Essays on pricing, advertising and market evolution

The dissertation comprises three research projects, each presented in a separate chapter. Chapter 1 characterizes advertising by its interfirm effect: either cooperative or predatory. How the relative magnitude that advertising being cooperative or predatory affects the cartel stability is investigated in a horizontally differentiated market. Collusion is more difficult to sustain the stronger the predatory effect of advertising. When advertising is primarily cooperative, there is a critical threshold point on the degree of cooperative effect. Before that point, collusion is easier the larger the degree of cooperative effect of advertising. However, after that point, collusion becomes more and more difficult when advertising approaches the degree of being perfectly cooperative.; Chapter 2 studies the multiproduct monopoly's optimal advertising policy. By treating advertising as endogenous and purely informative in the sense that it provides full and accurate information of product characteristics, we find that advertising level is decreasing in price when the multiproduct monopoly chooses non-overlapping market domains for its products, and the markup (market domain) for each product is increasing (shrinking) in the advertising level when the market domains are overlapping.; Chapter 3 is an empirical test to see to what extent the bottled water firms' pricing behavior is consistent with tacit collusion oligopoly models yielding counter-cyclical pricing. The U.S. bottled water market is characterized by its high concentration with only a handful of industry players who lead the boom. In witness of the seasonally fluctuating but continuously growing demand faced by the bottled water industry, I have examined the dynamic pattern of firms' pricing behavior in reaction to this changing demand. By controlling other exogenous factors, our results support the counter-cyclically pricing models and show that the bottled water firms exhibited both the ability to intermittently sustain a collusive price-cost margin in low seasons and the early phase of the sampling period, and a tendency to undergo the process of reshaping market shares in the shadow of possible price war.