G604 IO II
Eric Rasmusen, [email protected]
20 April 2006
Milyo and Waldfogel
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Readings
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11 April, Tuesday. Exclusive Dealing
John Asker, "Diagnosing Foreclosure Due to Exclusive Dealing," October 14, 2004,
Leonard N. Stern School of Business, NYU.
13 April, Thursday. File Sharing and Record Sales,
Felix Oberholzer and Koleman Strumpf, "The Effect of File Sharing on Record Sales An
Empirical Analysis," Harvard Business School (March 2004).
Week 14
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18 April, Tuesday. Antitrust Law.
"Statutory Provisions and Guidelines of the Antitrust Division," 3rd edition (April 2001)
Microsoft case: "Conclusions of Law," United States District Court for the District of
Columbia, Civil action 98-1232
Lawrence White (1999) "Present at the Beginning of a New Era for Antitrust: Reflections
on 1982-1983,"March 16, 1999. http://papers.ssrn.com/paper.taf?abstract_id=167208
Powerpoint lecture slides
20 April, Thursday. Prices, Ads, and Search
Jeffrey Milyo and Joel Waldfogel "The Effect of Price Advertising on Prices: Evidence in
the Wake of 44 Liquormart," American Economic Review, 89(5): 1081-1096 (December
1999).
You might be interested in reading the Supreme Court decision in 44 Liquormart.
Here are my powerpoint slides.
Week 15
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Does Price Advertising Reduce
Average Price?
Stigler (1961, JPE, “The Value of Information”) Ads reduce
prices at all stores.
Salop and Stiglitz, (1977 REStud, “Bargains and Ripoffs”) Ads
have complicated effects.
Benham (1972) Eyeglass paper, empirical. State laws. Ads
reduce prices.
Glazer (1981) empirical. Groceries. Newspaper strike.
Conclusion: Advertising reduces the price of advertised
products at stores that advertise, but has not effect on
prices at smaller stores that never advertise. (i.e.: during
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the strike, the big stores’ prices went up)
The y-Variables
PRICE:
Log of price
MARKUP: Log(retail price – wholesale price)
Why not the following?
MARKUP*(Retail Price)/(Wholesale price)
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Which Stores Chose to Advertise?
Was it the low-price stores that chose to advertise after the
Supreme Court said it was legal?
MW regressed
Log OldPrice = Product Dummies +_Time Dummies +
JustWindow Ads + NewspaperAds
Stores that advertised just in the windows (24 of 58) had
5.61% lower prices before May 1996 (t=9.92)
Stores that advertised in newspapers (?? of 58) had 7.71%
lower prices before May 1996 (t=9.83)
(9 of 58, earlier on the page)
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Conclusions
1.Prices of advertised products fell 20% at stores that
advertised them, but their other prices did not change.
2. Newspaper-advertising stores reduced their prices of a
product if rivals advertised it.
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A link to the course website
http://www.rasmusen.org/g604/0.g604.htm
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