Julie Holland Mortimer

Demand Estimation under Incomplete Product Availability

Incomplete product availability is an important feature of many markets; ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system installed on 54 vending machines to track product availability every four hours. The data allow us to account for product availability when estimating demand, and provides a valuable source of variation for identifying substitution patterns. We develop a procedure that allows for changes in product availability even when availability is only observed periodically. We find significant differences in demand estimates, with the corrected model predicting significantly larger impacts of stock-outs on profitability.

The Use of Full-Line Forcing Contracts in the Video Rental Industry

We provide an empirical study of bundling in a supply chain, referred to as fullline forcing. We use an extensive dataset on contracts between video retailers and movie distributors to analyze the choices made on both sides of the market: which distributors offer full-line forcing contracts, which retailers take them up, and whether their decisions are profitable. Most large distributors offer full-line forcing contracts in our data. Our simulations indicate that their choices of which contracts to offer are profit-maximizing. However, many retailers prefer to utilize linear pricing contracts even when our model indicates that this may not be profit-maximizing.

THE EFFECTS OF CAPACITY ON SALES UNDER ALTERNATIVE VERTICAL CONTRACTS

Retailer capacity decisions can impact sales for products by affecting, for example, availability and visibility. Using data from the U.S. video rental industry, we report estimates of the effect of capacity on sales under alternative vertical contracts. New monitoring technologies facilitated new supply contracts in this industry, reducing upfront costs of capacity but requiring minimum capacity purchases, strongly impacting stocking decisions. We find that larger capacity (more tapes) for a given title can substantially increase rentals of that title; and that alternative vertical contractual forms for distributing tapes from studios to retailers strongly impacts the relationship between capacity and rentals.

Effects of Product Availability: Experimental Evidence

Product availability impacts many industries such as transportation, events, and retail, yet little empirical evidence documents the importance of stocking decisions for firm profits, vertical relationships, or consumers. We conduct several experiments, exogenously removing top-selling products from a set of vending machines and analyzing substitution patterns and profit impacts of the changed product availability using non- parametric analyses and structural demand estimation. We find substantial switching to alternate products, and evidence of misaligned incentives between upstream and downstream firms in the choice of which products to carry. We discuss the trade-offs of both empirical approaches for analyzing product availability effects generally.

Analyzing the Welfare Impacts of Full‐Line Forcing Contracts

Theoretical investigations have examined both anti-competitive and efficiency-inducing rationales for vertical bundling, making empirical evidence important to understanding its welfare implications. We use an extensive dataset on full-line forcing contracts between movie distributors and video retailers to empirically measure the impact of vertical bundling on welfare. We identify and measure three primary effects of fullline forcing contracts: market coverage, leverage, and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor gaining leverage over another. As a result, we estimate that full-line forcing contracts increased consumer and producer surplus in this application.

Price Discrimination and Copyright Law: Evidence from the Introduction of DVDs

This paper examines the welfare effects of intellectual property protection, accounting for firms’ optimal responses to legal environments. I examine firms’ use of indirect price discrimination in response to U. S. copyright law preventing direct price discrimination. Using data covering VHS and DVD movie distribution, I explain studios’ optimal pricing strategies under U. S. copyright law, and determine optimal pricing strategies under E. U. copyright law, which allows for direct price discrimination. I find that studios’ use of indirect price discrimination benefits consumers and harms retailers. Optimal pricing under E. U. copyright law further benefits studios and consumers. I also reanalyze these issues assuming continued DVD adoption.

Copyright Enforcement: Evidence from Two Field Experiments: Copyright Enforcement

Effective dispute resolution is important for reducing private and social costs. We study how resolution responds to changes in price and communication using a new, extensive data set of copyright infringement incidences by firms. The data cover two field experiments run by a large stock‐photography agency. We find that substantially reducing the requested amount generates a small increase in the settlement rate. However, for the same reduced request, a message informing infringers of the price reduction and acknowledging the possible unintentionality generates a large increase in the settlement rate; including a deadline further increases response rate. The small price effect, compared to the large message effect, can be explained by two countervailing effects of a lower price: an inducement to settle early, but a lower threat of escalation. Furthermore, acknowledging possible unintentionality may encourage settlement due to the typically inadvertent nature of these incidences. The resulting higher settlement rate prevents additional legal action and significantly reduces social costs.