This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the US video game industry (2000–2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7 percent and 58 percent and consumer welfare by $1.5 billion. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.

The impact of insurer competition on welfare, negotiated provider prices, and premiums in the U.S. private health care industry is theoretically ambiguous. Reduced competition may increase the premiums charged by insurers and their payments made to hospitals. However, it may also strengthen insurers' bargaining leverage when negotiating with hospitals, thereby generating offsetting cost decreases. To understand and measure this trade-off, we estimate a model of employer-insurer and hospital-insurer bargaining over premiums and reimbursements, household demand for insurance, and individual demand for hospitals using detailed California admissions, claims, and enrollment data. We simulate the removal of both large and small insurers from consumers' choice sets. Although consumer welfare decreases and premiums typically increase, we find that premiums can fall upon the removal of a small insurer if an employer imposes effective premium constraints through negotiations with the remaining insurers. We also document substantial heterogeneity in hospital price adjustments upon the removal of an insurer, with renegotiated price increases and decreases of as much as 10% across markets.

We investigate how formularies used by pharmacy benefit managers (PBMs) affect equilibrium manufacturer rebates for branded drugs through tiering and exclusion. We develop a theoretical model of multidimensional contracting in which a PBM negotiates with drug manufacturers over menus of formulary‐contingent rebates and chooses a formulary. We then estimate consumer demand responses to tier placement for statins using claims data from Princeton University, a large employer contracting with a single PBM to offer prescription drug coverage to its employees. Combining the theoretical model with demand estimates and observed list prices, we quantify how allowing for differential tier placement and exclusion affect equilibrium rebates. Our predictions are consistent with available aggregate rebate data, and we find that allowing a PBM to place branded drugs on preferred‐ and non‐preferred tiers can substantially increase negotiated rebate payments.

We evaluate the consequences of narrow hospital networks in commercial health care markets. We develop a bargaining solution, "Nash- in-Nash with Threat of Replacement," that captures insurers' incentives to exclude, and combine it with California data and estimates from Ho and Lee (2017) to simulate equilibrium outcomes under social, consumer, and insurer- optimal networks. Private incentives to exclude generally exceed social incentives, as the insurer benefits from substantially lower negotiated hospital rates. Regulation prohibiting exclusion increases prices and premiums and lowers consumer welfare without significantly affecting social surplus. However, regulation may prevent harm to consumers living close to excluded hospitals.

We investigate the welfare effects of vertical integration of regional sports networks (RSNs) with programming distributors in U.S. multichannel television markets. Vertical integration can enhance efficiency by reducing double marginalization and increasing carriage of channels, but can also harm welfare due to foreclosure and incentives to raise rivals' costs. We estimate a structural model of viewership, subscription, distributor pricing, and affiliate fee bargaining using a rich data set on the U.S. cable and satellite television industry (2000?2010). We use these estimates to analyze the impact of simulated vertical mergers and divestitures of RSNs on competition and welfare, and examine the efficacy of regulatory policies introduced by the U.S. Federal Communications Commission to address competition concerns in this industry.

Will stock exchanges innovate to address latency arbitrage and the arms race for speed? This paper models how exchanges compete in the modern electronic era and how this shapes incentives for market-design innovation. In the status quo, exchange trading fees are competitive, but exchanges earn economic rents from selling speed. These rents create a wedge between private and social incentives to innovate and support the persistence of an inefficient market design in equilibrium of a market-design adoption game. We discuss implications for policy and insights for the literatures on market design, innovation, and platforms.

A “Nash equilibrium in Nash bargains” has become a workhorse bargaining model in applied analyses of bilateral oligopoly. This paper proposes a noncooperative foundation for “Nash-in-Nash” bargaining that extends Rubinstein’s alternating offers model to multiple upstream and downstream firms. We provide conditions on firms’ marginal contributions under which there exists, for sufficiently short time between offers, an equilibrium with agreement among all firms at prices arbitrarily close to Nash-in-Nash prices, that is, each pair’s Nash bargaining solution given agreement by all other pairs. Conditioning on equilibria without delayed agreement, limiting prices are unique. Unconditionally, they are unique under stronger assumptions.