Economics

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Author: search.filters.author.Tao, Xuezhen

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    Replication Code for "Should We Expect Merger Synergies To Be Passed Through to Consumers?"
    (2024-07-01) Sweeting, Andrew; Lecesse, Mario; Tao, Xuezhen
    When reviewing horizontal mergers, antitrust agencies balance anticompetitive incentives, resulting from market power, with procompetitive incentives, created by efficiencies, assuming complete information and static, simultaneous move Nash equilibrium play. These models miss how a merged firm may prefer not to pass through efficiencies when rivals would respond by lowering their prices. We use an asymmetric information model, where rivals do not observe the size of the realized cost efficiency, to investigate how this incentive could affect post-merger prices. We highlight how the strength of this incentive will depend on the market structure of non-merging rivals and discuss alternative settings where similar issues arise.
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    Replication code for Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers
    (2024-07-01) Sweeting, Andrew; Yao, Xinlu; Tao, Xuezhen
    We model repeated pricing by differentiated product firms when each firm has private information about its serially-correlated marginal cost. In a fully separating equilibrium of the dynamic game, signaling incentives can lead equilibrium prices to be signif icantly above those in a static, complete information game, even when the possible variation in the privately-observed state variables is very limited. We calibrate our model using data from the beer industry, and show that, without any change in conduct, our model can explain increases in price levels and changes in price dynamics and cost pass-through after the 2008 MillerCoors joint venture. The software in this repository allows all of the simulated numbers to be recalculated. It provides information on where the IRI dataset used in the empirical work can be found. Code to process the data is included.
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    Essays on Product Introduction
    (2018) Tao, Xuezhen; Sweeting, Andrew; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This dissertation contributes to the study of product introduction from two aspects. Chapter 1 and 2 study firms’ strategic decisions in product release frequencies as well as their dynamic pricing and innovation decisions in the flagship smartphone market. Chapter 3 studies consumers’ multi-version consumption in response to periodic new product releases in the video game industry. In Chapter 1, I extend the dynamic innovation framework developed by \cite{ericson1995markov} by incorporating firms' choices of their product release timing. In this new framework, firms first commit to their product release frequencies, then based on their committed schedules, I solve for their pricing and innovation decisions upon each product release. The welfare analysis in the counterfactual analysis shows that when the market shift from the duopoly to a monopoly, social welfare improves as higher innovation dominates higher prices and slower releases in welfare impact. In Chapter 2, I adopt the framework developed in Chapter 1, and further extend the discussion to provide managerial implications on firms’ optimal product release strategies in two dimensions: staggering in product release timing, and maintaining regular release schedules. Based on the simulated market outcome, firms should stagger their product releases with others and maintain the regular form of their release schedules. In Chapter 3, I study consumers’ responses to firms’ new product releases in the video game industries. Video game players are observed to continue playing their old games even after their new purchases, which contrasts with the single-product consumption assumption in the existing durable good literature. This paper develops a new framework where video game players allocate their playing time within their game portfolios based on a latent variable, ``game preference.'' The game preference is constructed to be flexible as it captures both contemporaneous heterogeneities across game versions and game modes, and also intertemporal heterogeneities across individuals like past gaming activities. We estimate the model parameters based on the data provided by Wharton Consumer Analytic Initiatives and report how our model fits the data pattern in three dimensions: game purchase decisions, game play decisions and game duration.