Three Essays on Non-Price Competition

Abstract

This thesis is comprised of three chapters that examine aspects of non-price competition among firms. The first chapter theoretically studies the effects of exclusive dealing in the presence of service competition. In our model, retailers compete not only in price but also in service. We find that the adoption of exclusive dealing by upstream manufacturers induces the retailers to offer higher service levels than under common agency. Depending on consumers' marginal valuation of service, the manufacturers may indeed adopt exclusive contracts in equilibrium. The second and third chapters consider a specific aspect of services in airline industry, namely flight delays. Specifically, the second chapter analyzes the flight delay impact on equilibrium airfare and passenger volume in metropolitan and secondary airport market in the United States. Using quarterly data from 2013 to 2019 , we find that delay is more likely to increase the airfare of connecting flights in metropolitan markets and reduce the price of direct flights in less busy routes. Passenger volumes between metropolises may not be affected by delay, but secondary airport markets may lose passengers because of delay. In the third chapter, we continue the study of the flight delay impact and explore the effect of flight delay on welfare. By using the three-stage least squares method to estimate a simultaneous equations system, we quantify the welfare change of both consumers and airlines in response to delay reduction. We find that existing passengers would substantially benefit from improvement of flights' on-time performance, and airlines would mainly gain from increases in passenger volumes.