This is an invited chapter for the forthcoming Volume 4 of the Handbook of Industrial Organization. We present empirical models of demand and supply in differentiated products industries with an emphasis on the key ideas arising from the recent applied literature. We start with a discussion of...

We investigate the effects of private equity on product markets using price and sales data for an extensive number of consumer products. Following a buyout, target firms increase sales 50% more than matched control firms. Price increases--roughly 1% on existing products--do not drive this...

A model is considered where firms internalize the regret costs that consumers experience when they see an unexpected price change. Regret costs are assumed to be increasing in the size of price changes and this can explain why the size of price increases is less sensitive to inflation than in...

This paper starts by discussing consumers' cognitive and emotional reaction to posted prices. Cognitively, some consumers do not appear to make effective use of price information to maximize their consumption-based utility. Emotionally, prices can induce regret and anger among consumers. The...

Bayesian consumers infer that hidden add-on prices (e.g. the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding...

I suppose that consumers see a firm as fair if they cannot reject the hypothesis that the firm is somewhat benevolent towards them. Consumers that can reject this hypothesis become angry, which is costly to the firm. I show that firms that wish to avoid this anger will keep their prices rigid...

Mediating transactions through the Internet removes important cues that salespeople can use to assess a consumer's willingness to pay. We analyze whether dealers' difficulty in identifying consumer characteristics on the Internet and consumers' ease in finding information affects equilibrium...

The safety of the commercial airline industry has attracted considerable public attention and debate since economic deregulation of the industry in 1978. These concerns have energized economic research on three aspects of airline safety. First, has the level of airline safety declined since...

This paper proposes a theory of price rigidity consistent with survey evidence that firms stabilize prices out of fairness to their consumers. The theory relies on two psychological assumptions. First, customers care about the fairness of prices: fixing the price of a good, consumers enjoy it...

We use a large dataset on retail pricing to document that a sizeable portion of the cross-sectional variation in the price at which the same good trades in the same period and in the same market is due to the fact that stores that are, on average, equally expensive set persistently different...