Oz Shy

A quick-and-easy method for estimating switching costs

Abstract I develop and test a method for a quick-and-easy calculation of consumer switching costs among brands in a given industry. The theory developed and tested here maps observed brands’ prices and market shares onto the switching costs which deter a consumer of a specific brand from switching to any other competing brand. Then, I demonstrate how users’ switching costs can be directly calculated in two different industries: (a) the Israeli cellular phone market, and (b) the Finnish market for bank deposits. This calculation method can be used to calculate switching costs in a wide variety of other industries, such as airlines, health services, computers, software, telecommunications, and more.

Price competition when consumer behavior is characterized by conformity or vanity

It has long been recognized that the pleasure of consuming a good may be affected by the consumption choice of other consumers. In some cases, social pressures may lead to conformity; in some others, individuals may feel the need of exclusiveness under the form of vanity. Such externalities have proven to be important in several markets. However, the market implication of these externalities are still unclear. To investigate them, we propose to combine the consumption externality model and the spatial duopoly model. When conformity is present but not too strong, both firms remain in business but price competition is fiercer and results in lower prices. The market share of the large firm increases with the population size; as the population keeps rising, the large firm may serve the entire market and set a price that has the nature of a limit price. When conformity is strong enough, different equilibria may exist. In most of these equilibria, a single firm captures the whole market. At the other extreme, when vanity is at work, price competition is relaxed.

Standardization policy and international trade

In this paper we examine the incentives for governments to recognize the standards of foreign products. In the case of non-recognition, a foreign firm must incur an additional cost to sell in the local market.

The Market for Electronic Cash Cards

We develop a theoretical framework aimed to model the pricing of electronic cash cards and the market domain in which these cards will be used in an environment where charge cards and currency (the legal tender) are competing payment media. We also investigate whether the adoption of the various payment media generates an underutilization or overutilization of the electronic cash cards relative to currency.

A Short Survey of Network Economics

This article surveys a variety of topics that are related to network economics. Topics covered include: consumer demand under network effects, compatibility decisions and standardization, technology advances in network industries, two-sided markets, information networks and intellectual property, and social influence.

Publishers, artists, and copyright enforcement

Abstract This paper investigates whether and to what extent there is a conflict of interest between artists and their publishers, regarding to whether and to what degree illegal distributions of their copyrighted recordings should be prevented. This conflict arises because artists also earn their profit from other market activities such as giving live performances, in addition to their share of profits from sales of their copyrighted recordings via the publishers.

Internet and peer-to-peer distributions in markets for digital products

Abstract This short paper investigates how publishers of digitally-stored products (such as computer software, movies, books and music titles) can utilize the Internets distribution channels, such as peer-to-peer (P2P) and Gnutella, to enhance sales of their product sold in stores.

Dynamic models of religious conformity and conversion: Theory and calibrations

This paper develops behavioral and deterministic overlapping generations models to explain and simulate changes in the proportion of secular and religious people. Under the behavioral approach, the role of the church is to generate an externality associated with the investment in enhancing the conformity rate among young believers. Under the deterministic approach, changes in the number of nonbelievers are explained by different birth rates among secular and religious parents as well as the relative proportion of nonconformists among the young in each group. This model is then used to calibrate for (non)conformity rates among secular and religious people. ZUSAMMENFASSUNG - (Dynamische Modelle religioser Konformitat und Konversion: Theorie und Simulationen) Diese Arbeit entwickelt deterministische und Verhaltensmodelle mit uberlappenden Generationen, welche die Veranderungen des Zahlenverhaltnisses von nicht religiosen zu religiosen Menschen erklaren und simulieren. Im Verhaltensansatz wird aufgezeigt, dass der Kirche die Aufgabe zukommt, einen externen Effekt zu erzeugen, der dafur sorgt, dass junge Glaubige mit der Glaubenseinstellung ihrer Eltern konform gehen. Der deterministische Ansatz erklart die Veranderungen in der Anzahl Nichtglaubiger einerseits mit den unterschiedlichen Geburtenraten unter nichtglaubigen Eltern im Vergleich zu religiosen Eltern und andererseits durch den relativen Anteil von Nichtkonformen unter der jungen Generation in jeder Gruppe. Dieses Modell wird verwandt, um (Nicht-)Konformitatsraten--nach denen junge Menschen ihren Eltern im Glauben folgen oder nicht--innerhalb der Gruppen weltlicher sowie religioser Menschen zu berechnen.

Customer Privacy and Competition

We analyze how different degrees of privacy protection affect industry profits, consumer welfare, and total welfare in a model with switching costs. Firms earn higher profits under weak privacy protection compared with strong or no privacy protection. The relationship between the degree of privacy protection and equilibrium profits is not monotonic. Consumer surplus and total welfare increase with the degree of privacy protection unless firms recognize consumer�?specific switching costs. In that case, pricing conditional on switching costs has favorable implications for consumer surplus and total welfare.

Pricing of library subscriptions with applications to scientific journals

Abstract This paper develops a model of journal photocopying in order to explain the existence and extent of price discrimination—the disparity between individual- and library-subscription rates—for scientific journals. We develop an algorithm for computing how many generations of copies will be made and the distribution of readers among the generations of copies. Based on this algorithm, we are able to analyze the factors that determine how publishers discriminate between library- and individual-subscription rates.