Oleg Baranov

 

Oleg Baranov

 

  • Revealed Preference and Activity Rules in Dynamic Auctions, (with Lawerence Ausubel), International Economics Review, 61(2): 471-502, 2020.
    Abstract: Activity rules—constraints that limit bidding in future rounds based on past bids—are intended to limit strategic bidding delays in high-stakes auctions. This article provides a general treatment of activity rules. Traditional point-based rules are effective for homogeneous goods and reasonably suited for substitute goods. However, they are simultaneously too strong and too weak for general environments; they allow parking, while sometimes preventing straightforward bidding. We prove that the activity rule operationalizing the generalized axiom of revealed preference (GARP) is essentially the unique rule that enforces the Law of Demand while enabling straightforward bidding and never producing “dead ends”.


Brian Cadena 

Brian Cadena

 

  • Investment over the Business Cycle: Insights from College Major Choice, (with Erica Blom and Benjamin J. Keys) , Journal of Labor Economics 39(4), 2021.
    Abstract: How does presonal exposure to economic contidions affect individual human capital investment choices? Focusing on bachelor’s degree recipients, we find that cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, have better employment prospects, and lead to work in a related field. Conditional on expected earnings, recessions also encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors. We conclude that economic environments change how students select majors, and we find evidence that students who respond to the business cycle enjoy earnings typical of their new majors.


Yongmin Chen 

Yongmin Chen

 

  • Experience Goods and Consumer Search, (with Zhuozheng Li and Tianle Zhang), American Economic Journals: Microeconomics, forthcoming
    Abstract:  We introduce a search model where products differ in variety and unobserved quality ('experience goods'), and firms can establish quality reputation. We show that the inability of consumers to observe quality before purchase significantly changes how search frictions affect market performance. In equilibrium, higher search costs hinder consumers' search for better-matched variety and increase price, but can boost firms' investment in product quality. Under plausible conditions, both consumer and total welfare initially increase in search cost, whereas both would monotonically decrease if quality were observable. We apply the analysis to online markets, where low search costs coexist with low-quality products.
  • Competitive Differential Pricing, (with Jianpei Li and Marius Schwartz), RAND Journal of Economics, 2021.
    Abstract: This paper analyzes welfare under differential versus uniform pricing across oligopoly markets that differ in costs of service. We establish general demand conditions for differential pricing by symmetric firms to increase consumer surplus, profit, and total welfare. The analysis reveals why competitive differential pricing is generally beneficial more than price discrimination but not always, including why profit may fall, unlike for monopoly. The presence of more competitors tends to enlarge consumersíshare of the gain from differential pricing, though profits often still rise. When firms have asymmetric costs, however, profit or consumer surplus can fall even with ësimpleílinear demands.


Jonathan Edward Hughes 

Jonathan Hughes

 

  • The Value of Rarity: Evidence from a Collectible Good, Journal of Industrial Economics, Forthcoming.
    Markets for art, coins and other collectibles, culinary delicacies and eco-tourism suggest consumers value the rarity of many goods. While empirical evidence supports higher prices for rare goods, isolating the value of rarity has proven difficult. I analyze prices for a collectible card game and show goods that are designated as rare trade at higher prices than functionally-equivalent substitutes. Importantly, I use novel features of this market to account for scarcity, observed and unobserved product characteristics and separately identify rarity effects. These results have important implications for markets ranging from luxury goods to conservation of endangered species.


Daniel Kaffine

 

Daniel Kaffine

 

  • Emissions, Transmission, and the Environmental Value of Renewable Energy,(with Harrison Fell and Kevin Novan), American Economic Journal: Economic Policy 13 (2): 241-72, 2021.
    Abstract: Growth in renewable electricity generation has spurred substantial private and public interest in increasing transmission capacity to export electricity from renewable-rich, demand-poor regions to urban demand centers. While the primary motives for these transmission investments are market-based (e.g., arbitraging regional electricity prices), they can also have large non-market impacts (e.g., altering the level and location of emissions). In this paper, we examine how transmission congestion alters the environmental benefits provided by renewable generation. Using hourly data from the Texas and Mid-Continent electricity markets, we find that relaxing transmission constraints between the wind-rich areas and the demand centers of the respective markets increases the non-market value of a MWh of wind by 31% for Texas and 13% for Mid-Continent markets, conservatively. Much of this increase in the non-market value arises from a redistribution in where emissions are avoided – which transmission is not constrained, wind offsets much more pollution from fossil fuel units located near highly populated demand centers.
  • Private monitoring and public enforcement: Evidence from complaints and regulation of oil and gas wells,(with Peter Maniloff), Journal of Environmental Economics and Management, 2021.
    Abstract: The traditional theory of firm regulatory compliance examines the interplay of firms and regulator, with the general public as passive consumers of goods or providers of votes. However, members of the public can play an important role in monitoring for compliance, which we analyze with a novel dataset of Colorado regulatory activities. We find regulators frequently conduct follow-up inspections of people’s complaints, and these complaint-driven inspections are at least as likely to be followed by regulatory action as “normal” scheduled inspections. However, regulators do not increase inspection activity of other assets owned by a firm that was complained about, consistent with regulators treating these complaints as “one-offs”. An inspector conducting a complaint inspection crowds out two regular inspections at the daily level, but we find no evidence of crowd-out at time scales of one month or greater. Finally, heterogeneity across complaint types suggests people are more adept at identifying nuisance-related violations (e.g. noise, smell), but are less adept at identifying more technical violations.


Wolfgang Keller 

Wolfgang Keller

 

  • Capital Markets in China and England, 18th and 19th Century: Evidence from Grain Prices, (with Carol H. Shiue and Xin Wang), American Economic Journal: Applied Economics 13(3): 31-64, 2021.
    Abstract: Based on the most comprehensive grain prices available, we employ a storage model to estimate consistent interest rates and compare capital market development in Britain and China. Interest rates for Britain were lower than China’s on average by about three percentage points from 1770 to 1860. Regional capital market integration in the Yangzi Delta comes close to the British average at distances below 200 kilometers, but at larger distances interest rate correlations in Britain are twice those of the Delta, and three or more times as high as elsewhere in China. Overall, our results suggest capital market divergence at an early date.
  • Comments on Mandelman and Waddle’s “Intellectual property, tariffs, and international trade dynamics”, Journal of Monetary Economics; Volume 109: 104-106, 2020.
    Abstract: In their paper, Federico Mandelman and Andrea Waddle are interested in the relation of trade and the protection of intellectual property rights (IPR) policies. This is against the backdrop of the so-called US-China Trade War, which is underpinned by claims of forced technology transfer from the US to China.1 In such a situation, might it be possible to use trade policy tools, specifically tariffs, to improve IPR protection? To address this question, in terms of positive economics the paper seeks a better understanding on how IPR enforcement and trade policies interact. Furthermore, the authors evaluate the effect of such policies on the welfare of agents in both countries. Mandelstam and Waddle tackle these issues in a dynamic, general equilibrium framework combing elements of (GhironiMelitz, 2005) and (Holmes et al., 2015). The authors argue that there might be room for cooperation between countries, as higher tariffs are found to be an effective deterrent for weak IPR protection just as weakening IPR enforcement may be a credible threat to prevent tariff increases.


Jin-Hyuk Kim 

Jin-Hyuk Kim

 

  • Local Network Effects in the Adoption of a Digital Platform,(with Peter Newberry, Liad Wagman, and Ran Wolff), Journal of Industrial Economics, forthcoming.
    Abstract: We examine the extent to which the network effects that lead to the adoption of an online social platform are local. Focusing on the fantasy sports market in the US, we find that the size of a county's existing user base on the platform significantly impacts the number of new users who join the platform in that county. However, the size of the user base in nearby counties does not impact adoption, suggesting a local network effect. We also find evidence of heterogeneous network effects, as the impact of the user base is stronger in higher-income counties. Using simulations, we demonstrate that the initial distribution of users across counties can significantly influence the growth of the network over time. We draw implications for optimal seeding based on county population and income.


Miles Kimball

 

Miles Spencer Kimball

 

  • Liquidity Constraints and Precautionary Saving, (with Martin Holm and Christopher Carroll), Journal of Economic Theory Volume 195, 2021.
    Abstract: We provide the analytical explanation of the interactions between precautionary saving and liquidity constraints. The effects of liquidity constraints and risks are similar because both stem from the same source: a concavification of the consumption function. Since a more concave consumption function exhibits heightened prudence, both constraints and risks strengthen the precautionary saving motive. In addition, we explain the apparently contradictory results that constraints and risks in some cases intensify, but in other cases weaken the precautionary saving motive. The central insight is that the effect of introducing an additional constraint or risk depends on whether it interacts with preexisting constraints or risks. If it does not interact with any preexisting constraints or risks, it intensifies the precautionary motive. If it does interact, it may reduce the precautionary motive in earlier periods at some levels of wealth.


Xiaodong Liu 

Xiaodong Liu

 

  • A Structural Model for the Coevolution of Networks and Behavior, (with Chih-Sheng Hsieh and Michael Kӧnig) The Review of Economics and Statistics, 2020.
    Abstract: This paper introduces a structural model for the coevolution of networks and behavior. We characterize the equilibrium of the underlying game and adopt the Bayesian Double Metropolis-Hastings algorithm to estimate the model. We further extend the model to incorporate unobserved heterogeneity and show that ignoring unobserved heterogeneity can lead to biased estimates in simulation experiments. We apply the model to study R&D investment and collaboration decisions in the chemical and pharmaceutical industry and find a positive knowledge spillover effect. Our model also provides a tractable framework for a long-run key player analysis.


Adam McCloskey

 

Adam McCloskey

 

  • Inference After Estimation of Breaks, (with Isaiah Andrews and Toru Kitagawa), Journal of Econometrics 224(1), 2021.
    Abstract:  In an important class of econometric problems, researchers select a target parameter by maximizing the Euclidean norm of a data-dependent vector. Examples that can be cast into this frame include threshold regression models with estimated thresholds and structural break models with estimated break dates. Estimation and inference procedures that ignore the randomness of the target parameter can be severely biased and misleading when this randomness is non-negligible. This paper studies conditional and unconditional inference in such settings, accounting for the data-dependent choice of target parameters. We detail the construction of quantile-unbiased estimators and confidence sets with correct coverage, and prove their asymptotic validity under data generating process such that the target parameter remains random in the limit. We also provide a novel sample splitting approach that improves on conventional split-sample inference.


Scott Savage 

Scott Savage

 

  • Tariff Pass-Through and Welfare in the Tablet Computer Market,  (with R. Scott Hiller), Journal of Industrial Economics 69(2), 2021.
    Abstract:  This paper estimates the short-run effects of tariffs on United States tablet computer prices and welfare. Market-level data are used to estimate a model of demand, supply and trade policy and to simulate equilibria prices and sales in scenarios with tariffs on Chinese production. A 25 percent tariff on firms assembling in China results in a tariff elasticity of consumer prices of 1.108, a 29.6 percent decline in profits for firms assembling in China, and a deadweight loss of 28.8 percent of total economic surplus. Firms assembling elsewhere benefit from the reduction in rival’s competitiveness by increasing their prices, market shares and profits. A long-run implication is that firms may be incented to shift production from “uncompetitive” facilities in China to lower-cost countries that are politically favored by the United States.


Carol Shiue 

Carol Shiue

 

  • Capital Markets in China and England in the 18th and 19th Centuries: Evidence from Grain Prices, (with Wolfgang Keller and Wang Xin) American Economic Journal: Applied Economics 13(3), 2021.
    Abstract: Based on the most comprehensive grain prices available, we employ a storage model to estimate consistent interest rates and compare capital market development in Britain and China. Interest rates for Britain were lower than China’s on average by about three percentage points from 1770 to 1860. Regional capital market integration in the Yangzi Delta comes close to the British average at distances below 200 kilometers, but at larger distances interest rate correlations in Britain are twice those of the Delta, and three or more times as high as elsewhere in China. Overall, our results suggest capital market divergence at an early date.


Shuang Zhang 

Shuang Zhang

 

  • Willingness to Pay for Clean Air: Evidence from Air Purifier Markets in China (with Koichiro Ito), Journal of Political Economy 128(5), 2020.
    Abstract: We develop a framework to estimate willingness to pay (WTP) for clean air from defensive investment. Applying this framework to product-by-store level scanner data on air purifier sales in China, we provide among the first revealed preference estimates of WTP for clean air in developing countries. A spatial discontinuity in air pollution created by the Huai River heating policy enables us to analyze household responses to long-run exposure to pollution. Our model allows heterogeneity in preference parameters to investigate potential heterogeneity in WTP among households. We show that our estimates provide important policy implications for optimal environmental regulation.