Essays on industrial organisation and behavioural economics

This thesis is composed of three chapters each of which deals with markets with agents who are not fully rational. The first chapter aims to understand the relationship between Word- of-Mouth marketing and traditional advertisement. With the advent of internet and social network web-sites, the cost of Word-of-Mouth marketing reduced dramatically. This chapter mainly analyses the effect of this change on the traditional advertisement efforts. The second chapter analyses the market implications of manipulable consumers. Manipulable consumers are defined as the consumers whose beliefs about the future can be altered by advertisement decisions of firms. The equilibrium outcome is given and extensions are discussed. The last chapter of the thesis studies the consumers who decide which firm to approach by sampling the price information offered by firms. Consumers do not conduct a rational evaluation but use one of the procedures which are motivated by axioms reflecting their limited understanding of the strategic environment. I analyse the market implications of such procedures and conduct several comparative statics.