Qihong Liu

• PhD, State University of New York at Stony Brook
• Professor at University of Oklahoma

In contrast to the extensive literature on behavior bias by individuals, studies on behavior bias by firms have been relatively scarce. We explore the possibility of the latter in the context of US airlines, where fuel hedging leads to lump sum gains or losses which may impact airlines' pricing decisions. Our results show that the (sunk) hedging ga...

This article studies the consumption of advertising when attention is costly. Our objective is to understand the advertiser’s optimal decision for informational and noninformational content when facing consumers with heavy distractions common in the digital age. We take an equilibrium approach in which an ad is consumed if and only if the content o...

We examine how competition impacts the provision of product quality. Using a unique data set of inflight amenities provided by U.S. airlines, we find that the composition of competition matters. There is significantly higher product quality - Wi-Fi, entertainment, and at-the-seat electrical power outlets - on on more competitive routes (with lower...

We explore firm quasi‐dynamics (entry, exit, and growth) in Chinese manufacturing industry and investigate how these dynamics vary across regions. Our results show that relative to provinces with less developed economies, in provinces with more developed economies (i) there is a higher proportion of new firms; (ii) new firms are smaller and more la...

Platforms such as Uber, Lyft and Airbnb serve two-sided markets with drivers (property owners) on one side and riders (renters) on the other side. Some agents join multiple platforms (multi-home). In the case of ride-sharing, a driver may drive for both Uber and Lyft, and a rider may use both apps and request a ride from the company that has a driv...

This study examines early career outcomes (i.e., tenure and promotion) of the Economics Ph.D. class of 2008. We find that female economists are less likely (by up to 15.8%) to have received tenure and promotion eight years post-graduation compared to males in the same cohort. The gender gap becomes more pronounced (e.g., 36.5% less likely to receiv...

The growth of YouTube and other digital content platforms in the prior decade may have been aided by their utilization of the skippable ad format, but as that growth tapers, this format may become less valuable to their ad revenue.

This paper introduces strategic agents into a two-sided market. We model strategic agents as advertisers who can invest in ad quality, which in turn affects readers, platforms and themselves. When platforms can choose prices on both the reader side and the advertiser side, strategic agents intensify competition, leading to lower prices and profits...

Existing theories of competition with behavior‐based price discrimination (BBPD, also known as price discrimination based on purchase history), typically assume that consumer valuations are distributed uniformly. This assumption implies that the availability of BBPD creates a prisoner's dilemma in which firms are worse off and consumers better off...

Ad blocking may benefit all stakeholders with better quality ads through a signaling mechanism.

In 2010, Spirit Airlines announced that it would start charging passengers for carry‐on baggage. Using a vector of route‐level characteristics, we construct a matched group consisting of routes which best match those served by Spirit (the treated group). We then run a difference‐in‐difference estimation using the treated and matched group, and exam...

Research summary Platform owners sometimes enter complementors’ product spaces and compete against them. Using data from Amazon.com to study Amazon’s entry pattern into third‐party sellers’ product spaces, we find that Amazon is more likely to target successful product spaces. We also find that Amazon is less likely to enter product spaces that req...

Since circular model was introduced in Salop (Bell J Econ 10:141–156, 1979), it has been the workhorse for analyzing spatial competition among differentiated firms. A common assumption in this literature is that firms are evenly spaced on the circle, even when entry is allowed. We characterize conditions for even spacing to be an equilibrium, using...

The price discrimination literature typically makes the assumption of no consumer arbitrage. This assumption is increasingly violated in the digital economy, where coupons are traded with increased frequency online. In this paper, we analyze the welfare impacts of coupon trading using a modified Hotelling model where firms send coupons to poach eac...

The price discrimination literature typically makes the assumption of no consumer arbitrage. This assumption is increasingly violated in the digital economy, where coupons are traded with increased frequency online. In this paper, we analyze the welfare impacts of coupon trading using a modified Hotelling model where firms send coupons to poach eac...

Advances in information technology have greatly enhanced firms' ability to collect, market and utilize consumer information. As the market for consumer information expands rapidly, businesses are armed with unprecedented means to target any group of consumers they desire. This has important and far-reaching impacts on consumer welfare. In this pape...

This study examines when firms offer higher product quality. We measure product quality by examining four different inflight amenities provided by airlines: Wi-Fi, seat size, entertainment, and seat power. Using daily flight level data for over 800 routes and spanning nine weeks in third quarter of 2015 we observe that carriers were actively retrof...

This paper introduces two modifications to standard two-sided market models. In the first modification, one side of the agents (advertisers) make strategic choices (on quality of their ads) which affect the utility of agents joining the same platform on the other side. We show that this feature of strategic agents leads to qualitatively different e...

This study examines early career outcomes (i.e., tenure and promotion) of the Economics Ph.D. class of 2008. We find that relative to males in the same cohort, female economists are less likely (by 9.6%) to have received tenure and promotion during the first eight years since graduation. The gender gap becomes more pronounced, or 12%, among individ...

Platform owners sometimes enter complementors’ product spaces to compete against them directly. Prior studies have offered two possible explanations for such entries: Platform owners may target the most successful complementors so as to appropriate value from their innovations, or they may target poor performing complementors to improve the platfor...

Platform owners sometimes enter complementors' product spaces to compete against them directly. Prior studies have offered two possible explanations for such entries: platform owners may target the most successful complementors so as to appropriate value from their innovations, or they may target poor performing complementors to improve the platfor...

We collect data on the 2007–2008 Ph.D. economist job market to investigate initial job placement in terms of job location, job type, and job rank. While there is little gender difference in all three dimensions, our results suggest significant source country heterogeneity in placement outcomes. In an analysis linking job location and job type, we f...

This paper investigates the roles of price-matching guarantee as a response to `showrooming' (quality free-riding) and as a tool for predation. Employing a duopoly vertical differentiation model, we find that price-matching guarantee raises consumer surplus but its impact on social surplus is ambiguous. We identify two effects of price-matching gua...

Advancing in information technology has empowered firms with unprecedented flexibility when interacting with each other. We compare welfare results in a vertical market (e.g., manufacturers and retailers) across several types of pricing strategies depending upon (1) which side (retailers or manufacturers) chooses retail prices and (2) whether there...

We analyze how firms' incentive for market foreclosure varies with market structure and competition intensity. Our results suggest that complete market foreclosure is always more likely under monopoly than under duopoly. Within duopoly competition, complete foreclosure is less likely to be an equilibrium when competition intensity increases. On the...

Since circular model was introduced in Salop (1979), it has been the workhorse for analyzing spatial competition among differentiated firms. A common assumption in this literature is that firms are symmetrically located on the circle, even when entry is allowed. We characterize conditions for this assumption to hold, using a two-stage (location-the...

We examine the issue of product differentiation using a multi-dimensional model with general consumer distribution. We consider both firm location and unit transport cost. First, equilibrium prices can increase or decrease with unit transport cost. In particular, a change in unit transport cost has a rotating effect on equilibrium prices in our mul...

We examine the profitability and welfare implications of price discrimination in a multi-dimensional model. First, when firms price discriminate on one and the same dimension, uniform price lies in between discriminatory prices and price discrimination raises profits relative to uniform pricing. This is in contrast to common findings in existing on...

We follow the framework in Arya and Mittendorf's 2011 Rand Journal of Economics paper but extend their analysis by investigating supplier(s)' equilibrium choices of disclosure or confidentiality regarding their contract terms with the downstream retailers. In the case of a common supplier, we find that the unique subgame perfect Nash equilibrium (S...

We follow the framework in Arya and Mittendorf's 2011 Rand Journal of Economics paper but extend their analysis by investigating supplier(s)' equilibrium choices of disclosure or confidentiality regarding their contract terms with the downstream retailers. In the case of a common supplier, we find that the unique subgame perfect Nash equilibrium (S...

We use data from the 2007-2008 Ph.D. economist job market to investigate initial job placement in terms of job location, job type, and job rank. Our results suggest gender differences in all three dimensions of job placement. Relative to their male counterparts, female candidates are less (more) likely to be placed into academic (government or priv...

We investigate the effect of competition on price dispersion in the airline industry. Using panel data from 1993 to 2008, we find a non-monotonic effect of competition on price dispersion. An increase in competition is associated with greater price dispersion in concentrated markets but is associated with less price dispersion in competitive market...

We investigate the welfare impacts of price discrimination using a two-dimensional product differentiation model with best-response asymmetry. Among our findings: (i) Price discrimination has a reduced demand elasticity effect in two-dimensional models but not in one-dimensional models. (ii) Price discrimination on one and the same dimension can ra...

There is a large literature on the impact of price-matching and price-beating guarantees (low-price guarantees) on competition. Existing studies typically employ static models and the results are sensitive to modeling assumptions such as the type of guarantees, consumer hassle costs and consumer heterogeneity. In contrast, we employ a fully dynamic...

We study the e¤ects of a Most-Favored Customer (MFC) clause on price competi-tion among major consumer electronics retailers. Our data span the periods before and after Best Buy introduced an MFC clause between April 1, 2003 and March 31, 2004. After controlling for a number of factors (including product life-cycle and seasonality e¤ ects), we …nd...

This lecture deals with third-degree price discrimination in both monopolistic and oligopolistic markets. The classical monopoly paradigm serves as a benchmark. Next, we move to an oligopoly setting, first with best-response symmetry, then with best-response asymmetry. We end with behavior-based price discrimination. This lecture targets advanced u...

In many markets, firms have the option of advertising at price comparison sites to broaden their market reach. Such sites are often controlled by profit-maximizing “information gatekeepers” charging advertising fees. This paper considers vertical merger between such a monopoly information gatekeeper and a firm in the product market. We find that: (...

We study the effects of introducing a Most-Favored Customer (MFC) clause on price competition among major consumer electronics retailers. Our data spans the periods before and after the introduction of an MFC clause by Best Buy, which occurred between April 1, 2003 and March 31, 2004. After controlling for various factors (including product life-cy...

This paper shows the conditions for consumer sorting to be profitable. Sorting of low quality goods dampens their substitutability with high quality goods and can raise firm's profit even when sorting lowers profit from low quality sales considered alone.

Using a dynamic overlapping-generations model, we show that loyalty rewards robustly facilitate tacit collusion. We compare the sustainability of tacit collusion when uniform prices are used, when loyal customers are rewarded without using commitment, and when loyalty rewards are implemented by committing to offering customers either lower fixed re...

Unrestricted flows of information usually improve efficiency. The recent growth of the In-ternet as a medium of communication and commerce, combined with the development of so-phisticated software tools have paved the road for the collection and analysis of a vast amount of data about consumers. Firms who possess such information can target individ...

We examine the profitability and the welfare implications of price discrimination in two-sided markets. Platforms have information about the preferences of the agents that allows them to price discriminate within each group. The conventional wisdom from one-sided horizontally differentiated markets is that price discrimination hurts the firms and b...

We employ a vertical differentiation model to examine the potential bias in pricing-to-market results when using export unit values aggregating differentiated products. Our results show that: (i) false evidence of pricing-to-market is always found when using unit values, whether the law of one price holds or not; and (ii) the size of the bias incre...

In this paper, we investigate how low-price guarantees (LPGs) a¤ect store price levels and price dynamics. In particular, we focus on three dimensions of LPGs, refund depth, length of search period and whether allowing own price-matching (OPM). We use a unique data set consisting of 33,587 daily price quotes collected from …ve major online consumer...

We employ a vertical differentiation model to examine the potential bias in pricing-to-market results when using export unit values aggregating differentiated products. Our results show that: (i) false evidence of pricing-to-market is always found when using unit values, whether the law of one price holds or not; and (ii) the size of the bias incre...

We study both theoretically and empirically the impact of a policy change on price competition among …ve major online retailers. Our data span the periods before and after Best Buy added a "most-favored-customer" clause (MFCC) to its low-price guar-antee policy between April 2003 and March 2004. After controlling for a number of factors (including...

The material contained herein is supplementary to the article named in the title and published in the American Journal of Agricultural Economics, Volume 89, Number 3, August 2007.

This paper introduces a second-degree oligopolistic price discrimination model with con-sumer heterogeneity both on a horizontal and a vertical dimension. We …nd a non-monotonic relationship between market power and price dispersion. Using data from the U.S. airline industry, we …nd supportive empirical evidence for the theoretical prediction. To t...

The advent of the Internet has revolutionized the way companies advertise, develop and distribute products. Firms can now customize their advertising messages and products to the particular characteristics and needs of customers. Customers themselves can create their own products. We investigate investments by firms in product-customization capabil...

The recent rapid growth of the Internet as a medium of communication and commerce, combined with the development of sophisticated software tools, are to a large extent responsible for producing a new kind of information: Databases with detailed records about consumers’ preferences. These databases have become part of a firm's assets, and as such th...

The recent literature on oligopolistic third-degree price discrimination has been primarily concerned with rival firms' incentives to acquire customer-specific information and the consequences of such information on firm profitability and welfare. This literature has taken mostly a static view of the interaction between competing firms. In contrast...

The recent literature on oligopolistic third-degree price discrimination has been primarily concerned with rival firms' incentives to acquire customer-specific information and the consequences of such information on firm profitability and welfare. This literature has taken mostly a static view of the interaction between competing firms. In contrast...

We explore the competitive implications of third-degree price discrimination based on consumer information of varying degrees of “precision” in a vertical differentiation duopoly model. We show that, if the cost of information is below a threshold, only the high quality firm will acquire it and offer targeted promotions, while the low quality firm...

We introduce a flexible third-degree price discrimination framework by modeling the information firms possess about consumers’ locations (preferences) on the Salop circle as a partition. Higher information quality is translated into a partition refinement. In the limit, we obtain the perfect price discrimination paradigm. We show that the free-entr...

Recent developments in information technology (IT) have resulted in the collection of a vast amount of customer-specific data. As IT advances, the quality of such information improves. We analyze a unifying spatial price discrimination model that encompasses the two most studied paradigms of two-group and perfect discrimination as special cases. Fi...

Pricing to market (PTM) has been examined extensively in the recent trade literature using Knetter's (1989) model. The technique is typically applied using export unit values that aggregate differentiated products. We examine the potential bias in PTM results when using export unit values using a vertical differentiation model. We find that: i) fal...

The recent rapid growth of the Internet as a medium of communication and commerce, combined with the development of sophisticated software tools, are to a large extent responsible for producing a new kind of information: databases with detailed records about consumers' preferences. These databases have become part of a firm's assets, and as such th...

We investigate how the endogenous acquisition of information, of a certain quality level, on consumers' willingness to pay (location) affects the equilibrium prices and welfare in a spatial price discrimination model. Higher information quality implies that the firms who acquire the information can identify the location of each consumer more accura...

This paper examines the welfare eects of vertical integration by an "information gatekeeper"into the product market it serves. We consider a homogeneous product market where n homogeneous product price-setting …rms can broaden their market reach by advertising at a price comparison site, which is controlled by a pro…t- maximizing gatekeeper. We sho...

Consumers, through their actions in the market place, have generated a vast amount of information about their preferences, habits and characteristics. Nevertheless, this information is exploited by other parties and consumers do not have much say in the process. In this paper, we are mainly interested in examining the consequences of a regulation t...