Panel Data Reduces Bias in Entry Models

Entry Models such as Bresnahan and Reiss(91)[4] can under estimate the effect of competition. If the profitability of markets is mismeasured, this introduces an positive correlation between unoberserved profitability and the number of firms in a market. Using data on entry and exit patterns in the Ready-Mix Concrete Industry from 1976-1999, I show that using fixed effects in a Bresnahan-Reiss entry model reduces the coefficient on demand by 50% and increases the coefficient on competition by 100% compared to the no fixed effect benchmark

Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry

In this paper we study mergers in two-sided industries. While mergers have been studied extensively in traditional industries, and there is a large and rapidly evolving literature on two-sided markets, there has been little work empirically examining mergers in these markets. We present a model that shows that mergers in two-sided markets may not necessarily lead to higher prices for either side of the market. We test our conclusions by examining a spate of mergers in the Canadian newspaper industry in the late 1990s. Specifically, we analyze prices for both circulation and advertising to try to understand the impact that these mergers had on consumer welfare. We find that greater concentration did not lead to higher prices for either newspaper subscribers or advertisers.Mergers; Two-Sided Markets; Newspapers

Did the Canadian Newspaper Acquisitions Raise Prices for Consumers?

In the late 1990s, the Canadian newspaper industry underwent rapid consolidation with a few conglomerates controlling the vast majority of daily papers. Over a 4 year period, about three-fourths of Canada’s daily newspapers changed ownership. While the issue re- ceived considerable attention and criticism at the time, the concerns were mostly about diversity of opinion. We have not found any study examining the straightforward economic implications of such a large scale realignment in this important industry. We examine the effect of this consolidation on observable variables relating to consumer welfare. Specifically, we analyze prices for both circulation and advertising, as well as study the extent to which concentration increased using county level circulation data. Our results do not support the notion that greater concentration led to the abuse of market power in the form of higher prices. In fact, our results suggest that newspapers with changed ownership and those in the dominant chains had either lower price increases or greater price declines after the merger, compared with the other papers

Demand Fluctuations and Plant Turnover in the Ready-Mix Concrete Industry

Fluctuations in demand cause some plants to exit a market and other to enter.Would eliminating these fluctuations reduce plant turnover? A structural model of entry and exit in concentrated markets is estimated for the ready-mix concrete industry, using plant level data from the U.S. Census. The Nested Pseudo-Likelihood algorithm is used to find parameters which rationalize behavior of firms involved in repeated competition. Due to high sunk costs, turnover rates would only be reduced by 3% by eliminating demand fluctuations at the county level, saving around 20 million dollars a year in scrapped capital. However, demand fluctuations blunt firms’ incentive to invest, reducing the number of large plants by more than 50%

Gender and Racial Biases: Evidence from Child Adoption

This paper uses a new data set on domestic child adoption to document the preferences of potential adoptive parents over born and unborn babies relinquished for adoption by their birth mothers. We show that adoptive parents exhibit significant biases in favor of girls and against African-American babies. A non-African-American baby relinquished for adoption attracts the interest of potential adoptive parents with probability 11.5% if it is a girl and 7.9% if it is a boy. As for race, a non-African-American baby has a probability of attracting the interest of an adopting parent at least seven times as high as the corresponding probability for an African-American baby. In addition, we show that a child’s desirability in the adoption process depends significantly on time to birth (increasing over the pregnancy, but decreasing after birth) and on adoption costs. We also document the attitudes toward babies’ characteristics across different categories of adoptive parents – heterosexual and same-sex couples, as well as single women and foreign couples. Finally, we consider several recently discussed policies excluding same-sex and foreign couples from the adoption process. In our data, such policies would reduce the number of adopted babies by 6% and 33%, respectively.child adoption, gender bias, racial bias, search, matching

Child-Adoption Matching: Preferences for Gender and Race

This paper uses a new data set on child-adoption matching to estimate the preferences of potential adoptive parents over U.S.-born and unborn children relinquished for adoption. We identify significant preferences favoring girls and unborn children close to birth, and against African-American children put up for adoption. These attitudes vary in magnitudes across different adoptive parents – heterosexual, same-sex couples, and single women. We also consider the effects of excluding single women and same-sex couples from the adoption process. In our data, such policies would substantially reduce the overall number of adopted children and have a disproportionate effect on African-American ones.