Title: «Essays in Empirical Industrial Organization»
- Steven Berry, Professor, Yale University
- Rachel Griffith, Professor, University of Manchester
- Natalia Fabra, Professor, University Carlos III
- Pierre Dubois, Professor, UT1 Capitole - TSE
- Mathias Reynaert, Assistant Professor, UT1 Capitole - TSE
- Christian Bontemps, Professor, UT1 Capitole - TSE
This thesis is composed of three chapters. The first chapter studies the economic effects of subsidies when firms can adjust both prices and a product attribute. The second chapter (joint with Christian Bontemps and Cristina Gualdani) builds and estimates a 2-stage model of airline competition. The third chapter (joint with Charles Pébereau) studies adoption of real-time pricing electricity tariffs.
In the first chapter I study the economic effects of electric car subsidies. Electric cars are subsidized around the world because they are seen as a key driver for decarbonizing the transport sector. In response to these subsidies, producers of electric cars can adjust the price of the car, but also the driving range. My analysis finds that subsidy design has an important impact on price and range choices. In the paper, I find that firms react to subsidy directly based on range by selling more expensive electric cars with a higher range. To the contrary, a flat subsidy leads firms to sell cheaper electric cars with a lower range. These findings have important implications for policymakers who have two objectives: Whereas electric car sales are maximized at the flat scheme, minimizing CO2 emissions entails a trade-off between maximizing electric car sales and generating substitution from more polluting cars that is solved at a scheme with a flat and a range-based part. However, whereas a policymaker cannot maximize electric car sales and minimize CO2 emissions with the same scheme, she is able to maximize electric car sales and the consumer surplus of lower-income consumers with the same scheme.
In the second chapter, joint with Christian Bontemps and Cristina Gualdani, we build and estimate a 2-stage model of airline competition. In the model, airlines choose the network of segments to serve in the first stage before competing in prices in the second stage. The two-stage framework allows us to account for selection of airlines into interdependent routes. Moreover, it permits us to make counterfactual exercises that robustly predict changes not only in prices and markups but also in how airlines adjust their route networks. We show that large hub-and-spoke operations lower marginal costs but increase fixed costs. We evaluate a merger between American Airlines and US Airways and compare it to the bankruptcy and disappearance of American Airlines. We also evaluate remedies imposed on the merging parties and find evidence that they limited harm to consumers.
In the third chapter, Charles Pébereau and I study the introduction of real-time electricity pricing in New Zealand and shed light on why adoption was low. Under this tariff, consumers are exposed to half-hourly varying spot prices. We find that prospective and recent adopters are highly sensitive to contemporaneous spot prices. Adoption rates significantly decrease with contemporaneous spot prices. During a crisis on the electricity spot market, the share of consumers discarding real-time pricing plans decreased with experience. These results suggest that, over time, consumers focus less on immediate outcomes. Our results can inform the debate regarding ways to foster the adoption of real-time pricing, such as opt-in and opt-out policies, and information provision.