Lowering Consumer Search Costs Can Lead To Higher Prices

We demonstrate that regulations that lower consumer search costs and make them less heterogeneous across consumers can lead to higher prices charged by firms. We estimate the distribution of consumer search costs for 366 isolated retail gasoline markets, and find that reducing the mean and standard deviation by 20% and 48%, respectively, leads to price increases in 32% of markets and an average price increase of 5.2 cents per gallon across all markets. Thus, price transparency regulation that results in higher prices may not stem from collusion, but from an equilibrium with less consumer search

Pass-Through And The Prediction Of Merger Price Effects

We use Monte Carlo experiments to study how pass-through can improve merger price predictions, focusing on the first order approximation (FOA) proposed in Jaffe and Weyl [2013]. FOA addresses the functional form misspecification that can exist in standard merger simulations. We find that the predictions of FOA are tightly distributed around the true price effects if pass-through is precise, but that measurement error in pass-through diminishes accuracy. As a comparison to FOA, we also study a methodology that uses pass-through to select among functional forms for use in simulation. This alternative also increases accuracy relative to standard merger simulation and proves more robust to measurement error

Upward Pricing Pressure As A Predictor Of Merger Price Effects

We use Monte Carlo experiments to evaluate whether “upward pricing pressure” (UPP) accurately predicts the price effects of mergers, motivated by the observation that UPP is a restricted form of the first order approximation derived in Jaffe and Weyl (2013). Results indicate that UPP is quite accurate with standard log-concave demand systems, but understates price effects if demand exhibits greater convexity. Prediction error does not systematically exceed that of misspecified simulation models, nor is it much greater than that of correctly-specified models simulated with imprecise demand elasticities. The results also support that UPP provides accurate screens for anticompetitive mergers

Sub-Perfect Game: Profitable Biases of NBA Referees

This paper empirically investigates three hypotheses regarding biases of National Basketball Association (NBA) referees. Using a sample of 28,388 quarter-level observations from six seasons, we find that referees make calls that favor home teams, teams losing during games, and teams losing in playoff series. All three biases are likely to increase league revenues. In order to distinguish between referee and player behavior we use play-by-play data, which allow us to analyze turnovers referees have relatively high and low discretion over separately.Keywords: Rule Compliance, National Basketball Association (NBA), Persuasion, Forensic Economics, Social Pressure, Home Bia

The Determinants And Consequences Of Search Cost Heterogeneity: Evidence From Local Gasoline Markets

Information frictions play a key role in an array of economic activities and are frequently incorporated into formal models as search costs. However, little is known about the underlying source of consumer search costs and how heterogeneous they are across markets. This study analyzes the sources and magnitude of heterogeneity in consumer search costs in retail gasoline markets. In doing so, the authors also investigate the extent to which retail gasoline stations employ mixed pricing strategies. They identify hundreds of geographically isolated markets and are the first to estimate the distribution of consumer search costs for many geographic markets. They directly recover the distribution of consumer search costs, market by market, using price data for retail gasoline in the United States. They find that the distribution of consumer search costs varies significantly across geographic markets and that distribution of household income is closely associated with search cost distribution

Race And Employment Outcomes: Evidence From NBA Coaches

We study the impact of management diversity on employment outcomes using data on NBA head coaches that includes information on the race of each coach and his supervisor. We find that a supervisor is more likely to hire a coach of his own race. We also find that black coaches are less likely to be rehired to a second job within three years than their white counterparts, and that a head coach\u27s race affects the quality of the opportunities he is offered. These findings are stronger for first‐time coaches than experienced coaches, suggesting that observable information on performance mitigates bias. (JEL J0, J4, J7