“An Empirical Model of the Effects of “Bill Shock” Regulation in Mobile Telecommunication Markets” with Jiawei Chen and Lai Jiang. International Journal of Industrial Organization, 83 (2022)
We develop an empirical model of consumer usage and price uncertainty under a three- part tariff plan to study the effects of an enacted “bill shock”agreement in mobile telecommunication markets, which requires mobile network operators to inform consumers when they use up the monthly allowance of their mobile phone plan. Using a rich billing dataset, we estimate an industry model of calling, subscription, and pricing. Our counterfactual simulations, which incorporate operators’ price responses to compute the new equilibrium, show that the regulation would lead to lower fixed fees, lower allowances, and lower over- age prices chosen by the operators. The regulation and the pricing changes in response to it would benefit both the consumers and the operators, and overall the total surplus would increase by $307 million per month. An increase in mobile penetration explains the joint increase in firm profits and consumer surplus.
Job Market Paper
Auctions for sale of agricultural produce have been gaining popularity in recent years. This paper uses a game-theoretic model of behaviour within the independent private-values paradigm (IPVP) to put structure upon a unique dataset collected from one of the seven brokerage firms that conducts auctions for sale of tea in Bangladesh. Incorporating insights from the theory of auctions, this paper estimates the distribution of valuation for the bidders in the Chattogram tea auction, both parametrically and non-parametrically. This flexible, realistic empirical framework enables the study of the equilibrium relationship between bidding behaviour and sale prices in the tea auctions. The results from counterfactual exercises suggest that the existing mechanism of oral, ascending price auction, actually would garner higher revenue for the auctioneer compared to a Dutch auction. On the other hand, implementation of a Generalized Vickrey Auction (GVA) in case of multi-unit sale would generate substantially higher revenue than single-unit English auctions. This paper also estimates the optimal reserve price for the auctioneer as well as the average surplus for the bidders.
“Size Matters – How Consumers’ Energy Drink Consumption Is Affected by Package Size Changes”
with Pradeep Chintagunta, Lai Jiang, and Ting Zhu
This paper examines the impact of new product introduction on consumers’ demand for energy drinks.In particular, we are interested in how consumers responded to Red Bull’s new product with larger package sizes and whether such product innovation strategy helped Red Bull gain higher market share and increased the consumers’ total energy drink consumption. We build a demand model of consumers’ choices on energy drinks. We find that quantity-discounts (due to larger sizes) and consumers’ preferences for larger sizes, helped Red Bull consumption to increase. According to our estimation results, it increased as much as 29.76% and 47.06% with introduction of 12 oz and 16 oz cans respectively. We find that the total consumption of energy drinks by the regular users decreased for the introduction of 12 oz and increased for the introduction of 16 oz. While introduction of larger package size may be profitable for manufacturers like, Red Bull, it might impose social costs as a large and growing body of scientific evidence demonstrates that energy drinks are harmful to health. As a consequence, policy options such ’soda-tax’ or ’cap-rule’ have been suggested. We compare the relative efficacy of these options in our counterfactual analysis and find that a ’cap-rule’ which limits the size of a can 8.4 oz is more effective than a 1 cent per oz soda tax in reducing consumers’ energy drink consumptions.
“Substitution Patterns and Welfare Implications of Local Taxation: Empirical Analysis of a Soda Tax”
with Jiawei Chen and Colin Reinhardt
We present a structural choice model that incorporates households’ geographic and product substitution for studying the effects of localized taxation policies. Using detailed retail and household data pertaining to Philadelphia’s soda tax, we estimate the choice model linking households’ demographiccharacteristics and proximity to the city border to their tax avoidance behavior—switching from taxed to untaxed products or from Philadelphia to non-Philadelphia stores. We find that the inclusion of travel time is vital for modeling households’ heterogeneous responses, with an extra minute of travel time to reach the untaxed region equivalent to adding 47¢ to the product price. Taking into account travel costs and the switch to less preferred products, Philadelphia households on average incur a loss in consumer surplus more than twice the amount of tax paid, with low-income households bearing the largest burden.
“Does Soda Tax Affect Store Sales? Evidence From Berkeley”
In recent years, voters and city councils in several cities in the U.S. have implemented taxes on sugar-sweetened beverages (SSBs). Some economists have argued that taxes on these drinks could lower consumption, particularly among high-risk populations and that lower consumption could reduce the prevalence of obesity. On the other hand, many retailers are also opposing the soda tax as they claim that such tax reduces their total sales. Marketers claim that beverages are often “loss leaders”, sold cheaply to attract shoppers. Hence, by raising the price of the product, the tax might reduce the value of beverages as an attractive force. Moreover, stores, which are not under the jurisdiction of the soda-tax, could undercut prices and attract customers from the stores with soda tax. That would reduce demand for all products sold in the stores with soda tax, not just beverages. In this paper, I tried to see how the soda tax has affected sales of the retail stores in Berkeley, which is the first city in the USA to implement such a tax. Using high-resolution scanner data and data-driven approaches to select comparison units for counterfactual analysis, I find that the tax has no significant effect on