Department of Economics
University of Wisconsin-Madison
1180 Observatory Dr
Madison, WI 53706
NBER Program Affiliations:
NBER Affiliation: Research Associate
Institutional Affiliation: University of Wisconsin-Madison
NBER Working Papers and Publications
|October 2019||Measuring Substitution Patterns in Differentiated Products Industries|
with Amit Gandhi: w26375
We study the estimation of substitution patterns within the discrete choice framework developed by Berry (1994) and Berry, Levinsohn, and Pakes (1995). Our objective, is to illustrate the consequences of using weak instruments in this non-linear GMM context, and propose a new class of instruments that can be used to estimate a large family of models with aggregate data. We argue that relevant instruments should reflect the (exogenous) degree of differentiation of each product in a market (Differentiation IVs), and provide a series of examples to illustrate the performance of simple instrument functions.
|April 2017||Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network|
with Peter Newberry, Katja Seim: w23361
We examine the economies of density associated with the expansion of Amazon’s distribution network from 2006 to 2018. We demonstrate that, in placing a fulfillment center in a new state, Amazon faces a trade-off between the revenue implications of exposing local customers to sales tax on their purchases and the cost savings from reducing the shipping distance to those customers. Using detailed data on online transactions, we estimate a model of demand for retail goods and show that consumers’ online shopping is sensitive to sales taxes. We then use the demand estimates and the spatial distribution of consumers relative to Amazon’s fulfillment centers to predict revenues and shipping distances under the observed fulfillment center roll-out and under counterfactual roll-outs over this time p...
|February 2014||Search Frictions and Market Power in Negotiated Price Markets|
with Jason Allen, Robert Clark: w19883
This paper develops and estimates a search and bargaining model designed to measure the welfare loss associated with frictions in oligopoly markets with negotiated prices. We use the model to quantify the consumer surplus loss induced by the presence of search frictions in the Canadian mortgage market, and evaluate the relative importance of market power, inefficient allocation, and direct search costs in explaining the loss. Our results suggest that search frictions reduce consumer surplus by almost $20 per month per consumer, and that 17% of this reduction can be associated with discrimination, 30% with inefficient matching, and the remainder with the search cost.
Published: Jason Allen & Robert Clark & Jean-François Houde, 2019. "Search Frictions and Market Power in Negotiated-Price Markets," Journal of Political Economy, vol 127(4), pages 1550-1598.
|June 2013||The Effect of Mergers in Search Market: Evidence from the Canadian Mortgage Industry|
with Jason Allen, Robert Clark: w19126
We examine the relationship between concentration and price dispersion using variation induced by a merger in the Canadian mortgage market. Since interest rates are determined through a search and negotiation process, consolidation eliminates a potential negotiation part- ner, weakening consumers bargaining positions. We combine reduced-form techniques to es- timate the mergers distributional impact, with a structural model to measure market power across consumers with different search costs. Our results show that competition benefits only consumers at the bottom and middle of the transaction price distribution. Estimates from a search and negotiation model attribute these differences to the presence of large search frictions.
Published: Jason Allen & Robert Clark & Jean-Fran?ois Houde, 2014. "The Effect of Mergers in Search Markets: Evidence from the Canadian Mortgage Industry," American Economic Review, American Economic Association, vol. 104(10), pages 3365-96, October. citation courtesy of