Essays on Uniform Pricing and Vertical Contracts in Two-sided Markets

This thesis is comprised of three chapters linked together by their economic analysis of uniform pricing and vertical contracts in two-sided markets. Various forms of uniform pricing and vertical contracts are present in the United States cable television market (Chapter 1), markets involving online purchasing platforms (Chapter 2), and in markets for health insurance (Chapter 3). These markets are common examples of two-sided markets since, for example, local television stations connect advertisers and viewers, online platforms connect buyers and sellers of various goods, and health insurers connect patients with medical providers. This thesis studies the economic consequences of vertical contracts and uniform pricing practices, which can arise through private contract or government regulation, in two-sided markets. Chapter 1 examines how local television stations have responded to a regulation of the 1992 Cable Act mandating cable distributors offer consumers local content in the form of a bundle with a single price. In this chapter, I show that this form of government-mandated uniform pricing results in television stations setting their prices for content higher than they would absent this regulation. In collaboration with Kenneth Corts, Chapter 2 examines the pricing incentives of sellers who reach potential buyers through platforms that may restrict sellers to offering a uniform price across all platforms. This contractual restriction is commonly referred to as a ``most-favored-nation" clause. In this chapter, we show that platforms may find it privately profitable to adopt such a contractual restriction, and that the result is higher fees charged by platforms to sellers.Chapter 3 studies the use of most-favored-nation clauses in markets for health insurance. A health insurer may find it privately profitable to restrict its participating medical providers from discounting their medical services to rival insurers, which amounts to uniform pricing of medical services to insurers. In this chapter, I show that such uniform pricing may lead to lower prices for health insurance as any discounts offered to one insurer must also be extended to all other insurers.Ph.D