Research
Michael Baye uses tools from game theory and industrial organization to derive equilibrium strategies in network industries, mergers, auctions, and contests. Much of this research concerns pricing strategies in oligopoly environments where consumers view the products sold by different firms to be close substitutes.
Baye’s pricing research applies to both conventional and online markets. Among other things, it shows that optimal pricing strategies by firms and information “gatekeepers” can lead to equilibrium price dispersion when firms have identical costs, shoppers are well-informed, and firms’ products are perceived to be identical.
Many of these pricing strategies are discussed in his best-selling managerial economics textbook, and are taught to business students around the world.
Visit my page at Google Scholar or see below to view my Working Papers and Published Papers.
Working Papers
Michael R. Baye and John Morgan, “Search Costs, Hassle Costs, and Drip Pricing: Equilibria with Rational Consumers and Firms,” March 2019.
Michael R. Baye and Rick Harbaugh, “Comparative Price Signaling by a Multiproduct Firm,” (in progress).
Michael R. Baye, Dan Kovenock and Casper G. de Vries, “Minimum Resale Price Maintenance in the Absence of Point-of-Sale Service, Agency or Free-Rider Problems,” (in progress).
Articles and Other Publications
Michael R. Baye and Jeffrey T. Prince, “Information,” in Elgar Encyclopedia on the Economics of Competition and Regulation (Michael Noel, General Editor), Northhampton: Edward Elgar Publishing Inc., forthcoming.
Michael R. Baye and Jeffrey T. Prince, “The Economics of Digital Platforms: A Guide for Regulators,” in The GAI Report on the Digital Economy (Douglas H. Ginsburg, General Editor), Arlington: Global Antitrust Institute, 2020, pp. 1250-1297.
Michael R. Baye and David E. M. Sappington, “Revealing Transactions Data to Third Parties: Implications of Privacy Regimes for Welfare in Online Markets,” Journal of Economics & Management Strategy, Vol. 29, No., 2, 2020, pp. 260-275. Technical Appendix .
Michael R. Baye, Graeme Hunter and Emily Walden, “Under the Radar: The Dean Foods-Foremost Farms Consummated Merger,” in The Antitrust Revolution: Economics, Competition and Policy, 7th edition (John E. Kwoka and Lawrence J. White, eds.), Oxford: Oxford University Press, 2019, pp. 147-164.
Michael R. Baye, “Traditional vs. Behavioral Modeling of Consumer Decisions: Myths,Caveats and the Importance of Evidence-Based Consumer Protection” ,” Consumer Financial Protection Bureau Symposium: Behavioral Economics, September 2019, pp. 1-11.
Michael R. Baye and Joshua D. Wright, “How to Economize Consumer Protection,” The Antitrust Source, Vol. 17, No 4 (February 2018), pp. 1-15.
Yonghong An, Michael R. Baye, Yingyao Hu, John Morgan, and Matt Shum, “Identification and Estimation of Online Price Competition with an Unknown Number of Firms,” Journal of Applied Econometrics, Vol. 32, 2017, pp. 80-102.
Michael R. Baye, Babur De los Santos, and Matthijs R. Wildenbeest, “What's in a Name? Measuring Prominence, and Its Impact on Organic Traffic from Search Engines,” Information Economics and Policy, Vol. 34, 2016, pp. 44-57.
Michael R. Baye, Babur De los Santos, and Matthijs R. Wildenbeest, “Search Engine Optimization: What Drives Organic Traffic to Retail Sites?,” Journal of Economics & Management Strategy,Vol. 25, No. 1 (Spring 2016), pp. 6-31.
Michael R. Baye and John Morgan, “Introduction” to The Economics of E-Commerce, Edward Elgar Publishing, 2016.
Michael R. Baye, Babur De los Santos, and Matthijs R.Wildenbeest, “Searching for Physical and Digital Media: The Evolution of Platforms for Finding Books,” Chapter 5 in the NBER’s Economic Analysis of the Digital Economy (edited by Shane Greenstein, Avi Goldfarb, and Catherine Tucker), University of Chicago Press, 2015, pp. 137-165.
Michael R. Baye and David E. M. Sappington, “General Introduction,” in Vol. 1 of Information Economics, New York: Routledge, 2014, pp. 1-31.
Michael R. Baye, “Vertical Restraints in Relation to Online Sales: Some Causes, Effects, and Cautionary Notes,” Directorate for Financial and Enterprise Affairs Competition Committee, Organization for Economic Cooperation and Development (OECD), DAF/COMP/WD(2013)17, 2013, pp. 173-182.
Michael R. Baye and John Morgan, “Pricing on the Internet,” in The New Palgrave Dictionary of Economics Online, Palgrave Macmillan, 2013.
Michael R. Baye, Babur De los Santos, and Matthijs R. Wildenbeest, “The Evolution of Product Search,” Journal of Law, Economics & Policy, Vol. 9 (2013), pp. 201-221.
Michael R. Baye, Dan Kovenock, and Casper G. de Vries, “Contests with Rank-Order Spillovers,” Economic Theory, Vol. 51 (October 2012), pp. 315–350.
Michael R. Baye, Dan Kovenock, and Casper G. de Vries, “The Herodotus Paradox,” Games and Economic Behavior, Vol. 74 (2012), pp. 399-406.
Michael R. Baye, Xiaxun Gao and John Morgan, “On the Optimality of Clickthrough Fees in Online Markets,” Economic Journal, Vol. 121 (November 2011), pp. 340-367.
Michael R. Baye and Joshua D. Wright, “Is Antitrust Too Complicated for Generalist Judges? The Impact of Economic Complexity and Judicial Training on Appeals,” Journal of Law and Economics, Vol. 54, No. 1 (February 2011), pp. 1-24.
Michael R. Baye and Graeme Hunter, “Going Beyond the Conventional Wisdom on Whether Merger-Related Cost Savings Will Benefit Customers,” Antitrust Insights, Spring 2010, pp. 1-9.
Michael R. Baye, J. Rupert J. Gatti, Paul Kattuman, and John Morgan, “Clicks, Discontinuities, and Firm Demand Online,” Journal of Economics & Management Strategy, Vol. 18, No. 4 (Winter 2009), pp. 935–75.
Michael R. Baye and John Morgan, “Brand and Price Advertising in Online Markets,” Management Science, Vol. 55, No. 7 (July 2009), pp. 1139–51.
Michael R. Baye, “Market Definition and Unilateral Competitive Effects in Online Retail Markets,” Journal of Competition Law and Economics, Vol. 4, No. 3 (September 2008), pp. 639–53. IU Permalink.
Michael R. Baye and Paul A. Pautler, “Introduction: Organisation, Operations and the Value of Economics in Antitrust and Consumer Protection at the U.S. FTC,” in Handbook of Competition Economics, (Global Competition Review), 2008.
Michael R. Baye and Dan Kovenock, “Bertrand Competition," in The New Palgrave Dictionary of Economics, 2nd edition, Palgrave Macmillan (edited by Steven N. Durlauf and Lawrence E. Blume), 2008.
Michael R. Baye, “Interview with FTC Director of the Bureau of Economics Michael R. Baye,” American Bar Association Antitrust Source, February 2008, pp. 1–12.
Michael R. Baye, “Initial Observations,” The Threshold (American Bar Association Antitrust Section), Vol. 8, No. 2 (Spring 2008), pp. 3–10.
Michael R. Baye, Matias Barenstein, Debra J. Holt, Pauline M. Ippolito, James M. Lacko, Jesse B. Leary, Janis K. Pappalardo, Paul A. Pautler and Michael G. Vita, “Economics at the FTC: The Google-DoubleClick Merger, Resale Price Maintenance, Mortgage Disclosures, and Credit Scoring in Auto Insurance,” Review of Industrial Organization, Vol. 33 (2008), pp. 211–30.
Michael R. Baye, J. Rupert J. Gatti, Paul Kattuman, and John Morgan, “A Dashboard for Online Pricing,” California Management Review, Vol. 50 No. 1 (Fall 2007), pp. 202–16.
Michael R. Baye, John Morgan, and Patrick Scholten, “Information, Search, and Price Dispersion,” Chapter 6 in Handbook in Economics and Information Systems, Volume 1 (T. Hendershott, Ed.), Amsterdam: Elsevier, 2006.
Michael R. Baye, Rupert Gatti, Paul Kattuman, and John Morgan, “Did the Euro Foster Online Price Competition? Evidence from an International Price Comparison Site,” Economic Inquiry, Vol. 44, No. 2, April 2006, pp. 265–79.
Michael R. Baye, John Morgan, and Patrick Scholten, “Persistent Price Dispersion in Online Markets,” in The New Economy and Beyond: Past, Present and Future (D. W. Jansen, Ed.), Edward Elgar, 2006.
Michael R. Baye, Dan Kovenock, and Casper G. de Vries, “Comparative Analysis of Litigation Systems: An Auction Theoretic Approach,” Economic Journal, Vol. 115, July 2005, pp. 583–601.
Michael R. Baye, John Morgan, and Patrick Scholten, “Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site,” Journal of Industrial Economics, Vol. 52, No. 4, December 2004, pp. 463–96. Winner of the Journal of Industrial Economics “Best Article Prize,” 2005.
Maria Arbatskaya and Michael Baye, “Are Prices ‘Sticky’ Online? Market Structure Effects and Asymmetric Responses to Cost Shocks in Online Mortgage Markets,” International Journal of Industrial Organization, Vol. 22, No. 10, 2004, pp. 1443–62.
Michael R. Baye and John Morgan, “Price Dispersion in the Lab and on the Internet: Theory and Evidence,” Rand Journal of Economics, Vol. 35, No. 3, Autumn 2004, pp. 449-446.
Michael R. Baye, John Morgan, and Patrick Scholten, “Temporal Price Dispersion: Evidence from an Online Consumer Electronics Market,” Journal of Interactive Marketing, Vol. 18, No. 4, Autumn 2004, pp. 101–15.
Michael R. Baye and Paul Kattuman, “Incentives at Cambridge in 1574,” Lagniappe to Journal of Political Economy, Vol. 111, No. 6, December 2003.
Michael R. Baye and John Morgan, “Competition in Internet Industries: Evidence from E-Retailing",” Oxford Internet Institute: Internet Issue Brief, No. 1.2, November 2003, pp. 14-18.
Michael R. Baye and Heidrun H. Hoppe, “The Strategic Equivalence of Rent-Seeking, Innovation, and Patent-Race Games,” Games and Economic Behavior, Vol. 44, 2003, pp. 217–26.
Michael R. Baye, John Morgan, and Patrick Scholten, “The Value of Information in an Online Consumer Electronics Market,” Journal of Public Policy & Marketing, Vol. 22 (1), Spring 2003, pp. 17–25.
Michael R. Baye and John Morgan, “Information Gatekeepers and Price Discrimination on the Internet,” Economics Letters, Vol. 76 (2002), pp. 47–51.
Michael R. Baye and John Morgan, “Winner-Take-All Price Competition,” Economic Theory, Vol. 19 (2002), pp. 271–82.
Michael R. Baye and John Morgan, “Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets,” American Economic Review, Vol. 91, No. 3 (June 2001), pp. 454–74.
Michael R. Baye and John Morgan, “A Simple Model of Advertising and Subscription Fees,” Economics Letters, Vol. 69, No. 3 (2000) pp. 345–51.
Michael R. Baye and Onsong Shin, “Strategic Behavior in Contests: Comment,” American Economic Review, Vol. 89, No. 3 (June 1999), pp. 691–93.
Michael R. Baye and John Morgan, “A Folk Theorem for One Shot Bertrand Games,” Economics Letters, Vol. 65 (1999), pp. 59–65.
Michael R. Baye and Shyh Fang Ueng, “Commitment and Price Competition in a Differentiated Product Duopoly,” Journal of Economics, Vol. 69, No. 1 (1999), pp. 41–52.
Michael R. Baye, Dan Kovenock, and Casper de Vries, “The Incidence of Overdissipation in Rent Seeking Contests,” Public Choice, Vol. 99, No. 3/4 (June 1999), pp. 439–54.
Michael R. Baye, Robert Maness, and Steven N. Wiggins, “Demand Systems and the True Subindex of the Cost of Living for Pharmaceuticals,” Applied Economics, Vol. 29 (1997), pp. 1179–89. IU Permalink.
Michael R. Baye and Dennis W. Jansen, “Repeated Games with Stochastic Discounting,” Economica, Vol. 63 (1996), pp. 531–41.
Michael R. Baye, Dan Kovenock, and Casper G. de Vries, “The All-Pay Auction with Complete Information,” Economic Theory, Vol. 8 (1996), pp. 291–305.
Michael R. Baye, Keith Crocker, and Jiangdong Ju, “Divisionalization, Franchising, and Divestiture Incentives in Oligopoly,” American Economic Review, Vol. 86 (March 1996), pp. 223–36.
Michael R. Baye, Keith Crocker, and Jiangdong Ju, “Divisionalization and Franchising Incentives with Integral Competing Units,” Economics Letters, Vol. 50, No. 3 (March 1996), pp. 429–36.
Michael R. Baye, Dan Kovenock, and Casper de Vries, “The Solution to the Tullock Rent-Seeking Game when R > 2,” Public Choice, Vol. 81 (1994), pp. 363–80.
Michael R. Baye, Ann Gillette, and Casper de Vries, “Limit Orders, Asymmetric Information, and the Formation of Asset Prices With a Computerized Specialist,” Zeitschrift für Nationalökonomie/Journal of Economics, Vol. 59, No. 1 (1994), pp. 71–96.
Michael R. Baye and Dan Kovenock, “How to Sell a Pickup Truck: Beat-or-Pay Advertisements as Facilitating Devices,” International Journal of Industrial Organization, Vol. 12, No. 1 (1994), pp. 21–33.
Michael R. Baye and Casper G. de Vries, “An Oligopoly Model of Free Banking: Theory and Tests,” De Economist, Vol. 141, No. 4, (1993), pp. 497–514.
Michael R. Baye, Guoqiang Tian, and Jianxin Zhou, “Characterizations of the Existence of Equilibria in Games with Discontinuous and Nonquasiconcave Payoffs,” Review of Economic Studies, Vol. 60 (October 1993), pp. 935–48.
Michael R. Baye, Dan Kovenock, and Casper G. de Vries, “Rigging the Lobbying Process: An Application of the All-Pay Auction,” American Economic Review, Vol. 86 (March 1993), pp. 289–94.
Michael R. Baye, Dan Kovenock, and Casper G. de Vries, “It Takes Two-to-Tango: Equilibria in a Model of Sales,” Games and Economic Behavior, Vol. 4 (1992), pp. 493–510.
Michael R. Baye, Dennis W. Jansen, and Jae-Woo Lee, “Advertising Effects in Complete Demand Systems,” Applied Economics, Vol. 24 (1992), pp. 1087–96. IU Permalink.
Michael R. Baye and Casper G. de Vries, “Mixed-Strategy Trade Equilibria,” Canadian Journal of Economics, Vol. 25, No. 2 (May 1992), pp. 281–93.
Michael R. Baye and Dennis W. Jansen, “Industry Performance Indices and the Economics of Information: New Perspectives and Caveats,” Review of Industrial Economics, Vol. 7, No. 1 (1992), pp. 83–90.
Michael R. Baye, “Quotas as Commitment in Stackelberg Trade Equilibrium,” Jahrbucher für Nationalökonomie und Statistik, Vol. 209 (1992), pp. 22–30.
Michael R. Baye and Dan A. Black, “Income Taxation, Labor Supply, and the Theory of Income-Based Cost-of-Living Indices,” European Economic Review, Vol. 36 (1992), pp. 83–100.
Michael R. Baye, Mary E. Deily, and Dennis W. Jansen, “Marginal and Total Production Cost Indices: Theory and Applications,” Journal of Productivity Analysis, Vol. 2 (1991), pp. 91–102.
Michael R. Baye and Dan A. Black, “A Differential Measure of the Real Wage Index,” Economics Letters, Vol. 36 (July 1991), pp. 295–98.
Michael R. Baye and Thomas F. Cosimano, “Choosing Sides in Matching Games: Nash Equilibrium and Comparative Statics,” Economica, Vol. 57 (August 1990), pp. 295–98.
Bernard van Praag and Michael R. Baye, “The Poverty Concept when Prices are Income-Dependent,” Journal of Econometrics, Vol. 43 (1990), pp. 153–66.
Paul M. Anglin and Michael R. Baye, “Information Gathering and Cost of Living Differences Among Searchers,” Economics Letters, Vol. 28 (1988), pp. 247–50.
Michael R. Baye and Dan A. Black, “The Microeconomic Foundations of Measuring Bracket Creep and Other Tax Changes,” Economic Inquiry, Vol. 25 (July 1988), pp. 471–84.
Paul M. Anglin and Michael R. Baye, “Information, Multiprice Search, and Cost-of-Living Index Theory,” Journal of Political Economy, Vol. 95 (December 1987), pp. 1179–95.
Michael R. Baye and Thomas F. Cosimano, “Erratic Monetary Policy and the Dispersion of Commodity Prices,” Journal of Macroeconomics, Vol. 8 (Spring 1986), pp. 201–59.
Michael R. Baye, “Population Intervals and the True Cost-of-living Index with Known Price Distributions,” Economics Letters, Vol. 17 (1985), pp. 257–59.
Michael R. Baye, “A Note on Price Stability and Consumers' Welfare,” Econometrica, Vol. 53 (January 1985), pp. 213–17.
Michael R. Baye, “Price Dispersion and Functional Price Indices,” Econometrica, Vol. 53 (January 1985), pp. 217–23.
Michael R. Baye, “Review of Thomas Sowell’s Civil Rights: Rhetoric or Reality?” Business Horizons, September–October 1985, pp. 79–80.
Michael R. Baye and Darrell F. Parker, “Combining Ridge and Principal Component Regression: A Money Demand Illustration,” Communications in Statistics (Theory and Methods), Vol. 13 (1984), pp. 197–205.
Michael R. Baye and Dan A. Black, “Indexation and the Inflation Tax,” Cato Policy Analysis, Vol. 39 (July 1984), pp. 1–12.
Michael R. Baye, “Optimal Adjustments to Restrictions on Advertising: Some Further Comments,” Journal of Industrial Economics, Vol. 32 (December 1983), pp. 249–51.
Michael R. Baye, “Optimal Adjustments to Changes in the Price of Advertising,” Journal of Industrial Economics, Vol. 30 (September 1981), pp. 95–103.
Michael R. Baye and Darrell F. Parker, “The Consumption Tax and Supply Side Economics: Some Short-Term Revenue Effects,” The Cato Journal, Vol. 1 (Fall 1981), pp. 629–32.