A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft

This paper develops a multi-agent dynamic model of the commercial aircraft industry and then uses that model to analyze industry pricing, industry performance, and optimal industry policy. In the model, firms are differentiated in their products and cost structure, and entry, exit, prices, and quantity sold are endogenously determined in dynamic equilibrium. Re ecting the focus of the paper, demand and supply are modeled structurally, while investment is modeled in reduced form. The model utilizes a cost model of commercial aircraft production developed and estimated in a previous paper (Benkard (2000)), and a discrete choice model of commercial aircraft demand to determine static profits. I find that many unusual aspects of the aircraft data, such as high concentration and pricing below the level of static marginal cost, are explained by this model. The model also replicates the stochastic evolution of the industry well. Many of these properties could not be explained with a static model. These results provide support for the structural dynamic modeling approach in general. I also find that the unconstrained Markov perfect equilibrium is quite efficient from a social perspective, providing only 9% less welfare on average than a social planner would obtain, but that the Markov perfect equilibrium shifts a substantial amount of welfare from consumers to producers. Finally, I provide simulation evidence that an anti-trust policy in the form of a concentration restriction would be welfare reducing with high probability.

Demand Estimation With Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach

We study the identification and estimation of preferences in hedonic discrete choice models of demand for differentiated products. In the hedonic discrete choice model, products are represented as a finite dimensional bundle of characteristics, and consumers maximize utility subject to a budget constraint. Our hedonic model also incorporates product characteristics that are observed by consumers but not by the economist. We demonstrate that, unlike the case where all product characteristics are observed, it is not in general possible to uniquely recover consumer preferences from data on a consumer's choices. However, we provide several sets of assumptions under which preferences can be recovered uniquely, that we think may be satisfied in many applications. Our identification and estimation strategy is a two stage approach in the spirit of Rosen (1974). In the first stage, we show under some weak conditions that price data can be used to nonparametrically recover the unobserved product characteristics and the hedonic pricing function. In the second stage, we show under some weak conditions that if the product space is continuous and the functional form of utility is known, then there exists an inversion between a consumer's choices and her preference parameters. If the product space is discrete, we propose a Gibbs sampling algorithm to simulate the population distribution of consumers' taste coefficients.

On the Nonparametric Identification of Nonlinear Simultaneous Equations Models: comment on B. Brown (1983) and Roehrig (1988)

This note revisits the identification theorems of B. Brown (1983) and Roehrig (1988). We describe an error in the proofs of the main identification theorems in these papers, and provide an important counterexample to the theorems on the identification of the reduced form. Specifically, contrary to the theorems, the reduced form of a nonseparable simultaneous equations model is not identified even under the assumptions of those papers. We conclude the note with a conjecture that it may be possible to use classical exclusion restrictions to recover some of the key implications of the theorems.Simultaneous equations, Non-separable errors

Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach

We study the identification and estimation of Gorman-Lancaster style hedonic models of demand for differentiated products for the case when one product characteristic is not observed. Our identification and estimation strategy is a two-step approach in the spirit of Rosen (1974). Relative to Rosen's approach, we generalize the first stage estimation to allow for a single dimensional unobserved product characteristic, and also allow the hedonic pricing function to have a general, non-additive structure. In the second stage, if the product space is continuous and the functional form of utility is known then there exists an inversion between the consumer's choices and her preference parameters. This inversion can be used to recover the distribution of random coefficients nonparametrically. For the more common case when the set of products is finite, we use the revealed preference conditions from the hedonic model to develop a Gibbs sampling estimator for the distribution of random coefficients. We apply our methods to estimating personal computer demand.

Regulation of T cell lymphokine production by killer cell inhibitory receptor recognition of self HLA class I alleles.

The killer cell inhibitory receptors (KIRs) are surface glycoproteins expressed by natural killer (NK) and T cells that specifically recognize defined groups of polymorphic human histocompatibility leukocyte antigen (HLA) class I molecules. Interactions between KIRs on NK or T cells and major histocompatibility complex (MHC) class I molecules on potential target cells inhibit cell-mediated cytotoxicity, presumably by delivering a negative signal preventing lymphocyte activation. In this study we examined whether KIRs also regulate cytokine production induced in response to T cell receptor-dependent T cell activation. CD4+ and CD8+ T cell clones were stimulated by bacterial superantigens in the presence or absence of monoclonal antibodies (mAbs) against the KIR NKB1 or MHC class I molecules, and production of tumor necrosis factor alpha and interferon gamma was evaluated. When bacterial superantigen was presented by an autologous antigen-presenting cell (APC) to a KIR+ T cell clone, cytokine production was always enhanced in the presence of anti-MHC class I mAb. Similarly, anti-KIR mAb also augmented cytokine production, provided that the APC expressed a HLA class I allele recognized by the KIR. These results suggest that recognition of autologous MHC class I molecules by KIR+ T cells provides a regulatory mechanism acting to modulate the potency of their responses to antigenic challenge

House Prices and Consumer Welfare

We develop a new approach to measuring changes in consumer welfare due to changes in the price of owner-occupied housing. In our approach, an agent's welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current home prices. We demonstrate that, up to a first-order approximation, there is no aggregate change in welfare due to price increases in the existing housing stock. This follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers. Welfare losses can occur, however, from price increases in new construction and renovations. We show that this result holds (approximately) even in a model that accounts for changes in consumption and investment plans prompted by current price changes. We estimate the welfare cost of house price appreciation to be an average of $127 per household per year over the 1984-1998 period.

CARMIL family proteins as multidomain regulators of actin-based motility

CARMILs are large multidomain proteins that regulate the actin-binding activity of capping protein (CP), a major capper of actin filament barbed ends in cells. CARMILs bind directly to CP and induce a conformational change that allosterically decreases but does not abolish its actin-capping activity. The CP-binding domain of CARMIL consists of the CP-interaction (CPI) and CARMIL-specific interaction (CSI) motifs, which are arranged in tandem. Many cellular functions of CARMILs require the interaction with CP; however, a more surprising result is that the cellular function of CP in cells appears to require binding to a CARMIL or another protein with a CPI motif, suggesting that CPI-motif proteins target CP and modulate its actin-capping activity. Vertebrates have three highly conserved genes and expressed isoforms of CARMIL with distinct and overlapping localizations and functions in cells. Various domains of these CARMIL isoforms interact with plasma membranes, vimentin intermediate filaments, SH3-containing class I myosins, the dual-GEF Trio, and other adaptors and signaling molecules. These biochemical properties suggest that CARMILs play a variety of membrane-associated functions related to actin assembly and signaling. CARMIL mutations and variants have been implicated in several human diseases. We focus on roles for CARMILs in signaling in addition to their function as regulators of CP and actin. </jats:p

Estimating Dynamic Models of Imperfect Competition

We describe a two-step algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov Perfect Equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated. In the second step, the remaining structural parameters are estimated using the optimality conditions for equilibrium. The second step estimator is a simple simulated minimum distance estimator. The algorithm applies to a broad class of models, including I.O. models with both discrete and continuous controls such as the Ericson and Pakes (1995) model. We test the algorithm on a class of dynamic discrete choice models with normally distributed errors, and a class of dynamic oligopoly models similar to that of Pakes and McGuire (1994).

Markov Perfect Industry Dynamics with Many Firms

We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We develop a simple algorithm for computing an ``oblivious equilibrium,'' in which each firm is assumed to make decisions based only on its own state and knowledge of the long run average industry state, but where firms ignore current information about competitors' states. We prove that, as the market becomes large, if the equilibrium distribution of firm states obeys a certain ``light-tail'' condition, then oblivious equilibria closely approximate Markov perfect equilibria. We develop bounds that can be computed to assess the accuracy of the approximation for any given applied problem. Through computational experiments, we find that the method often generates useful approximations for industries with hundreds of firms and in some cases even tens of firms.

Simulator evaluation of optimal thrust management/fuel conservation strategies for airbus aircraft on short haul routes

The feasibility of incorporating optimal concepts into a practical system was determined. Various earlier theoretical analyses were confirmed, and insight was gained into the sensitivity of fuel conservation strategies to nonlinear and second order aerodynamic and engine characteristics. In addition to the investigation of optimal trajectories the study ascertained combined fuel savings by utilizing various procedure-oriented improvements such as delayed flap/decelerating approaches and great circle navigation