This dissertation consists of three essays on applied microeconomics. The first and second essays focus on the impacts of market power and the estimation of markups. The third one focuses on behavioral economics and the impacts of variety changes.
In the first chapter, coauthored with Jeffrey M. Perloff, we analyze double markups. Because prices exceed marginal costs in many upstream and downstream industries, downstream prices often reflect a double markup. We are the first to estimate the size of double markups across many industries taking account of direct and indirect upstream markups. The double markups in many U.S. manufacturing industries are large both because of large upstream and downstream markups and increasing returns to scale.
Recent papers show that market power has increased in the US economy in the last decades. There is a large variability on the magnitude of the estimated markups. Different methods, data, and periods have been used. Focusing on methods that use industry-level data, the second chapter analyzes how sensitive estimated markups are to the estimation strategy, data, and the period selected.
As the number of varieties increases, do sales increase or fall? In the third chapter, coauthored with David McLaughlin, Jeffrey M. Perloff, Tiffany Shih, and Sofia B. Villas-Boas, we test the conflicting predictions of the following two theories. The matching theory says that the more varieties, the greater the chance that a consumer will find a desirable one, so the quantity demanded increases. The overload theory holds that excess choice overwhelms a consumer, so demand drops. A national chain ́s quasi-experimental rollout of new varieties of ice cream and removal of some old varieties allows us to simultaneously identify both effects of changes in varieties. We find support for both theories, and that the matching and overload effects tend to offset each other, except for variety-preferring households.