We establish nonparametric identification of auction models with continuous unobserved heterogeneity using either three consecutive order statistics of bids or two with an instrument. We then propose sieve maximum likelihood estimators for the joint distribution of unobserved heterogeneity and private value, as well as their conditional and marginal distributions. Lastly, we apply our methodology to a novel dataset from judicial auctions in China. Our estimates suggest substantial gains from accounting for unobserved heterogeneity when setting reserve prices. We propose a simple scheme that achieves nearly optimal revenue by using the appraisal value as the reserve price.
{"title":"Order Statistics Approaches to Unobserved Heterogeneity in Auctions","authors":"Yao Luo, Peijun Sang, Ruli Xiao","doi":"10.2139/ssrn.3704644","DOIUrl":"https://doi.org/10.2139/ssrn.3704644","url":null,"abstract":"We establish nonparametric identification of auction models with continuous unobserved heterogeneity using either three consecutive order statistics of bids or two with an instrument. We then propose sieve maximum likelihood estimators for the joint distribution of unobserved heterogeneity and private value, as well as their conditional and marginal distributions. Lastly, we apply our methodology to a novel dataset from judicial auctions in China. Our estimates suggest substantial gains from accounting for unobserved heterogeneity when setting reserve prices. We propose a simple scheme that achieves nearly optimal revenue by using the appraisal value as the reserve price.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"127 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117353040","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies how a carbon tax differentially affects the welfare of electricity producers and consumers, also known as incidence. In so doing, I develop a new framework to estimate the incidence of input taxes that accounts for incomplete pass-through to retail prices, imperfect competition, and heterogeneity in marginal costs of producers. Leveraging exogenous variation in the level of the Australian carbon tax, I then apply this framework to the context of the National Electricity Market in Australia. I find that 95 to 97 percent of the welfare cost from changes in the carbon tax falls on electricity consumers. The large burden borne by consumers is driven by full pass-through of increases in wholesale electricity prices to retail electricity prices in combination with negligible decreases in aggregate profits for electricity producers. Simulations show that incorporating heterogeneous firms is particularly important when market demand is elastic.
{"title":"Who Bears the Load? Carbon Taxes and Electricity Markets","authors":"J. Cross","doi":"10.2139/ssrn.3918363","DOIUrl":"https://doi.org/10.2139/ssrn.3918363","url":null,"abstract":"This paper studies how a carbon tax differentially affects the welfare of electricity producers and consumers, also known as incidence. In so doing, I develop a new framework to estimate the incidence of input taxes that accounts for incomplete pass-through to retail prices, imperfect competition, and heterogeneity in marginal costs of producers. Leveraging exogenous variation in the level of the Australian carbon tax, I then apply this framework to the context of the National Electricity Market in Australia. I find that 95 to 97 percent of the welfare cost from changes in the carbon tax falls on electricity consumers. The large burden borne by consumers is driven by full pass-through of increases in wholesale electricity prices to retail electricity prices in combination with negligible decreases in aggregate profits for electricity producers. Simulations show that incorporating heterogeneous firms is particularly important when market demand is elastic.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"192 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122815557","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
P. Aghion, M. Jackson, Antoine Mayerowitz, Abhijit Tagade
We use the universe of USPTO data on patents and inventors from 1976 to 2019 to look at the dynamics of coauthorship on patents and its relationship with competition. First, we find an inverted-U relationship between competition and the growth in coauthorship: the number of new collaborators on each patent is maximized at intermediate levels of competition. Next, we find that there is a surge of new coauthors at the time of invention, and then fewer than normal new coauthors after a breakthrough invention. Third, the sizes of the surge and subsequent decline in coauthorship are largest in industries with intermediate levels of competition. We also present a simple model in which researchers trade off gains from collaboration against threats of business stealing, which provides one explanation for our empirical findings.
{"title":"Innovation Networks and Business-Stealing","authors":"P. Aghion, M. Jackson, Antoine Mayerowitz, Abhijit Tagade","doi":"10.2139/ssrn.3917979","DOIUrl":"https://doi.org/10.2139/ssrn.3917979","url":null,"abstract":"We use the universe of USPTO data on patents and inventors from 1976 to 2019 to look at the dynamics of coauthorship on patents and its relationship with competition. First, we find an inverted-U relationship between competition and the growth in coauthorship: the number of new collaborators on each patent is maximized at intermediate levels of competition. Next, we find that there is a surge of new coauthors at the time of invention, and then fewer than normal new coauthors after a breakthrough invention. Third, the sizes of the surge and subsequent decline in coauthorship are largest in industries with intermediate levels of competition. We also present a simple model in which researchers trade off gains from collaboration against threats of business stealing, which provides one explanation for our empirical findings.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129687203","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A decision maker (DM) determines a set of reactions that receivers can choose before senders and receivers move in a generalized competitive signaling model with two-sided matching. The DM’s optimal design of the unique stronger monotone signaling equilibrium (unique D1 equilibrium) is equivalent to the choice problem of two threshold sender types, one for market entry and the other for pooling on the top. Our analysis sheds light on the impacts of a trade-off between matching efficiency and signaling costs, the relative heterogeneity of receiver types to sender types, and the productivity of the sender’s action on optimal equilibrium designing.
{"title":"Designing a Competitive Monotone Signaling Equilibrium","authors":"Seungjin Han, Alex Sam, Youngki Shin","doi":"10.2139/ssrn.3920592","DOIUrl":"https://doi.org/10.2139/ssrn.3920592","url":null,"abstract":"A decision maker (DM) determines a set of reactions that receivers can choose before senders and receivers move in a generalized competitive signaling model with two-sided matching. The DM’s optimal design of the unique stronger monotone signaling equilibrium (unique D1 equilibrium) is equivalent to the choice problem of two threshold sender types, one for market entry and the other for pooling on the top. Our analysis sheds light on the impacts of a trade-off between matching efficiency and signaling costs, the relative heterogeneity of receiver types to sender types, and the productivity of the sender’s action on optimal equilibrium designing.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"54 1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131444835","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Hendrik Döpper, Alexander Mackay, Nathan H. Miller, Joel Stiebale
We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. We use detailed data on prices and quantities for products in more than 100 distinct product categories to estimate demand systems with flexible consumer preferences. We recover markups under an assumption that firms set prices to maximize profit. Within each product category, we recover separate yearly estimates for consumer preferences and marginal costs. We find that markups increase by about 25 percent on average over the sample period. The change is attributable to decreases in marginal costs that are not passed through to consumers in the form of lower prices. Our estimates indicate that consumers have become less price sensitive over time.
{"title":"Rising Markups and the Role of Consumer Preferences","authors":"Hendrik Döpper, Alexander Mackay, Nathan H. Miller, Joel Stiebale","doi":"10.2139/ssrn.3939126","DOIUrl":"https://doi.org/10.2139/ssrn.3939126","url":null,"abstract":"We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. We use detailed data on prices and quantities for products in more than 100 distinct product categories to estimate demand systems with flexible consumer preferences. We recover markups under an assumption that firms set prices to maximize profit. Within each product category, we recover separate yearly estimates for consumer preferences and marginal costs. We find that markups increase by about 25 percent on average over the sample period. The change is attributable to decreases in marginal costs that are not passed through to consumers in the form of lower prices. Our estimates indicate that consumers have become less price sensitive over time.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122123333","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
How do customer loyalty programs create switching costs? We estimate the demand effects of tier levels within a frequent flier program by exploiting discrete tier thresholds. We have two main results. First, members increase demand to reach a higher tier level just before the end of the calendar year when tier levels are determined, but do not manipulate demand in the months before. Second, using a fuzzy regression discontinuity design with running variables from earlier months, we show that upgraded members further increase their demand to enjoy the tier level benefits. Both effects are increasing in tier level. These findings are consistent with economic theories which point out that loyalty programs aim to create convex switching costs.
{"title":"From Silver to Platinum: The Effect of Frequent Flier Tier Levels on Airline Demand","authors":"Christiaan Behrens, G. D. Jong, J. Ommeren","doi":"10.2139/ssrn.3914811","DOIUrl":"https://doi.org/10.2139/ssrn.3914811","url":null,"abstract":"How do customer loyalty programs create switching costs? We estimate the demand effects of tier levels within a frequent flier program by exploiting discrete tier thresholds. We have two main results. First, members increase demand to reach a higher tier level just before the end of the calendar year when tier levels are determined, but do not manipulate demand in the months before. Second, using a fuzzy regression discontinuity design with running variables from earlier months, we show that upgraded members further increase their demand to enjoy the tier level benefits. Both effects are increasing in tier level. These findings are consistent with economic theories which point out that loyalty programs aim to create convex switching costs.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114578584","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, I develop a structural supply and demand model of the infant formula industry to evaluate the role that endogenous firm product offerings play in determining equilibrium market outcomes and welfare measures. Using the structural model's preference and cost estimates, I evaluate counterfactual scenarios which increase the proportion of infant formula voucher recipients and show i) the policy's negative effect on consumers without vouchers, and, ii) how the magnitude of consumer, producer, and total surplus depend on firms' adjustment margins.
{"title":"Product Responses to Income-Based Subsidies in the U.S. Infant Formula Industry","authors":"Travis Triggs","doi":"10.2139/ssrn.3912953","DOIUrl":"https://doi.org/10.2139/ssrn.3912953","url":null,"abstract":"In this paper, I develop a structural supply and demand model of the infant formula industry to evaluate the role that endogenous firm product offerings play in determining equilibrium market outcomes and welfare measures. Using the structural model's preference and cost estimates, I evaluate counterfactual scenarios which increase the proportion of infant formula voucher recipients and show i) the policy's negative effect on consumers without vouchers, and, ii) how the magnitude of consumer, producer, and total surplus depend on firms' adjustment margins.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"114 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117079230","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines whether sports betting markets are semistrong-form efficient—i.e., whether new information is rapidly and completely incorporated into betting prices. We use the news of ghost matches in the top European football leagues due to the COVID-19 pandemic as the arrival of public information. Because spectators are absent in ghost games, the home field advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers systematically overestimate a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semistrong-form efficient. We exploit a betting strategy that yields a positive net payoff over more than one month.
{"title":"Are Sports Betting Markets Semistrong Efficient? Evidence from the COVID-19 Pandemic","authors":"P. Meier, Raphael Flepp, E. Franck","doi":"10.2139/ssrn.3676515","DOIUrl":"https://doi.org/10.2139/ssrn.3676515","url":null,"abstract":"This paper examines whether sports betting markets are semistrong-form efficient—i.e., whether new information is rapidly and completely incorporated into betting prices. We use the news of ghost matches in the top European football leagues due to the COVID-19 pandemic as the arrival of public information. Because spectators are absent in ghost games, the home field advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers systematically overestimate a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semistrong-form efficient. We exploit a betting strategy that yields a positive net payoff over more than one month.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129632055","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the world of omnichannel retail, some brands open a flagship store at online marketplaces, while others avert it. Focusing on a large e-commerce platform, we empirically study how flagship entry affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform. In the meantime, flagship entry cannibalizes the sales of same-brand sellers, while other brands may gain as the buyer base expands on the platform. Counterfactual simulation suggests that flagship entry improves the gross merchandise value (GMV) of the platform but hurts existing sellers of the entry brand. On average, the effect on consumer welfare is more positive if the flagship entry is from a non-prominent brand than from a prominent brand, because consumers tend to lower their willingness to pay for individual sellers upon a prominent flagship entry. In hypothetical scenarios where flagship entry were accompanied by constraints on other same-brand sellers, the reduced competition would benefit the flagship store but hurt consumers.
{"title":"Flagship Entry in Online Marketplaces","authors":"G. Jin, Zhentong Lu, Xiaolu Zhou, Lu Fang","doi":"10.2139/ssrn.3908123","DOIUrl":"https://doi.org/10.2139/ssrn.3908123","url":null,"abstract":"In the world of omnichannel retail, some brands open a flagship store at online marketplaces, while others avert it. Focusing on a large e-commerce platform, we empirically study how flagship entry affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform. In the meantime, flagship entry cannibalizes the sales of same-brand sellers, while other brands may gain as the buyer base expands on the platform. Counterfactual simulation suggests that flagship entry improves the gross merchandise value (GMV) of the platform but hurts existing sellers of the entry brand. On average, the effect on consumer welfare is more positive if the flagship entry is from a non-prominent brand than from a prominent brand, because consumers tend to lower their willingness to pay for individual sellers upon a prominent flagship entry. In hypothetical scenarios where flagship entry were accompanied by constraints on other same-brand sellers, the reduced competition would benefit the flagship store but hurt consumers.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116428249","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study whether there is a racial bias in ratings of professional football players in Italian newspapers. We find that there is such a bias. Conditional on objective performance indicators black players receive a lower rating than non-black players. This is not a difference across the board but predominantly present at the lower end of the newspaper rating distribution. The best black players are not subject to a racial bias in ratings. We also find that clubs do not have a racial bias in the wages they pay to players. We speculate that for clubs there is sufficient competition to remove racial wage discrimination. Clubs simply want value for money. Newspaper football experts do seem to have a racial bias in their rating of players. We hypothesize that this might be unconscious discrimination related to stereotyping of black players.
{"title":"Racial Bias in Newspaper Ratings of Professional Football Players","authors":"Francesco Principe, J. van Ours","doi":"10.2139/ssrn.3897655","DOIUrl":"https://doi.org/10.2139/ssrn.3897655","url":null,"abstract":"We study whether there is a racial bias in ratings of professional football players in Italian newspapers. We find that there is such a bias. Conditional on objective performance indicators black players receive a lower rating than non-black players. This is not a difference across the board but predominantly present at the lower end of the newspaper rating distribution. The best black players are not subject to a racial bias in ratings. We also find that clubs do not have a racial bias in the wages they pay to players. We speculate that for clubs there is sufficient competition to remove racial wage discrimination. Clubs simply want value for money. Newspaper football experts do seem to have a racial bias in their rating of players. We hypothesize that this might be unconscious discrimination related to stereotyping of black players.","PeriodicalId":430354,"journal":{"name":"IO: Empirical Studies of Firms & Markets eJournal","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126959817","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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