My general interests are in empirical industrial organization, applied econometrics and law and economics.
"Copyright and Generic Entry in Book Publishing" [current version]
Copyright affects the distribution of creative content. Taking works off copyright promotes their availability, which benefits consumers. But it also allows generic entry to dissipate producer surplus. Evaluating the welfare impact of a copyright extension requires estimation of differences in consumer and producer surplus across a range of works between actual and counterfactual copyright regimes. I create a structural model of the book industry to simulate the elimination of copyright for works affected by the extension. I find that a copyright extension causes a decrease in consumer surplus that outweighs an increase in producer surplus by over $40 million annually.
"Storming the Gatekeepers: Digital Disintermediation in the Market for Books" (with Joel Waldfogel) [current version]
Digitization is transforming the market for books. Lower marginal costs have reduced prices by 10-15 percent in the past four years, and digitization has given creators the ability to circumvent traditional gatekeepers and publish their work directly. The number of self-published works has grown by almost 300 percent since 2006 and now exceeds the number of traditionally published works. Given the inherent difficulty in predicting the ex post appeal of creative products at the time of investment, a growth in available new products can substantially expand the appeal of available products. While e-book data are not systematically available, we are able to document that falling prices have increased consumer surplus by $2-3 billion per year. Using bestseller lists in conjunction with title-level data on physical sales and our best estimates of e-book sales, we document that many self-published books have substantial ex post appeal to consumers. Works that began their commercial lives through self-publishing began to appear on bestseller lists in 2011 and by late 2012 such works accounted for a tenth of both bestseller listings and estimated unit sales. In romantic fiction, self-published works account for almost a third. These changes challenge the role of gatekeepers while benefiting consumers.
"Endogenous Entry into Two-Sided Markets: The Case of e-Coupons" (with Chunying Xie)
There has recently been a surge in online platforms that connect consumers and producers more efficiently by decreasing search costs. The sites provide mechanisms that increase producer or consumer surplus while extracting some of the surplus themselves. This paper focuses on websites offering daily deal coupons to consumers. To firms a daily-deal website has two effects. It offers a platform on which to promote its product and it provides a tool for third-degree price discrimination. Both effects can increase profits. Likewise, daily-deal websites profit from every coupon sold. One would thus expect that all firms in a market offer their products on such websites. Yet only a small subset of firms offers deals at any given time. We develop a model of entry into these two-sided markets which builds upon the literature of differentiated product demand, price discrimination and entry to explain this limited selection. We apply this model to a dataset of Groupon and LivingSocial transactions. We find that entry and variety are limited because a firm's entry affects the level of consumer participation. If every firm enters, then all consumers will follow. If no firm enters, then all consumers will pay the full price. The optimal level of price discrimination thus lies between these two extremes.
"Can Private Piracy Protection be Effective? Evidence from Book Publishing" [current version] (Publishers Weekly article)
Digitization has impacted media industries by lowering the cost of distributing cultural goods. With the option to download creative works legally, however, comes the possibility of doing so illegally. Efforts to prevent such piracy have mostly been public in nature, with mixed receptions. The book publishing industry showcases a more private approach to piracy protection, in which publishers hire private companies to protect their titles. I exploit a natural experiment where different book titles are protected by a piracy protection service at different times. I compare sales of similar book titles with and without piracy protection, before and after titles have been added by the service, in a difference-in-differences setting. I find that the effect of piracy protection varies across formats and titles. E-books, the closest substitute for online piracy, benefit from piracy protection by selling over 11% more units, while there is no significant effect on other formats. The effect is more pronounced if more effort is exerted. The effect is also larger for titles that have been successful prior to protection, indicating that book piracy has a promotional effect for lesser known works. The results are robust to different specifications.
"Throwing the Books at Them: Amazon's Puzzling Long-Run Pricing Strategy" (with Joel Waldfogel) [current version]
Firms competing to get consumers to adopt new platforms have incentives to charge low prices to promote adoption, followed by higher prices later on. This study explores Amazon’s dynamic pricing strategy by comparing its contemporary pricing on e-books, a new product with complementary hardware, a proprietary file format, and switching costs, with its current pricing on physical books, a now-mature product without complementary hardware or switching costs. Using over 150,000 hourly observations on prices and sales ranks for electronic and physical bestseller books in late 2012 and early 2013, in conjunction with actual quantity data, we estimate the price elasticities of demand for books at Amazon. Puzzlingly, e-books appear to be priced below the static profit maximizing levels. More surprisingly, we find that physical book prices also fall substantially short of the static profit maximizing level two decades after Amazon’s launch. These findings raise questions for both policymakers and shareholders.
Other Works in Progress:
"Microeconomic Effects of Sovereign Loans" (with Jonas Bunte)
"Welfare Effects of Snippets" (with Gerard McCullough)
"Trade in Books" (with Joel Waldfogel)
"Google Books and Library Lending, Availability, and Sales" (with Abhishek Nagaraj)
Here is a link to data sources on the economics of digitization.
"Copyright and Generic Entry in Book Publishing" [current version]
Copyright affects the distribution of creative content. Taking works off copyright promotes their availability, which benefits consumers. But it also allows generic entry to dissipate producer surplus. Evaluating the welfare impact of a copyright extension requires estimation of differences in consumer and producer surplus across a range of works between actual and counterfactual copyright regimes. I create a structural model of the book industry to simulate the elimination of copyright for works affected by the extension. I find that a copyright extension causes a decrease in consumer surplus that outweighs an increase in producer surplus by over $40 million annually.
"Storming the Gatekeepers: Digital Disintermediation in the Market for Books" (with Joel Waldfogel) [current version]
Digitization is transforming the market for books. Lower marginal costs have reduced prices by 10-15 percent in the past four years, and digitization has given creators the ability to circumvent traditional gatekeepers and publish their work directly. The number of self-published works has grown by almost 300 percent since 2006 and now exceeds the number of traditionally published works. Given the inherent difficulty in predicting the ex post appeal of creative products at the time of investment, a growth in available new products can substantially expand the appeal of available products. While e-book data are not systematically available, we are able to document that falling prices have increased consumer surplus by $2-3 billion per year. Using bestseller lists in conjunction with title-level data on physical sales and our best estimates of e-book sales, we document that many self-published books have substantial ex post appeal to consumers. Works that began their commercial lives through self-publishing began to appear on bestseller lists in 2011 and by late 2012 such works accounted for a tenth of both bestseller listings and estimated unit sales. In romantic fiction, self-published works account for almost a third. These changes challenge the role of gatekeepers while benefiting consumers.
"Endogenous Entry into Two-Sided Markets: The Case of e-Coupons" (with Chunying Xie)
There has recently been a surge in online platforms that connect consumers and producers more efficiently by decreasing search costs. The sites provide mechanisms that increase producer or consumer surplus while extracting some of the surplus themselves. This paper focuses on websites offering daily deal coupons to consumers. To firms a daily-deal website has two effects. It offers a platform on which to promote its product and it provides a tool for third-degree price discrimination. Both effects can increase profits. Likewise, daily-deal websites profit from every coupon sold. One would thus expect that all firms in a market offer their products on such websites. Yet only a small subset of firms offers deals at any given time. We develop a model of entry into these two-sided markets which builds upon the literature of differentiated product demand, price discrimination and entry to explain this limited selection. We apply this model to a dataset of Groupon and LivingSocial transactions. We find that entry and variety are limited because a firm's entry affects the level of consumer participation. If every firm enters, then all consumers will follow. If no firm enters, then all consumers will pay the full price. The optimal level of price discrimination thus lies between these two extremes.
"Can Private Piracy Protection be Effective? Evidence from Book Publishing" [current version] (Publishers Weekly article)
Digitization has impacted media industries by lowering the cost of distributing cultural goods. With the option to download creative works legally, however, comes the possibility of doing so illegally. Efforts to prevent such piracy have mostly been public in nature, with mixed receptions. The book publishing industry showcases a more private approach to piracy protection, in which publishers hire private companies to protect their titles. I exploit a natural experiment where different book titles are protected by a piracy protection service at different times. I compare sales of similar book titles with and without piracy protection, before and after titles have been added by the service, in a difference-in-differences setting. I find that the effect of piracy protection varies across formats and titles. E-books, the closest substitute for online piracy, benefit from piracy protection by selling over 11% more units, while there is no significant effect on other formats. The effect is more pronounced if more effort is exerted. The effect is also larger for titles that have been successful prior to protection, indicating that book piracy has a promotional effect for lesser known works. The results are robust to different specifications.
"Throwing the Books at Them: Amazon's Puzzling Long-Run Pricing Strategy" (with Joel Waldfogel) [current version]
Firms competing to get consumers to adopt new platforms have incentives to charge low prices to promote adoption, followed by higher prices later on. This study explores Amazon’s dynamic pricing strategy by comparing its contemporary pricing on e-books, a new product with complementary hardware, a proprietary file format, and switching costs, with its current pricing on physical books, a now-mature product without complementary hardware or switching costs. Using over 150,000 hourly observations on prices and sales ranks for electronic and physical bestseller books in late 2012 and early 2013, in conjunction with actual quantity data, we estimate the price elasticities of demand for books at Amazon. Puzzlingly, e-books appear to be priced below the static profit maximizing levels. More surprisingly, we find that physical book prices also fall substantially short of the static profit maximizing level two decades after Amazon’s launch. These findings raise questions for both policymakers and shareholders.
Other Works in Progress:
"Microeconomic Effects of Sovereign Loans" (with Jonas Bunte)
"Welfare Effects of Snippets" (with Gerard McCullough)
"Trade in Books" (with Joel Waldfogel)
"Google Books and Library Lending, Availability, and Sales" (with Abhishek Nagaraj)
Here is a link to data sources on the economics of digitization.
