UC Davis

This dissertation analyzes the role of regulation and competition in a variety of markets.

In the first chapter, I examine how regulation and market structure can lead to market unraveling when firms face rapidly increasing risk due to climate change. I first present a simple model of an adversely selected disaster insurance market to investigate how price regulation and increasing climate costs impact private markets in the presence of an insurer of last resort. I then empirically study the California non-renewal moratoriums, a first-of-its-kind regulation aimed at stymieing the retreat of insurance companies from high wildfire risk areas by forcing insurers to supply insurance to current customers following disasters in 2019 and 2020. Using quasi-random geographic variation in regulatory borders and a difference-in-differences identification strategy, I find that the moratoriums successfully reduced company-initiated non-renewals in the short run. However, the effects only lasted for one year, with insurers resuming non renewals as soon as the moratorium lapsed. Additionally, the moratoriums had no discernible effect on participation in the State's insurer of last resort.

In the second chapter, I estimate the effect of nearby entry and exit on the pricing of incumbent firms using high frequency price data and the precise geographic location of all gas stations in California. Using a difference-in-differences design, I find that entry of a new station is associated with a two-cent decrease in prices at incumbent stores, which equates to a 5\% decrease in estimated retail markups. The effects are immediate, persistent, and show no sign of deterrence or limit pricing behavior. However, nearby exit results in precisely estimated null effects on prices. Both results are robust to various specifications and market size definitions. This paper also contributes to the conversation on California's ``Mystery Gas Surcharge", a divergence between California and nationwide gas prices after the February 2015 Torrance refinery fire that cannot be explained by differences in taxes, regulation, or input and spot prices \citep{Borenstein2023}. I show that the magnitude of entry effects was unchanged, providing evidence that retail competition was largely unaffected.

In the third chapter, I study the link between auto insurance and health insurance market. specifically, I study how the increase in health insurance status from the implementation of the Affordable Care Act (ACA) overlapped with automobile insurance. Using data on automobile insurance claims from the National Association of Insurance Commissioners, I identify a plausibly causal impact of the ACA on the frequency of automobile insurance claims. These increases are restricted to the private market portion of the ACA and are associated with a 4.7\% increase in bodily injury liability claim frequency.