Empirical studies of pricing

Abstract: This dissertation contains four essays and is focused on evaluating, and to a lesser degree, extending, theories on monopoly and oligopoly pricing. The data in all of the essays originates from the Swedish daily newspaper markets."Pricing Contracts With Different Duration: The Role of Switching Costs" analyzes how prices of contracts with different duration are affected by the degree of "lock-in". We extend a model by Glazer and Hassin (1982) by adding switching cost. We use the daily newspaper data to test propositions from the model. The essay also analyzes the use of second-degree price discrimination, in the form of different contract durations, by newspapers, and finds that more competition yields more discrimination. "Prices, Margins and Liquidity Constraints: Swedish Newspapers 1990-1996" analyzes an example of how the financial situation of firms may affect their product market pricing decisions. When consumers have switching costs, they are to some extent "locked in" and can be exploited. If a firm finds itself in financial distress it may have to resort to raising prices to cover short run expenses, thus sacrificing long run profits. This effect is found in subscription markets but not in advertising markets where consumers do not have switching costs. "Pricing Pre-Announcements and Price Leadership in the Swedish Daily Newspaper Industry" analyzes the publication of prices and price-setting behavior in the advertising markets. We find that large price increases and price cuts are published earlier. Duopolies exhibit publication behavior that differs from monopolies. Price leadership is prevalent in many of the duopoly markets and the price leadership observed in these markets is likely to be barometric. "Third-Degree Price Discrimination in Oligopoly: Evidence from Swedish Newspapers" addresses the question of how competition affects the use of third-degree price discrimination. We study the discounting behavior in subscription markets and find that duopolies and firms with weak market positions use more third-degree price discrimination. There is some indication that large immigration to the market and the firm being present in a large number of markets increases the use of discounts.