Three Essays in Applied Industrial Organization

This thesis analyzes three separate, controversially discussed socioeconomic and policy issues. The first chapter is concerned with the regulation of hospitals. It is shown that the informational problems hinder the regulator to set optimal prices in a prospective payment system. It is also shown that the mechanism that the literature typically recommends for finding best prices, namely yardstick competition, fails in the hospital market. The second chapter analyzes the question whether general smoking bans in taverns can be welfare improving or whether they are an illegtimate market intervention. It is shown that owners of such establishments indeed do not necessarilly have an incentive to act in the consumers' interests. That is, it is possible that taverns do not prohibit smoking in their domain although it is in the social interest. The third chapter offers an alternative theory of how noninformative advertising can influence consumer's behavior. The advantages of the approach are that, first, it can explain the effect of advertising without violating fundamental assumptions of micoreconomic theory and, second, that it allows for welfare analysis.