Using market prices for crude-oil futures options and the prices of their underlying futures contracts, we estimate the volatility skew in two ways. As a benchmark for our theoretical model, on each date we first estimate a crosssectional polynomial structure for each maturity to demonstrate the strength and weaknesses of a purely-mechanical model. We then apply to the empirical data a Merton-s...

This paper investigates firms’ decisions to reimburse consumers’ switching costs in network industries. Prior literature finds that switching costs incentivize firms to harvest their locked-in consumers rather than price aggressively for market dominance, thereby resulting in a lower market concentration. Using a dynamic duopoly model, we show that this result is reversed if firms have the opti...