibility strategically, using data from ATM markets. High ATM fees degrade the value of competitors' deposit accounts, and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation. Our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes ATM profit considered as a stand-alone operation. The results are consistent with such behavior by large banks, but not by small banks. For large banks, the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base.
Compatibility and pricing with indirect network effects: evidence from ATMs
Incompatibility in markets with indirect network effects can reduce consumersâ willingness to pay if they value âmix and matchâ combinations of complementary network components. For integrated firms selling complementary components, incompatibility should also strengthen the demand-side link between components. In this paper, we examine the effects of incompatibility using data from a classic market with indirect network effects: Automated Teller Machines (ATMs). Our sample covers a period during which higher ATM fees increased incompatibility between ATM cards and other banksâ ATM machines. We find that incompatibility led to lower willingness to pay for deposit accounts. We also find that incompatibility benefited firms with large ATM fleets.Automated tellers
Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs
Incompatibility in markets with indirect network effects can affect prices if consumers value "mix and match" combinations of complementary network components. In this paper, we examine the effects of incompatibility using data from a classic market with indirect network effects: Automated Teller Machines (ATMs). Our sample covers a period during which higher ATM fees increased incompatibility between ATM cards (which are bundled with deposit accounts) and other banks' ATM machines. A series of hedonic regressions suggests that incompatibility strengthens the relationship between deposit account pricing and own ATMs, and weakens the relationship between deposit account pricing and competitors' ATMs. The effects of incompatibility are stronger in areas with high population density, suggesting that high travel costs increase both the strength of network effects and the importance of incompatibility in ATM markets.
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