Berlin IO Day

Program (PDF, 90.16 KB)

Coasian Dynamics in Sequential Search
Eeva Mauring (joint with Cole Williams)
Consumer-tracking technology offers new tools for price discrimination in digital markets. We examine the impact of sellers using this technology to adjust prices according to a buyer’s prior search length in a competitive search market where buyers differ in patience. We find “Coasian equilibria” wherein sellers reduce prices for buyers with longer search lengths which in turn requires them to reduce prices for buyers with shorter search lengths. In commonly studied environments, Coasian equilibria not only yield higher welfare for every buyer than all uniform-pricing equilibria, but are also the only equilibria when some mass of buyers are arbitrarily patient.
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Binding Emissions Constraints in the European Car Market
Philipp Schmidt-Dengler (joint with Klaus Gugler and Thomas Wiedenhofer)
The EU has significantly tightened emissions standards for new passenger vehicles over the past decade, concurrently implementing a more precise testing procedure. The emissions standard introduces a kink in the profit function, rendering standard methods for estimating differentiated products models inapplicable. By introducing uncertainty we smooth the kink, allowing us to perform counterfactuals evaluating the standard. We illustrate the heterogeneous effects of the standard on manufacturers' pricing policies and profits, and on consumer welfare across EU countries.

Improving Performance Through Allocation and Competition: Evidence from a Patient Choice Reform
Tanja Saxell (joint with Mika Kortelainen, Liisa T. Laine, Konsta Lavaste, and Luigi Siciliani)
We study the allocative effects of enhancing consumer choice and non-price competition in markets with heterogeneous producers. We use comprehensive administrative data and a difference-in-differences design based on the introduction of a regional patient choice reform for planned surgeries in Finland. We find that the enhanced choice led to a reallocation of patients towards large teaching hospitals and increased concentration in their markets. Waiting times decreased in hospitals exposed to the reform and more patients were treated, with little effect on clinical quality or surgical expenditure after the reform. Our results suggest that enhanced choice can improve public hospital performance and allocative efficiency.
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Price Saliency and Fairness: Evidence from Regulatory Shaming
Itai Ater (joint with Or Avishay-Rizi)
How do firms and consumers respond, when consumers realize that they pay more than other consumers for the same product? We study the effects of a regulation that required Israeli retailers to display on-the-shelf signs showing the (cheap) international price of products alongside the price of the very same products in the local store. We find that prices fell on average by 8\%, and more so for products whose prices were more expensive compared to their international counterparts. Quantities increased after prices fell, but were significantly smaller than increases predicted based on pre-regulation demand elasticities and actual price drops. Moreover, the products that remained more expensive relative to their international counterparts exhibited larger differences between predicted and actual quantities. To explain these findings, we develop and estimate a version of the model by Eyster et. al 2021, and find that from a consumer point of view, a 1\% decrease in a product's sale price is equivalent to a 7 percentage points increase in the international price of that product. Also, consumer welfare decreased for some products. This happens when the disutility from observing that other consumers paid less exceeds the added utility from increased consumption. We discuss the implications of our findings for optimal pricing strategies and theoretical models of salient thinking.

Wage Markups and Buyer Power in Intermediate Input Markets
Leonard Treuren
How are market imperfections in different input markets related? I show theoretically that the extent of buyer power in intermediate input markets determines both wages and wages relative to the marginal revenue contribution of employees if collective bargaining characterizes labor markets. This relationship is examined empirically using data on the universe of Dutch manufacturing firms from 2007 to 2018. I find that buyer power for intermediates is widespread and can explain a substantial portion of within-industry-year wage dispersion. In years where firms have more buyer power, they overpay their employees more relative to their revenue contribution, suggesting that collective bargaining allows workers to extract rents from their employers. Using exchange rate shocks to instrument for buyer power, I find that buyer power indeed increases wages, both in absolute terms and relative to employees' marginal revenue contribution.

The Berlin IO Day is a one-day workshop sponsored by the Berlin Centre for Consumer Policies (BCCP) and the Vereinigung der Freunde e.V. (VdF) des DIW Berlin and supported by the Berlin's leading academic institutions, including DIW Berlin, ESMT Berlin, Freie Universität Berlin, Humboldt-Universität zu Berlin, and Technische Universität Berlin which takes place twice a year, in the Spring and in the Fall.

For each Berlin IO Day, we will invite four or five speakers to present their recent work on a variety of IO topics, followed by a general discussion. The aim is to create an international forum for high quality research in Industrial Organization in the heart of Berlin, one of Europe's most vibrant and intellectually lively cities.

Tomaso Duso, Jo Seldeslachts, Hannes Ullrich (DIW Berlin)

Michał Grajek, David Ronayne, Stefan Wagner (ESMT Berlin)

Andreas Asseyer (Freie Universität Berlin)

Daniel Guhl, Daniel Klapper, Sebastian Schweighofer-Kodritsch, Roland Strausz (Humboldt-Universität zu Berlin)

Radosveta Ivanova-Stenzel (Technische Universität Berlin)

This time, Hannes Ullrich (DIW Berlin & University of Copenhagen) is hosting the workshop.
Special thanks!