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Primary
fields: Industrial
Organization and Applied Microeconomics
Dissertation: Consumer
Search, Price Dispersion and Asymmetric Pricing 
Working papers:
Rockets and Feathers. Understanding Asymmetric Pricing RAND Journal of Economics, Vol. 40, No. 4,
2009.
Abstract: Prices rise like
rockets but fall like feathers. This stylized fact of most markets was
confirmed by many empirical studies in the past. However, the advance on
theoretical work trying to explain it has been rather low. I present a simple
model of competitive firms and rational partially-informed consumers where
the asymmetric response to costs by firms emerges naturally. In contrast to
public opinion and past work, collusion is not needed for such a result.
read an informal reference here
Consumer Search and Dynamic Price
Dispersion: An Application to Gasoline Markets (joint with Ambarish Chandra)
Supplementary notes
Abstract: This paper
studies the importance of imperfect information in explaining market price
dispersion. We describe a theoretical model of endogenous non-sequential
consumer search and then test its predictions using a new panel dataset on
the U.S. retail gasoline industry.
We establish the importance of consumer search in this market using a simple
and unique test of temporal price dispersion. We find that the number of
price-rank changes among pairs of gas stations located at the same street
intersection, where consumer search is absent, is significantly lower than
the price-rank changes among stations located just out of sight of each
other. Our empirical results regarding market price dispersion and firm's
markup behavior are consistent with the predictions of the theoretical model
of search. In particular, price dispersion and markups are positively related
to the number of firms in the market and to consumers' search costs. Additionally,
higher production costs lead to lower markups and price dispersion which in
turn should reduce consumers' incentive to search. Therefore, increased
search during periods of peak pricing is sub-optimal.
A Theory of Automatic Markdowns (coming
soon!)
Abstract: This paper looks
at the use of time-decreasing price schedules (automatic markdowns) as an
alternative to fixed posted prices in environments where a seller is
uncertain about consumers' valuations and their arrivals. We characterize the
symmetric equilibrium under automatic markdowns as a function of consumers'
transaction cost. In addition, we show the conditions under which a retailer
prefers this method over the traditional fixed posted price.
Work in Progress:
Location and Competition. The Retail Gasoline Market
Retail prices in the gasoline market differ significantly across locations
within a city or geographical region and that has been the cause of heated
public debates on the degree of competition in the market. This price
dispersion is a consequence of gasoline not being a homogeneous good. Rather
it is a differentiated product, giving firms some market power. In this paper
I use a unique dataset that covers the population of gasoline stations in the
market to measure the effect of spatial differentiation on retail prices and
market power. This allows for counterfactual experiments designed to measure
the welfare effects of horizontal mergers, divestitures requirements and
zoning restrictions imposed by city governments.
The model to be estimated is a nested discrete choice model in which
consumers first choose the type of gasoline (regular, midgrade, premium or
diesel) to purchase and then the station to buy from. On the supply side,
stations simultaneously choose prices according to their contracts with the
refineries. This pricing game is the last of a two-stage game where location
and product characteristics are chosen first.
The supply equilibrium conditions together with the aggregate demands faced
by the stations allow the estimation of demand and cost parameters by GMM. No
quantities or market shares are used in the estimation (see Thomadsen, 2002)
avoiding the problem of measurement error that is always present in gasoline
datasets (Manuszak 2001, Hastings 2001).
Races, Optimal Prizes and Soccer
In
this paper, a model of soccer games is used to understand optimal prize
schemes for dynamic competitions with a known ending period. In soccer games,
teams act strategically at every moment of the game by deciding effort levels
based on the teams' characteristics. We study the effects of the reward
system on those decisions. In particular, what are the consequences of
changing the system from 2 points per win (2-1-0) to a system of 3 points per
win (3-1-0)? Are there better schemes that make teams exert more effort?
This framework of dynamic competition is not exclusive to soccer and can be
use to analyze various –and probably more relevant- situations. Primary and
general presidential elections, innovation races and government contests are
some examples. Formal models of this type of races have been also studied in
the past (AOKI 1991). The feature of general models is that optimal reward
systems are sensitive to the assumptions on transition probabilities as well
as agents’ objective functions. As a result, few general characterizations
can be made. In that sense, soccer games present an excellent opportunity to
push the analysis a step further by using available data to estimate the
parameters of a fairly flexible structural model. Unlike reduced form
estimations (Palomino et. al. 2002), the estimations obtained in this paper
allow for the evaluation of different reward schemes. [with Juan Pantano]
Vertical Integration or Separation? Contract Choices by
Gasoline Refineries
Past
Work:
“The Use
of Derivatives by Non-Financial Argentinean Firms” with Gustavo Jaconiuk and
Eduardo Levy Yeyati. CIF Working Paper # 7 (September 2000). In Spanish.
“Local
Government's Debt. The case of the Municipalities in Buenos Aires” with
Agustin Lodola, 30th Public Finance Annual Meetings, Cordoba Argentina 1997.
In Spanish.
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