New Product Launch, Learning, and Credence Goods

Abstract: My dissertation comprises three chapters on industrial organization and health economics. The first Chapter studies a monopolist's product launch strategy. The second Chapter studies credence goods markets. The third chapter analyzes informal payments in public health sectors of developing countries. In the first Chapter, joint with Pasquale Schiraldi, we study how a monopolist should launch a new product to distinct markets when the uncertainty of the product's quality is resolved over time. We examine how the monopolist may influence consumer learning by manipulating the launch sequence when the monopolist and consumers can learn about the quality of the product from previous sales. Depending on the price of the product and the general reputation of the product, the monopolist may prefer a sequential launch to a simultaneous launch. We derive the optimal number of markets in which the monopolist will launch the product in each period. The monopolist's dynamic equilibrium strategy endogenizes informational herding. In the second Chapter, I study credence goods markets when an expert is either selfish or conscientious. A selfish expert is a profit maximizer. A conscientious expert wants to maximize profit and repair the consumer's problem. In a monopoly model, there are only uniform-price equilibria and nonuniform-price equilibria. I study whether a consumer can infer the expert's type from his equilibrium price list and analyze the efficiency of an equilibrium. Finally, I check the robustness of each class of equilibria for a competitive setting. In the third Chapter, joint with Monic Jiayin Sun, we study informal payments in public health sectors of many developing countries. Such payments are made by patients to providers for services which are supposed to be supplied by public health care sectors. Informal payments are made because the allocation mechanism in the public sector fails to take into account provider or patient circumstance. We compare welfare implications of different policies that regulate informal payments. Patient and provider heterogeneity play a central role in the comparison.