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Essays in Industrial Organization
- Perez, Daniel Reyes
- Advisor(s): Asker, John W.
Abstract
This dissertation examines questions in industrial organization regarding the evaluation of antitrust and procurement policies. In the first two chapters, I examine whether antitrust agencies should consider the effects of product variety changes due to a merger. In the first chapter I test whether the merger had any effect on product variety directly. I find evidence of product variety changes due to a merger in the context of the MillerCoors merger of 2008. I find that the merged firm decreased the number of brands offered and offset this by increasing product variety in more successful brands. However, under a difference-and-differences framework, I find that product variety declined relative to that of other top competitors.
In the second chapter, I examine the welfare effects of product variety changes and compare them to the welfare effects of prices to see what should be the priority of antitrust agencies. I estimate demand for the MillerCoors merger in the postmerger period, expanding on previous work in the literature. In a set of two counterfactuals, I test the value of new products created after the merger and the value of discontinued products lost after the merger. I find that the merger increased consumer surplus from changes in product variety. Benchmarking this to results in the literature, I find that the effects of product addition and discontinuation are approximately 34% and -4%, respectively, of the consumer welfare effects of the postmerger price changes in the presence of coordinated pricing found in prior work.
In the third chapter, I provide a theoretical framework on how restrictions on firms participating in government procurement auctions affect local government procurement costs, firm participation for procurement decisions and firm investment decisions under the context of the Buy America Policy change in 2015. This policy increased the domestic materials requirement for federal funds to be used for purchases of transit goods, thereby restricting foreign firms from participating in procurement and potentially raising the costs of domestic firms that rely on foreign capital for their products. I find federal transportation funds used for railcars increased while funds used for buses remained flat. I then propose three models to examine the theoretical impact of the policy. The first model estimates a standard first price sealed-bid auction model standard for procurement. The second model separates bidders into two types: one domestic type which draws from a higher mean cost distribution, and one foreign type which draws from a lower mean cost distribution. I find costs and markups increase, while the participation of foreign firms declines.
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