Consumer Response to Cigarette Excise Tax Changes

We use a rich dataset of weekly cigarette sales to examine how consumers adapt their behavior before and after excise tax increases--whether by reducing demand, stockpiling, traveling to low-tax jurisdictions, or substituting towards lower-cost brands. Consumer response varies substantially for different types of cigarettes. Stockpiling primarily occurs for discount cigarettes and is most pronounced at stores far from lower-tax jurisdictions. Border-crossing is greatest at stores close to low-tax jurisdictions and occurs primarily for cigarettes sold by the carton. Finally, we find modest short-run substitution towards lower-cost brands following a tax-increase, consistent with consumers smoothing the transition to higher cigarette taxes. These differences in consumer behavior lead to meaningful differences in tax incidence--pass-through is higher for discount cigarettes which have more inelastic demand. Pass-through is lower near low-tax borders, especially for cigarettes sold by the carton for which cross-border evasion is greatest.

Consumer Response to Cigarette Excise Tax Changes

We use a rich dataset of weekly cigarette sales to examine how consumers adapt their behavior before and after excise tax increases - whether by reducing demand, stockpiling, traveling to low-tax jurisdictions, or substituting towards lower-cost brands. Consumer response varies substantially for different types of cigarettes. Stockpiling primarily occurs for discount cigarettes and is most pronounced at stores far from lower-tax jurisdictions. Border-crossing is greatest at stores close to low-tax jurisdictions and occurs primarily for cigarettes sold by the carton. Finally, we find modest short-run substitution towards lower-cost brands following a tax-increase, consistent with consumers smoothing the transition to higher cigarette taxes. These differences in consumer behavior lead to meaningful differences in tax incidence - pass-through is higher for discount cigarettes which have more inelastic demand. Pass-through is lower near low-tax borders, especially for cigarettes sold by the carton for which cross-border evasion is greatest

How Does the Use of Trademarks by Third-Party Sellers Affect Online Search?

Firms that sell via a direct channel and via indirect channels have to decide whether to allow third-party sellers to use trademarked brand names of products in their advertising. This question has been particularly controversial for advertising on search engines. In June 2009, Google started allowing any third-party reseller of a product to use a trademark such as “DoubleTree” in the text of its ad, even if the reseller did not have the trademark holder's permission. We study the effects of this change empirically within the hotel industry. We find some evidence that allowing third-party sellers to use a trademark in their online search advertising weakly reduced the likelihood of a consumer clicking on a trademark holder's paid search ads. However, the decrease in paid clicks was outweighed by a large increase in consumers clicking on the unpaid links to the hotelier's website within the main search results. Our evidence shows that when a third-party seller focuses on a trademarked brand in its ads, the ads become less distinct, and customers are more likely to ignore the advertised offers and buy from the direct channel

Empirical essays in industrial organization

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2005.Includes bibliographical references.In this dissertation, I present three empirical essays that encompass topics in industrial organization. The first essay examines the degree of competition and spatial differentiation in the retail industry by exploiting a unique dataset that describes a consumer's choice of store, product of purchase, item price, and demographics. I estimate a consumer's choice of retailer in the sales market for DVDs among online, mass merchant, electronics, video specialty, and music stores, and I allow for unobserved heterogeneity in preferences for store types and disutility of travel. A consumer's traveling cost varies by income, and substitution occurs proportionately more among stores of the same type. The second essay investigates an intriguing puzzle in the movie industry: "why do studios cluster their big theatrical hits during the July 4th weekend?" A series of recent papers by Einav (2002) indicate that although the underlying demand for theatrical movies remains high around Labor Day, studios tend to release their high quality movies at the beginning of the summer. I employ data from the home video industry to provide more evidence on whether booms in theatrical revenues are supply- or demand-driven and to investigate why firms might cluster their releases as they do.(cont.) The third essay presents examples based on actual and synthetic datasets to illustrate how simulation methods can often mask identification problems in the estimation of mixed logit models. Typically, simulation methods approximate an integral (that does not have a closed form) by taking draws from the underlying distribution of the random variable of integration. The examples reveal how a "low" number of draws can generate estimates that appear identified, but in fact, are either not theoretically identified by the model or not empirically identified by the data. The number of draws required to reveal the identification problem will depend on the data, model, and type of draws used. These examples emphasize the importance of checking the stability of the estimates with respect to the number of draws.by Lesley C. Chiou.Ph.D

How Does Content Aggregation Affect Users’ Search for Information?

The digital revolution has dramatically reduced search costs for information. Con- sumers can now access information that is aggregated from many sources. We ask whether aggregators encourage users to \skim" or investigate content in depth. We exploit a contract dispute that led a major aggregator to remove content from a content provider. We nd that after the removal, users were less likely to investigate additional content in depth. Further analysis suggests that the presence of information beneted either very national or local content the most. Our study is the rst to measure how new communications technology aects information gathered by consumers

How Does Content Aggregation Affect Users’ Search for Information?

The digital revolution has dramatically reduced search costs for information. Con- sumers can now access information that is aggregated from many sources. We ask whether aggregators encourage users to \skim" or investigate content in depth. We exploit a contract dispute that led a major aggregator to remove content from a content provider. We nd that after the removal, users were less likely to investigate additional content in depth. Further analysis suggests that the presence of information beneted either very national or local content the most. Our study is the rst to measure how new communications technology aects information gathered by consumers