"Search Frictions, Network Effects and Spatial Competition: Taxis versus Uber" (Job Market Paper) Download [Slides]
In this paper, I model the search and matching process among drivers and passengers of taxis and Uber cars in New York City to analyze the matching efficiency taking into account network effects and supply competition. Drivers make dynamic spatial search decisions to supply rides and passengers make static discrete choice decisions among taxi and Uber. I model network effects by adding demand and supply levels to both sides’ decisions in the form of a matching probability or waiting time. I use the nonstationary oblivious equilibrium concept to solve the model and analyze equilibrium frictions as mismatches between empty cars and waiting passengers. I show that network effects and supply competition, in addition to fixed fare and search costs, have extensive effects on frictions and welfare in three counterfactual scenarios. The first decreases Uber supply by 30%, the second improves traffic conditions and the third eliminates the Uber surge multiplier. I find that taxis’ pickups increase by 5.9% if traffic improves but do not increase significantly under supply regulation. Taxis’ profits increase by 1% under supply regulation and increase by 5.18% if traffic improves. Uber’s search friction increases after eliminating the surge multiplier or restricting supply. Consumer welfare decreases if Uber supply is restricted. Without network effects, search frictions and pickups will be underestimated.
"Market Power versus Cost Efficiencies of Merger in the U.S. Beer Industry"
In this paper, I study the effects of Miller and Coors joint venture in 2008 on prices and costs of beer with the Nielsen datasets. On the demand side, I model consumers’ discrete choice among products of different retailers. On the supply side, I model the vertical relationship of retailers and wholesalers on price setting with double marginalization. Downstream retailers set optimal retail prices after observing wholesale prices and upstream wholesalers set optimal wholesale prices anticipating retailers’ responses. This vertical relationship affects pass-through of cost saving and market concentration effects of this merger on retail prices. Cost savings are calculated by comparing retailers’ and wholesalers’ implicit costs before and after the merger. I find that the merger reduces the cost of flagship brands, such as Coors Light and Miller Lite, by 15%.
Work in progress
"Network Externalities to Entry in Platform and Two-sided Markets"
"Network Effects and Dynamic Pricing in the U.S. Digital Game Market"