I study coverage requirements, a common regulation in the mobile telecommunications industry that intends to accelerate the roll-out of new mobile telecommunications technologies to disadvantaged areas. I argue that the regulation may engender entry deterrence effects that limit its efficacy and lead to technology introduction patterns that are not cost-efficient. To quantify the impact of coverage requirements on market structure and the speed and cost of technology roll-out, I develop and estimate a dynamic game of entry and technology upgrade under regulation. I estimate the model using panel data on mobile technology availability at the municipality level in Brazil. In counterfactual simulations, I find that coverage requirements accelerate the introduction of 3G technology by just over 1 year, on average, and reduce firms’ profits by 24% relative to a scenario with no regulation. I find the entry deterrence effects to be small. Moreover, an alternative subsidization policy leads to a similar acceleration in the roll-out of 3G and substantially higher aggregate profits, likely increasing aggregate welfare relative to coverage requirements.
Winner of the Hiram C. Haney Fellowship Award in Economics
Product portfolios have a direct effect on prices via optimal pricing decisions and also an indirect effect because they influence retailers’ bargaining positions, and thus the wholesale prices retailers are able to procure. I study the effects of characteristics of retailers’ product portfolios, in particular their offerings of store-brand products, on the retail prices of national brands. I propose a Nash-in-Nash model of wholesale and retail price determination, which I estimate using IRI scanner data. I use the estimated model to simulate a counterfactual in which I eliminate store-brand products and to quantify the welfare effect of double marginalization. I find that the presence of store-brand products decreases the prices of national brands by about 1%, and that the elimination of double marginalization leads to substantial consumer welfare gains.
Recursivity and the Estimation of Dynamic Games with Continuous Controls (with Giuseppe Forte) [Updated draft coming soon!]
We revisit the estimation of dynamic games with continuous control variables, such as investments in R&D, quality, and capacity. We show how to use the recursive characterization of Markov Perfect Equilibria to develop estimators that make full use of the structure of the model. Our estimator resembles an indirect inference estimator, albeit in a two-step procedure that is common in the estimation of dynamic games. We use Monte Carlo experiments based on an empirically-relevant model of investment in R&D to compare the performance of our estimator with alternatives. We find that our estimator outperforms the commonly-used inequality estimator of Bajari, Benkard, and Levin (2007) and a naive implementation of an estimator based on recursive equilibrium conditions.
Work in Progress
Scheduling Competition and Efficiency in Passenger Transportation Markets: Evidence from Long Distance Buses in Brazil.
Many passenger transportation markets are characterized by low load factors, which suggests large inefficiencies. I quantify these inefficiencies in an environment in which firms compete on their schedules as well as prices. To do so, I use new and detailed data on firms' schedules and sales, collected in partnership with the Brazilian transportation regulator.