Three Essays On Industrial Innovation

Author : Xing Li
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (951 download)

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Download or read book Three Essays on Industrial Organization written by Xing Li and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines a few empirical questions industrial organization and economics of innovation. Chapter 1 studies mobile app industry. More specifically, success breeds success in many mass market industries, as well known products gain further consumer acceptance because of their visibility. However, new products must struggle to gain consumer's scarce attention and initiate that virtuous cycle. The newest mass market industry, mobile apps, has these features. Success among apps is highly concentrated, in part because the "top apps lists" recommend apps based on past success as measured by downloads. Consequently, in order to introduce themselves to users, new app developers attempt to gain a position on the top app lists by "buying downloads, " i.e., paying a user to download the app onto her device. We build a model to rationalize this rational, that accommodates the impact of buying downloads on top list ranking, and optimal investment in buying downloads. We leverage a private dataset of one platform for buying downloads and identify the return on this investment, as a test for the assumption of the model. $100 invested will improve the ranking by 2.2%. We provide some informal tests of the two empirical prediction of the model: (1) there are two humps in the diffusion pattern of the app, and (2) early-day ranking is less persistent than later-day ranking. We estimate an empirical analog of the model to show the relative importance of buying downloads and rich heterogeneity in the market. We use these estimates to evaluate the efficiency of top-ranking list as a revealing system by counterfactual. This chapter is coauthored with Tim Bresnahan and Pai-Ling Yin. Chapter 2 provides a model that uses preference heterogeneity to rationalize the cross-sectional and intertemporal variation in a firm's horizontal product differentiation strategies. Product-line dynamics arise from shocks to preference heterogeneity. For example, in the potato chip category I study, consumer concerns over fat levels in foods created two desirable alternatives (low fat and zero fat) for each flavor. On the supply side, firms learn about these changing tastes and adapt product lines accordingly. For tractability, the heterogeneity in preference is captured by the nesting parameter in an aggregate nested logit demand model. I find greater preference heterogeneity for chips in smaller packages and for markets with more demographic diversity. The dominant firm in the market bases its decisions primarily on its past experience in the market, with the latest preference shocks representing only 30% of the influence in product-line decisions. Gross margins are increased by 5% if firms have perfect information about preference heterogeneity. Costs for product line maintenance constitute about 2% of total revenue. Sunk costs incurred when expanding the product line are estimated to be four times the per-product fixed cost, thereby limiting the flexibility of product-line adjustment. The probability of line length adjustment grows from 70% to 90% under a smooth cost structure. Chapter 3 exploits a differential increase in copyright under the UK Copyright Act of 1814 - in favor of books by dead authors - to examine the influence of longer copyrights on price. Difference-in-differences analyses, which compare changes in the price of books by dead and living authors, indicate a substantial increase in price in response to an extension in copyright length. By comparison, placebo regressions for books by dead authors that did not benefit from the extension indicate no differential increase. Historical evidence suggests that longer copyrights increase price by improving publishers' ability to practice intertemporal price discrimination. This chapter is coauthored with Petra Moser and Megan MacGarvie.