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University of Rochester |
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Simon School of Business |
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Alexei Alexandrov |
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Employment Assistant Professor of Economics and Management. University of Rochester (Simon School). 2007 –
Education
Ph.D., Managerial Economics and Strategy, Northwestern University, Evanston, IL, 2007 B.A., Economics, Wayne State University, Detroit, MI, 2003
Publications
Fat Products (2008), Journal of Economics and Management Strategy, 17(1), 67 – 95 |
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C Simon Hall 3-110P University of Rochester Box 270100 Rochester, NY 14627-0100 Phone: 585-275-1058 |
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Contact Information |
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I show that risk-neutral firms with the ability to hedge commodity, labor, or foreign exchange costs without committing to a particular quantity have an incentive to take on additional cost risk or, if the costs are highly positively correlated with the competitors' costs, to strategically hedge. I also show that demand-shifters (e.g., input quality) should be managed similarly. If a firm is a monopolist, then the firm has an incentive to take on as much cost risk as possible because the firm can adjust prices in response to a cost change. If demand is more elastic and the cost pass-through rate is higher, that incentive is increased. In a duopoly setting, if costs are positively correlated, cross-elasticity is high, and the competing firms are mainly competing over the same base of customers as opposed to expanding the overall market, then one of the firms hedges, and the other one does not. Financial hedging generally does not affect incentives at the margin, and can be undertaken concurrently with risk-seeking actions at the margin. |
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We build a model to analyze the cost (wholesale price) pass-through incentives of a retailer selling two products. The products, `leader' and `follower,' are such that the leader's price affects the follower's demand, but not vice versa. These products could be in different categories, such as a featured soft drink and chewing gum near the register, or they could be in the same category, such as a higher-quality, higher-price national brand and a lower-quality, lower-price generic alternative. We first show that the cross-product cost pass-through rates are negative when the products are in different categories and positive when they are in the same category. In each case, we find that the retailer has stronger incentives to pass-through trade deals to consumers on the leader product, and weaker incentives to pass-through on the follower product. We outline the intuition of these results and show that the incentive to pass-through on the leader product increases with retail competition. We show that in the monopoly case with linear demand, the pass-through rates add up to one, with the leader's being larger, and that higher demand elasticity due to peak demand reduces the difference between the pass-through incentives associated with each type of product, resulting in more similar pass-through rates. In the duopoly case with linear demand, competition increases the pass-through rate of the leader, decreases the pass-through rate of the follower, and makes the sum of the pass-through rates larger than one. |
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We show that bundling and advance selling are equivalent when the consumers and the seller agree on the probability of each possible state of nature occurring and are risk-neutral, and when the seller can pre-commit to spot prices to be charged after the uncertainty about the state of nature is resolved. The result allows both researchers and practitioners to apply the insights from the vast literature on bundling to advance selling problems. We highlight several insights which are particularly relevant---for example, the interpretation of the correlation of consumer valuations in different possible states of the world. |
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I analytically model two manufacturers competing through a retailer. I show that different types of advertising affect the retailer's and the channel metrics differently. Advertising resulting in more differentiated products decreases the retailer's margin, sales volume, and profits, and it also decreases the channel profits. Advertising resulting in a higher (perceived) value of a product increases the retailer's margin, sales volume, and both the retailer's and the channel profits. Advertising resulting in a higher proportion of loyal consumers decreases the retailer's margin, with the effects on sales volume, the retailer's and the channel profit conditional: they increase only if the loyal segment is sufficiently stronger than the switcher segment. I also offer another explanation for the empirical finding of advertising's opposite effects on the retailer's margin and the wholesale price. |
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Antitrust and Competition in Two-Sided Markets (with George Deltas and Daniel Spulber), accepted at Journal of Competition Law and Economics
Are Reservations Recommended? (with Martin Lariviere), accepted at Manufacturing & Service Operations Management
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Some of the Way to a Publication Price Discrimination and Investment Incentives (with Joyee Deb), revise and resubmit at International Journal of Industrial Organization Should you sell Pepsi and Coke In the Same Aisle? (Effects of Different Types of Manufacturers' Advertising on Volumes, Retail Margins, and Retail Profits), revise and resubmit at Management Science Teaching Managerial Economics for MBAs (STR 401, mean of the teaching evaluations out of 5, most recent class first): 4.97, 5.0, 4.93, 5.0, 5.0, 4.81, 4.50, 3.53. B2B Pricing for MBAs (MKT/STR 442A): 4.47, 4.23 |
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Recent Working Papers |