Robin S. Lee

Vertical Integration and Exclusivity in Platform and Two-Sided Markets

This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the US video game industry (2000-2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7 percent and 58 percent and consumer welfare by

Exclusivity and Control

1.5 billion. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.

Competing Platforms: Competing Platforms

We model competition between content distributors (platforms) for content providers, and show that whether or not content is exclusive or “multihomes” depends crucially on whether or not content providers maintain control over their own pricing to consumers: if content providers sell their content outright and relinquish control, they will tend to be exclusive; on the other hand, if content providers maintain control and only “affiliate” with platforms, then multihoming is sustainable in equilibrium. We show that the outcome under affiliation depends on the tradeoff between platform rent extraction (which increases in exclusivity) and content rent extraction (which increases in multihoming), and demonstrate that the propensity for exclusivity can be increasing, decreasing, or even nonmonotonic in content quality. Finally, if a content provider internalizes the effect of its own price on platform demand, we prove that a platform that already has exclusive access to content may prefer to relinquish control over content pricing to the content provider in order to reduce price competition at the platform level.

Nash-in-Nash Bargaining: A Microfoundation for Applied Work

Why do competing platforms or networks exist? This paper focuses on instances where the value of a platform depends on the adoption decisions of a small number of firms, and analyzes the strategic competition among platforms to get this oligopolistic side on�?board. I study a bilateral contracting game among platforms and firms that allows for general externalities across both contracting and noncontracting partners, and examine when a market will sustain a single or multiple platforms. When firms can join only one platform, I provide conditions under which market�?tipping and/or market�?splitting equilibria may exist. In particular, even without coordination failure, congestion effects, or firm multihoming, multiple platforms can co�?exist in equilibrium despite being inefficient from the perspective of the contracting parties. Expanding the contracting space to include contingent contracts may exacerbate this inefficiency.

Interviewing in two-sided matching markets

A “Nash equilibrium in Nash bargains” has become a workhorse bargaining model in applied analyses of bilateral oligopoly. This paper proposes a noncooperative foundation for “Nash-in-Nash” bargaining that extends Rubinstein’s alternating offers model to multiple upstream and downstream firms. We provide conditions on firms’ marginal contributions under which there exists, for sufficiently short time between offers, an equilibrium with agreement among all firms at prices arbitrarily close to Nash-in-Nash prices, that is, each pair’s Nash bargaining solution given agreement by all other pairs. Conditioning on equilibria without delayed agreement, limiting prices are unique. Unconditionally, they are unique under stronger assumptions.

Physician Prices, Hospital Prices, and Treatment Choice in Labor and Delivery

We introduce the interview assignment problem, which generalizes classic one-to-one matching models by introducing a stage of costly information acquisition. Firms learn preferences over workers via costly interviews. Even if all firms and workers conduct the same number of interviews, realized unemployment depends also on the extent to which agents share common interviewing partners. We introduce the concept of overlap that captures this notion and prove that unemployment is minimized with perfect overlap: that is, if two firms interview any common worker, they interview the exact same set of workers.

Subsidizing Creativity Through Network Design: Zero Pricing and Net Neutrality

We study the effect of changing the price differential for cesarean versus vaginal deliveries paid by commercial insurers to hospitals and physicians on cesarean rates. Using eight years of claims data containing negotiated prices, we exploit within hospital–physician group–insurer price variation arising from contract renegotiations over time. We find that increasing the physician price differential by one standard deviation (

Interviewing in Two-Sided Matching Markets

420) yields a 12 percent increase in the odds ratio for cesarean delivery. Increasing the hospital price differential by one standard deviation (

Insurer Competition and Negotiated Hospital Prices

5,805) for births delivered by hospital-exclusive physician groups yields a 31 percent increase in the odds ratio. Our findings confirm and extend the prior literature on behavioral responses to physician and hospital prices in the context of private insurers, and point to further research questions to understand the hospital-physician principal-agent problem and the future of accountable care organizations.