Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative methods of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage. Using unique shopping diary data, we estimate a payment choice model with individual unobserved heterogeneity (demandside factors) while controlling for merchants’ acceptance of cards (supply-side factors). Based on a policy simulation where we impose universal card acceptance among merchants, we find that overall cash usage would decrease by only 7.7 percentage points, implying that cash usage in small-value transactions is driven mainly by consumers’ preferences

Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market

Consumers often purchase more than one differentiated product, assembling a portfolio, which might potentially affect substitution patterns of demand and, as a consequence, oligopolistic firms’ pricing strategies. To study such consumers’ portfolio considerations, this paper develops and estimates a structural model that allows for flexible complementarities/substitutabilities, using Japanese household-level data on automobile purchases. My estimates suggest that complementarities arise when households purchase a combination of one small automobile and one minivan as their portfolio. Simulation results suggest that, due to such portfolio considerations, a policy proposal of repealing the current tax subsidies for small eco-friendly automobiles would not necessarily sharply decrease the demand

Portfolio Considerations in Automobile Purchases: An Application to the Japanese Market

This dissertation empirically studies demand complementarities in automobile purchases using newly collected Japanese household-level panel data, Keio Household Panel Survey. It is motivated by the observation that approximately one third of Japanese households own more than one automobile and they tend to hold particular combinations of products, which cannot be captured by the prevalent single choice model in this literature.The dissertation develops a structural model where consumers can purchase up to two differentiated products, where I allow for flexible complementarities which depend on consumer attributes and product characteristics. In the model, firms set the prices for their products, given other firms’ pricing strategies and consumer demand. I then estimate the model using two types of data: micro-level data on household automobile purchasing decisions and macro-level data on market share. My estimates suggest that strong complementarities arise when households purchase a combination of one small automobile and one regular-sized automobile, or one small automobile and one minivan as their portfolio. The estimates also indicate that households are more likely to purchase two automobiles as their numbers of earners increase or if they are located in rural areas.Ignoring such portfolio effects would lead to biased counterfactual analyses. For example, my results suggest that a policy proposal of repealing the current tax subsidies for eco-friendly small automobiles would decrease the demand for those automobiles by 12%, which is less than the 17% drop predicted by a standard single discrete choice model. Similarly, model simulations indicate that the presence of positive portfolio effects significantly influences firms’ pricing behavior: firms potentially have incentive to use a mixed bundling strategy when the number of products and firms in the market is small

A simple way to identify the degree of collusion under proportional reduction

Proportional reduction is a common cartel practice, in which cartel members reduce their output by the same percentage. We develop a simple method to quantify this reduction relative to a benchmark market equilibrium scenario. Our measure is continuous, has a simple interpretation as the “degree of collusion" and nests the earlier models in the existing literature. More importantly, by exploiting firms ex post heterogeneity and optimality conditions, Corts (1999) critique can be addressed by estimating time-varying degree of industry monopolization from a short panel of firm-level observations. We illustrate the method in Monte-Carlo simulations and in application to the data from the Joint Executive Committee railroad cartel

A simple way to identify the degree of collusion under proportional reduction

Proportional reduction is a common cartel practice, in which cartel members reduce their output by the same percentage. We develop a simple method to quantify this reduction relative to a benchmark market equilibrium scenario. Our measure is continuous, has a simple interpretation as the “degree of collusion" and nests the earlier models in the existing literature. More importantly, by exploiting firms ex post heterogeneity and optimality conditions, Corts (1999) critique can be addressed by estimating time-varying degree of industry monopolization from a short panel of firm-level observations. We illustrate the method in Monte-Carlo simulations and in application to the data from the Joint Executive Committee railroad cartel

How Would Hedge Fund Regulation Affect Investor Behavior? Implications for Systemic Risk

We estimate an investors’ demand model for hedge funds to analyze the potential impact of leverage limits in the industry. Our estimation results highlight the importance of heterogeneous investor preference for the use of leverage, i.e., 20% of investors prefer leverage usage while others do not. We then conduct a policy simulation in which regulators put a cap on allowable leverage, as proposed by the Financial Stability Board in 2012. Simulation results suggest that the 200% leverage limit would lower the total demand (assets under management) for hedge funds by 10%. In particular, the regulation would lead to lower investments in highly leveraged funds and to lower investments in risky strategies, which, in turn, would reduce systemic risk

How Would Hedge Fund Regulation Affect Investor Behavior? Implications for Systemic Risk

We estimate an investors’ demand model for hedge funds to analyze the potential impact of leverage limits in the industry. Our estimation results highlight the importance of heterogeneous investor preference for the use of leverage, i.e., 20% of investors prefer leverage usage while others do not. We then conduct a policy simulation in which regulators put a cap on allowable leverage, as proposed by the Financial Stability Board in 2012. Simulation results suggest that the 200% leverage limit would lower the total demand (assets under management) for hedge funds by 10%. In particular, the regulation would lead to lower investments in highly leveraged funds and to lower investments in risky strategies, which, in turn, would reduce systemic risk