Topics in applied microeconomics : time allocation and natural resource use on Alaska's North Slope and market power in the U.S. motor carrier industry

This paper presents two applications of empirical microeconomics based on choice theoretic optimization principles. The first topic explores the determinants of subsistence time allocation in a utility theoretic model of household production. The second topic examines firm pricing behavior in a deregulated, but concentrated industry setting. The first part of this applied microeconomic analysis estimates the subsistence time versus wage labor time allocations of Alaska's North Slope inhabitants using ordered probit based on a household production model. The explanatory variables measure labor supply, demographic, and cultural influences. The major findings are as follows. First parameter estimates differ statistically and substantially between Inupiat versus non-Inupiat residents, implying that optimal natural resource management decisions may vary with the ethnicity of the resource owners. Second, marital status, age, gender, and participation in generalized gift giving and receiving are important determinants of subsistence time allocations. Third, time spent in wage labor appears to be exogenous to the subsistence time allocation decision, indicating that the time allocation process is recursive. Fourth, we find an inverse relationship between wage labor time and subsistence participation. This means that reductions in wage employment opportunities lead to increased subsistence activity. For the North Slope, this implies that Prudhoe oil depletion will result in an increase in the use of subsistence natural resources. The second part of this study turns from the individual behavior to firm behavior. During the 1980's, researchers have noted a trend towards increased concentration in the general freight, less-than-truckload (LTL) portion of the U.S. motor carrier industry. The purpose of this study is to employ new empirical industrial organization (NEIO) techniques to determine whether the more concentrated post-1980, LTL motor carrier industry is exerting anti-competitive monopoly pricing behavior. The NEIO approach is used to formulate the relationship between market price and marginal cost in what is referred to as the representative firm's 'supply relation.' The firm's supply relation is estimated jointly with the cost function and the factor share equations under the assumption that cross equation disturbance terms are correlated (SUR). An instrumental variables procedure is used to test and control for correlation between output (on the right hand side) and the disturbance terms in the cost and supply equations. The results indicate that the trend toward increased industry concentration does not imply anti-competitive performance in the sense of rising price-cost margins

Change in the Bristol Bay Economy 1970 - 1980

Under Contract with Impact Assessment, Inc. For U.S. Department of the Interior Minerals Management Service

Testing for market power in the U.S. motor carrier industry

Motor carrier, market power, regulation reform,

Biases in Static Oligopoly Models?: Evidence from the California Electricity Market

Estimating market power is often complicated by the lack of reliable measures of marginal cost. Instead, policy-makers often rely on other summary statistics of the market, thought to be correlated with price cost margins--such as concentration ratios or the HHI. In many industries, these summary statistics may be only weakly correlated with deviations from perfectly competitive pricing. Beginning with Gollop and Roberts (1979), a number of empirical studies have allowed the data to identify industry competition and marginal cost levels by estimating the firms' first order condition within a conjectural variations framework. Despite the prevalence of such "New Empirical Industrial Organization" (NEIO) studies, Corts (1999) illustrates the estimated mark-up levels may be biased, since the estimated conjectural variations model forces the supply relationship to be a ray through the marginal cost intercept, whereas this need not be true in dynamic games. In this paper, we use direct measures of marginal cost for the California electricity market to measure the extent to which estimated mark-ups and marginal costs are biased. Our results suggest that the NEIO technique poorly estimates the level of mark-ups and the sensitivity of marginal cost to cost shifters