Three essays in microeconomics

This dissertation consists of two chapters in investigating firms’ pricing strategies in different information settings, and one more empirical chapter exploring the effect of low-skilled immigrants on college-educated women. In the first chapter, I investigate the strategic pricing of firms and the innovation adoption processes of consumers in a forward-looking social learn- ing environment. The equilibrium dynamics will depend on both the market structure and the arrival rate of exogenous signals. I show that in perfect good news, with a low arrival rate of exogenous signals, the monopoly firm will encourage learning to end up with a ”free samples” period. In contrast, with a high arrival rate of exogenous signals, the monopoly firm does not sell until there is a good signal. In duopoly under perfect good news, for a low arrival rate of exogenous signals, the market structure will make both firms use ”free samples” strategy in the early stage to compete for the arrival of a breakthrough. On the other hand, for a high arrival rate of exogenous signals, the firms will wait for the good news and only sell after the realization of the state. The concave adoption curves generated in perfect good news are con- sistent with those in marketing literature. In the second chapter, I investigate the prices and consumer switching when switching costs are consumers’ private information, but firms can observe consumers’ purchase histories. There are two types of equilibrium: poaching equilibrium and non-poaching equilibrium. In a poaching equilibrium, firms will first offer different prices to separate two types of consumers by pur- chase history and then exploit the two types separately. In a non-poaching equilibrium, firms will keep all their current consumers and charge them low- switching-cost consumers’ prices until the end of the game. Compared with myopic consumers, forward-looking high-switching-cost consumers will con- sider future high prices when they choose to stay and thus require better prices. Firms will require a more substantial proportion of high-switching-cost consumers to sustain a poaching equilibrium, which improves the efficiency of equilibrium. When consumers’ switching costs can randomly change from period to period, firms will be less willing to pursue poaching equilibrium. In the third chapter, I investigate how the inflow of low-skilled immi- grants affects the household decisions: the divorce decision, the fertility deci- sion, and who marries whom. I firstly specify an equilibrium model of match- ing, fertility decision, and divorce decision over the life cycle. Compared the equilibrium outcomes with and without low-skilled immigrants, I find that with low-skilled immigrants providing household production: (1) marriage market is more positive assortative; (2) couples both with high-education are more likely to have children; (3) couples both with high-education are less likely to get divorced. In the empirical part, I construct an instrumental variable by exploiting the variation in the immigrants’ country of origin. I find that the inflow of low-skilled immigrants does not have a significant effect on women’s marriage rate, fertility rate, and working decision in general. Still, it increases college-educated women’s marriage rate, fertility rate, and labor participation and, at the same time, decreases college-educated women’s divorce rate.