Improve Consumer Welfare Research Articles

The Pursuit of Happiness: Can it Make You Happy?

The pursuit of happiness has preoccupied philosophers, psychologists, and consumer researchers, amongst others. Recently, the pursuit of happiness has been investigated empirically, with results appearing to support the perspective that explicitly trying to enhance one’s own happiness may be counterproductive. However, prior investigations were often correlational or involved participants being asked to monitor their happiness under constrained conditions (e.g., while engaging in tasks assigned to them by an experimenter). The current research endeavors to address this limitation, and build a broader framework for understanding when the pursuit of happiness may be effective. In line with prior work, we find that when consumers are asked to monitor their own happiness, they often experience a decrease in happiness regardless of whether their experience is constrained or not. However, when individuals adopt a behavior-focused happiness goal, and are given the freedom to engage in behaviors of their choosing, they tend to modify their behaviors in a way that improves their overall happiness. We relate our findings to prior research regarding why individuals often fail to make happiness-enhancing choices and discuss the practical implications these results may offer for improving consumer welfare.

The Future of HBO NOW: Investigating the Effects of the Charter-Time Warner-Bright House Merger on Over-the-Top Services

This paper aims to examine the effects of media ownership concentration on over-the-top (OTT) services. To do so, it will examine the Time Warner-Charter-Bright House merger as a case study, as well as explore current regulation for OTT services, particularly as multichannel video programming distributors (MVPD), and compare concerns for OTT services that previous moves to consolidate media ownership, like the failed Comcast-Time Warner merger, raised. Specifically, this paper will examine the relationship of HBO and HBO NOW, as an OTT service, and potential impacts of the merger on such content. Charter has argued that the merger will not negatively affect OTT services and lauds their benefits to consumers. However, the argument from those who have voiced opposition to the merger suggest that Charter will restrict the distribution of OTT services in order to preserve the exclusivity of its content. The case of HBO NOW offers a unique position as it is selling their content directly to consumers as OTT but also continues to be included in cable bundles through its traditional HBO cable channels. This paper hopes to explore this tension within the context of the Time Warner-Charter-Bright House Merger in order to address the effects of media consolidation on innovation and consumers.Including popular press, as well as press releases and blog posts from the relevant companies, data will be gathered from filings with the FCC, SEC, among other regulatory groups and activist organizations. This paper intends to conclude with a determination on how the merger might affect OTT services and a recommendation for changes to media law and policy on ownership in order to promote access to citizens, improve consumer welfare, and reduce barriers to entry in these media markets. The relationships explored in this paper between infrastructure, innovation, media ownership, and law and policy, are important sites of investigation – particularly for understanding how these forces impact citizens.

The Spillover Effects of Good Governance in a Tax Competition Framework with a Negative Environmental Externality

We investigate the impact of a political regime shift affecting consumers, business interests and lobby contributions when countries engage in tax competition in capital and a polluting resource. When consumers have more influence than resource owners, the resource tax rate and public spending rise while environmental damages, lobbying contribution, and the capital tax rate fall. This response can spillover to other countries leading to lower welfare. Capital tax harmonization improves welfare of consumers and resource owners. Resource tax harmonization and governance harmonization both reduce the influence of lobbying and improve consumer welfare but resource owners are worse off.

Learning Match Quality

A consumer with unit demand sequentially visits sellers of competing products for which her private values are uncertain. She can learn each value at a cost or purchase any of the products without learning. Each seller optimally sets either a "regular" price which induces a visiting consumer to learn or a sufficiently low "preemption" price which induces the consumer to accept immediately. In contrast to the common intuition about search frictions, we find that higher learning costs can improve consumer welfare by increasing sellers' incentive to preempt, which lowers prices and increases sales. We also demonstrate that the incentive to preempt is lower in a monopoly than in an oligopoly, and in a uniform example show that welfare and consumer surplus are higher in a monopoly for a range of learning costs.

The consumer welfare implications of governmental policies and firm strategy in markets for medicines

This paper empirically examines the consumer welfare implications of changes in government policies related to patent protection and compulsory licensing in the Indian market for oral anti-diabetic (OAD) medicines. In contrast to previous studies on the impact of pharmaceutical patents in India, we observe, and estimate the welfare effects accruing from differential pricing and voluntary licensing strategies of patent-holding innovator firms. Three novel molecules belonging to the dipeptidyl peptidase-4 (DPP-4) inhibitor class of OADs have been launched in India by the patent holders, at lower prices than those prevailing in the developed countries. Using aggregate market transaction data, we structurally estimate demand and supply and use the parameter estimates in our model to simulate consumer welfare under various counterfactual scenarios. Our results suggest that the introduction of DPP-4 inhibitors generated a consumer surplus gain of around 7.6 cents per day for a typical DPP-4 inhibitor user under the existing differential pricing and voluntary licensing strategies. If the innovators decide to price at developed-country levels, this surplus is eliminated almost entirely. The issuance of compulsory licensing does not always improve consumer welfare because if innovators defer or delay the introduction of new drugs in response, the loss in consumer welfare could be substantial.

Putting Disclosure to the Test: Toward Better Evidence-Based Policy

Financial disclosures no longer enjoy the immunity from criticism they once had. While disclosures remain the hallmark of numerous areas of regulation, there is increasing skepticism as to whether disclosures are understood by consumers and do in fact improve consumer welfare. Debates on the virtues of disclosures overlook the process by which regulators continue to mandate disclosures. This article fills this gap by analyzing the testing of proposed disclosures, which is an increasingly popular way for regulators to establish the benefits of disclosure. If the testing methodology is misguided then the premise on which disclosures are adopted is flawed, leaving consumers unprotected. This article focuses on two recent major testing efforts: the European Union’s testing of fund disclosure and the Consumer Financial Protection Bureau’s testing of the integrated mortgage disclosures, which will go into effect on August 1, 2015.Despite the substantial resources invested in these quantitative studies, regulation based on study results is unlikely to benefit consumers since the testing lacks both external and internal validity. The generalizability of the testing is called into question since the isolated conditions of testing overlook the reality of financial transactions. Moreover, the testing method mistakenly assumes a direct link between comprehension and improved decisions, and so erroneously uses comprehension tests. As disclosure becomes more central to people’s daily lives, from medical decision aids to nutritional labels, greater attention should be given to the testing policies that justify their implementation. This article proposes several ways to improve the content and design of quantitative studies as we enter the era of testing.

The Price of Liquor is Too Damn High: State Facilitated Collusion and the Implications for Taxes

We study the relative benefits of taxation versus market structure regulations for distilled spirits. One popular regulation, called post and hold, helps wholesalers set collusive prices as the competitive equilibrium of a single period game. Assembling new datasets of wholesale and retail prices, and sales, we show PH leads to average wholesale markups of 30-40%, with higher markups on expensive products. Taxes distort relative prices less than PH. We show Connecticut could increase tax revenue by 350% and improve consumer welfare while holding alcohol consumption fixed. However, we also show our counterfactual policy may be slightly regressive compared to PH.

DEMAND FOR QUANTITY VERSUS QUALITY IN BEEF, CHICKEN AND FISH CONSUMPTION IN NIGERIA

This study examines income elasticity of demand for quantity andquality beef, chicken, and fish in Nigeria. The analysis is based on randomlyselected 134 households in Ondo state. The empirical results show that incomeelasticity of demand for beef, chicken, and fish are inelastic. This suggeststhat these food items are considered necessities among households in thesample. The computed income elasticity of demand for quality was found tobe positive for all food items. The implication of this is that demand for qualitybeef, chicken, and fish increased as income of the household rises. Thus, frompolicy standpoint, this evidence could be explored to facilitate a better designof food policies aim at improving consumer welfare in Nigeria.

Regulation and Net Neutrality

This paper seeks to inform the network neutrality debate by looking at the role existing government regulation has played in shaping the market for broadband access. Prior research has concluded that network externalities that exist in the market for broadband services justify government intervention (Economides and Tag, 2012). This literature takes limited competition among broadband providers as given rather than questioning why competition is limited in the first place. I argue here that limited competition among broadband providers is not the result of a market failure but rather stems from barriers to entry erected by government regulation, notably municipal “rights-of-way.” The key to improving consumer welfare is therefore not to impose additional regulations on broadband providers, but to clear the way for capital investments in the expansion of new infrastructure and the improvement of existing infrastructure by removing existing regulatory barriers to entry. I conclude that deregulation rather than more regulation would improve Internet access and result in a more level playing field for all content providers.

Are Consumer Decision-Making Phenomena a Fourth Market Failure?

This paper challenges the increasingly common view that the findings of behavioural economics constitute a fourth type of market failure. It shows how many behavioural phenomena, while they do imply departure from the standard competitive market model, undermine the use of this idealized model for policy analysis. A case study of the three-part tariff illustrates two problems: the validity of inferring that consumers’ choices after an intervention are superior to previous choices and the potential for distributional consequences when policy alters choice. These issues make behavioural phenomena fundamentally different from the standard market failures, as the deductive theoretical framework can no longer provide criteria to determine whether a policy improves consumer welfare. Thus, conceiving of behavioural phenomena as another form of market failure is to underestimate their implications for policymaking.

Can access regulation promote broadband investment and consumer welfare?

A facility-based firm invests in network quality and sells wholesale local access to two competing downstream firms, which offer vertically differentiated value-added services. We show that, contrary to common wisdom, access price regulation may simultaneously improve consumer welfare and foster investment incentives compared with regulatory forbearance. This result is robust to a number of different model specifications: (i) the bottleneck owner is vertically integrated, and: (a) the regulator can commit before the investment stage, or: (b) there are first-mover advantages, such as consumer switching costs; (ii) the bottleneck owner is vertically separated. We also show that, under access price regulation, consumer welfare and network quality may be higher under vertical separation than under vertical integration.

Competing for Consumer Inattention

Consumers purchase multiple types of goods but may be able to examine only a limited number of markets for the best price. We propose a simple model that captures these features, conveying new insights. A firm’s price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of cross-market competition. We characterize the equilibrium and show that having partially attentive consumers improves consumer welfare. With less attention, consumers are more likely to miss the best offers; but enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers’ radar.

THE EVOLUTION OF US MERGER CONTROL POLICY – PART 1: 1890-1973

The aim of the study is to present the changes in US merger control policy at different stages of development of competition theories and views on pro- and anti-competitive effects of mergers (especially Harvard, Chicago, and Post-Chicago Schools of Competition). The research methods used in the study include literature review as well as the in-depth analysis of US legislation, antitrust agencies' enforcement policy and federal courts' case-law with focus on changes in the economic analysis of mergers and their impact on market competition. The first part of the study covers the years 1890-1973. Apart from explaining some procedural issues it highlights the early days of merger control policy in the United States with an emphasis on the creation of antitrust legislation and institutional framework for its enforcement. In 1890-1950 the antitrust authorities' approach to mergers was generally friendly as large enterprises were supposed to play an important role contributing to the development and international expansion of the US economy. However, together with a surging increase in concentration in the US market and with the emergence of new competition theories that focused their research on market structure (Harvard School) this approach changed for the very interventionist (1950-1973). At that time the main purpose of merger control policy was to preserve competitors and small businesses rather than to improve consumer welfare, economic efficiencies or to protect competition process.

On and off China's turnpike

AbstractA reorientation towards emphasis on consumption has become a major issue in China, raising the question of the relationship between economic growth and the composition of output. The issue is addressed here, using insights from economic growth theories. These theories indicate that concentration on capital goods production generates the most rapid overall growth. With short‐term deviations and without explicit reference to any theory, Chinese practice in the past seems to have conformed. A shift to emphasizing output of consumption goods while resulting in an overall growth slowdown, will improve consumer welfare, suggesting the benefits of shifting to this criterion of economic success.

Video Marketplace Regulation: A Primer on the History of Television Regulation and Current Legislative Proposals

The television distribution marketplace has been substantially regulated since the advent of broadcast television in the 1940s and 1950s. The Federal Communications Commission and Congress have relied on several justifications for the regulatory protection of the system of local broadcasters envisioned post-World War II, namely, (1) universal service; (2) localism; (3) free television; and (4) competition. These policy goals are at odds with one another and can only be supported simultaneously through far-reaching regulations like compulsory copyright licenses, network nonduplication rules, retransmission consent regulations, and industry concentration prohibitions. We describe the history of these and other regulations. We argue that regulatory repeal would improve distorted television markets and improve consumer welfare. Finally, we describe pending video legislation and explain how various pending bills would affect the current regulatory system.

The Economics of Debt Collection: Enforcement of Consumer Credit Contracts

In the U.S., creditors often outsource the task of obtaining repayment from defaulting borrowers to third-party debt collection agencies. This paper argues that an important incentive for this is creditors’ concerns about their reputations. Using a model along the lines of the common agency framework, we show that, under certain conditions, debt collection agencies use harsher debt collection practices than original creditors would use on their own. This appears to be consistent with empirical evidence. The model also fits several other empirical facts about the structure of the debt collection industry and its evolution over time. We show that the existence of third-party debt collectors may improve consumer welfare if credit markets contain a sufficiently large share of opportunistic borrowers who would not repay their debts unless faced with “harsh” debt collection practices. In other cases, the presence of third-party debt collectors can result in lower consumer welfare. The model provides insight into which policy interventions may improve the functioning of the collections market.

Postal Services Liberalization in Turkey: Observations and Reflections

With a view to promoting competition and improving consumer welfare, postal markets have been liberalized in many jurisdictions over recent years. The present study intends to review liberalization movements in postal services with a particular focus on Turkey. Although Turkey has long before embarked upon reform initiatives to liberalize network industries, the (state-owned) incumbent is one of last comers to meet competitive conditions in postal markets. Recently a new Postal Services Law has been enacted in the country in order to develop a well-designed regulatory structure, to delegate a regulatory agency, to limit the scope of the incumbent's reserved area, to determine standards and financing means of the provision of the universal service, to define licensing and operation conditions, and last but not least to specify principles of tariffs among others. The article concludes that despite crucial shortcomings such as continuation of the postal monopoly, and lack of ex ante regulations regarding third party access to the (monopolistic) incumbent's postal network, introducing competition into postal services is prima facie a positive step towards the improvement of efficiency and so the enhancement of users' prosperity.

How Emerging Markets are Reshaping the Innovation Architecture of Global Firms

Purpose – The purpose of the paper is to advance knowledge on how firms should rethink and develop their innovation architecture by leveraging emerging market opportunities.Design/methodology/approach – The paper provides a conceptual framework comprising the drivers and consequences of innovation architecture across emerging and developed markets. It also highlights emerging market innovation characteristics using detailed examples.Findings/conclusions – Most of the future growth in the global economy will come from emerging markets. Successful global firms will have to rethink and develop their innovation architecture by leveraging innovations developed for emerging markets. By balancing the long-term costs and benefits of innovations in both developed and emerging markets, global firms can successfully reshape their innovation architecture.Practical implications – From a practical perspective, the paper provides guidelines to executives for managing innovation architecture across emerging and developed markets. Innovations appropriately developed and launched in emerging markets have the potential to expand global consumer base and increase shareholder value.Social implications – From a societal standpoint, the paper helps improve consumer welfare in emerging markets by offering a roadmap to develop safe, relevant, and affordable products for mainstream customers. Reverse innovations, developed primarily for emerging markets also benefit consumers in developed markets and enhance their social welfare.Value/originality – The paper provides an original theoretical contribution in an important and underexplored research area – emerging market innovation. It is the first to develop an in-depth analysis of innovation architecture, advance a conceptual framework of the role of emerging markets in the development and consequences of innovation architecture, and offer a roadmap for strategic management of innovation architecture. Academic researchers, practitioners, and policy makers will benefit from this paper.

Competing for Consumer Inattention

Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.

Unilateral Versus Coordinated Effects: Comparing the Impact on Consumer Welfare of Alternative Merger Outcomes

The nature of tacitly collusive behaviour often makes coordination unstable, and this may result in periods of breakdown, during which consumers benefit from reduced prices. This is allowed for by adding demand uncertainty to the Compte et al. (2002) model of tacit collusion amongst asymmetric firms. Breakdowns occur when a firm cannot exclude the possibility of a deviation by a rival. It is then possible that an outcome with collusive behaviour, subject to long/frequent break downs, can improve consumer welfare compared to an alternative with sustained unilateral conduct. This is illustrated by re-examining the Nestle/Perrier merger analyzed by Compte et al., but now also taking into account the potential for welfare losses arising from unilateral behaviour.