Chapter 1: Quality Differentiation and Optimal Pricing Strategy in Multi-sided MarketsThis paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for users on one side leads to a decrease in the price charged to users on the other side, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among the choice variables for the platform, so that the platform strategically uses quality differentiation to raise its profits.Chapter 2: Dynamic Game with Multidimensional Type: The Case of Carbon-Credit MarketA significant problem with the carbon credit market that has become apparent in recent years is that the market price has been far more volatile than originally envisioned. The underlying problem is the ill-understood pricing anomalies in a repeated period dynamic setting. In this paper, we drive the equilibrium price path in a dynamic setting and suggests ways to overcome price instability. The model setup allows the firms to differ in terms of their value for the carbon credit as well as the urgency of obtaining it. For example, a firm with an early deadline for obtaining the carbon credits will have a higher demand urgency. We find that the equilibrium price is affected by future demand and supply expectations. The findings show that the cap or the supply limit for each period can be used to decrease price instability. Currently, the government or the carbon credit seller decides a per period limit on the supply, which decreases over time. However, this paper suggests that to curb price fluctuation the per period supply should be a function of expected future demand. We show that correlating supply rate with expected future demand leads to a more stable price.Chapter 3: Revenue-Maximizing Number of Ads per Page in the Presence of Market ExternalitiesFirms use advertising as a medium to gain a competitive advantage, which is negatively affected if the ad appears alongside their rival's ad---a form of externality. The multiple ad display setting on search engines, such as Google and Yahoo!, introduces such externalities in the market. In this paper, I estimate a structural model based on a novel data set of Yahoo! ads to (i) quantify the effect of externality on an advertiser's willingness to pay and (ii) simulate the revenue-maximizing number of ads for a search engine. First, I find that externality depends on the quality and quantity of competing ads. For example, an advertiser's willingness to pay decreases by 18.5 percent due to the addition of a second high-quality ad, but only by 0.15 percent due to the addition of a seventh low-quality ad. Second, the counterfactual results suggest that the revenue-maximizing number of ads per page differs across the ad product category, with the average being five ads per page, and implementing the suggested number of ads would lead to a 4.5 percent increase in revenue, on average. These results provide evidence in support of recent changes in the online advertising market; for example, Microsoft introduced a service called RAIS that provides advertisers with an option of an exclusive ad display.
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