Department of Strategy
Kellogg School of Management
2211 Campus Drive
Evanston, IL 60208
Institutional Affiliation: Northwestern University
Information about this author at RePEc
NBER Working Papers and Publications
|September 2017||How Efficient is Dynamic Competition? The Case of Price as Investment|
with , : w23829
We study industries where the price that a firm sets serves as an investment into lower cost or higher demand. We assess the welfare implications of the ensuing competition for the market using analytical and numerical approaches to compare the equilibria of a learning-by-doing model to the first-best planner solution. We show that dynamic competition leads to low deadweight loss. This cannot be attributed to similarity between the equilibria and the planner solution. Instead, we show how learning-by-doing causes the various contributions to deadweight loss to either be small or partly offset each other.
Published: David Besanko & Ulrich Doraszelski & Yaroslav Kryukov, 2019. "How Efficient Is Dynamic Competition? The Case of Price as Investment," American Economic Review, vol 109(9), pages 3339-3364.
|June 2016||Insurance and the High Prices of Pharmaceuticals|
with , : w22353
We present a model in which prospective patients are liquidity constrained, and thus health insurance allows patients access to treatments and services that they otherwise would have been unable to afford. Consistent with large expansions of insurance in the U.S. (e.g., the Affordable Care Act), we assume that policies expand the set of services that must be covered by insurance. We show that the profit-maximizing price for an innovative treatment is greater in the presence of health insurance than it would be for an uninsured population. We also show that consumer surplus is less than it would be if the innovation was not covered. These results show that even in the absence of moral hazard, there are channels through which insurance can negatively affect consumer welfare. Our model also p...