Essays on pricing and contracting

This dissertation is concerned with studying certain pricing and contracting issues that are motivated by real problems. The second chapter is focused on determining why persistent excess demand is pervasive on certain markets. The focus is on the markets for popular concert tickets which present a number of viable theoretical issues to consider and also allow us to assemble a unique data set of prices from both primary and secondary markets that we can use to test the alternative theories. We find that secondary markets emerge not because promoters fail to price or price discriminate optimally, but because they have strong incentives to either underprice or artificially maintain shortages on the market. These incentives are provided by their desire to share risk with speculators when demand is uncertain, by the presence of complementary products, and by social influence.;Continuing to study the effects of social influence, the third chapter builds a theoretical model of price discrimination under social influence. We show that when consumers are uninformed about a product they can be persuaded through social influence to update their preferences. Under these conditions social influence reduces the profitability and incidence of price discrimination. We show that sellers that are more sensitive to social influence price discriminate less and offer less product variety. We also show that rationing occurs mainly at the low end and it can be severe. All these results are consistent with the empirical evidence from the entertainment industry and also with other observations from certain fashion and cult product industries.;The fourth chapter considers a long studied pricing problem in both the Industrial Organization and International Trade literature. We try to shed light on why the law of one price does not always hold. The focus is on the automotive industry inside the European Union. We show that prices for identical models failed to converged in spite of the elimination of virtually all trade barriers and the adoption of the common currency. We argue that the exclusive dealership system allows for successful market segmentation and price discrimination based on purchasing power. We also point to pricing patterns that are consistent with collusive agreements among the three major manufacturing groups in Italy, France, and Germany.;The final chapter of this thesis analyzes the efficiency implications of different sets of legal rules in contract litigation. When contracts are affected by asymmetric information, litigation often occurs. The legal rules under which the contracts are being written affect the incentives of both contracting parties and therefore the prices and efficiency of these contracts. We show that a non interference rule that allows the parties to settle the dispute on their own is more preferable to a strict liability rule that forces the contractor to fulfill his obligations regardless of the cost, and also to a rule that allows the private information to be made public and awards damages based on this information.