Topics in Empirical Industrial Organization: A Structural Approach
Saturday, Jan. 5, 2019 10:15 AM - 12:15 PM
- Chair: Yoosoon Chang, Indiana University
Endogenous and Selective Service Choices After Airline Mergers
AbstractWe estimate a model of service choice and price competition in airline markets, allowing for the carriers that provide nonstop service to be a selected subset of the carriers competing in the market. Our model can be estimated without an excessive computational burden and we use the estimated model to illustrate the effects of selection on equilibrium market structure and to show how accounting for selection can change predictions about post-merger market power and repositioning, in ways that are consistent with what has been observed after actual mergers, and possible merger remedies.
Wholesale Market Power and the Limited Profitability of Retail Zone Pricing
AbstractThis paper presents a first estimation of the magnitude of arbitrage costs limiting geographical price discrimination. Using spirit sales data across all liquor stores in Pennsylvania, we take advantage of the extreme alcohol price regulation enforced by the Pennsylvania Liquor Control Board (PLCB) to estimate a model of demand for differentiated products that incorporates wholesalers' optimal price responses to any change in the PLCB's pricing strategy. Counterfactual analysis allows us to evaluate the profitability of alternative zone pricing strategies for multiple realistic configurations of local markets. By comparing foregone profits across these market configurations we obtain a lower bound estimate of arbitrage costs that we can relate to average distance across stores and other socioeconomic characteristics of markets.
Mortgage Pricing and Monetary Policy
- D1 - Household Behavior and Family Economics
- L0 - General