- The Welfare Effects of Intertemporal Price Discrimination: An Empirical Analysis of Airline Pricing in U.S. Monopoly Markets, revise and resubmit at the American Economic Review [PDF]
This paper studies how a firm's ability to price discriminate over time affects production, product quality, and the product allocation among consumers. The theoretical model has forward-looking and heterogeneous consumers who face a monopoly firm. The firm can affect the quality and quantity of the goods sold each period. I show that the welfare effects of intertemporal price discrimination are parameter-dependent. I use this model to study the time paths of prices for airline tickets offered on monopoly routes in the U.S. Using estimates of the model's demand and cost parameters, I compare the welfare travelers receive under the current ticketing system to several alternative systems, including one in which there is free resale of airline tickets.
- Simulating the Dynamic Effects of Horizontal Mergers: U.S. Airlines, with Lanier Benkard and Aaron Bodoh-Creed, revise and resubmit at the RAND Journal of Economics [PDF]
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- Quantifying Delay Propagation in Airline Networks, with Liyu Dou and Jakub Kastl, under revision [PDF]
We develop a framework for quantifying delay propagation in airline networks.
Using a large comprehensive data set on actual delays and a model-selection algorithm (elastic net),
we estimate a weighted directed graph of delay propagation for each major airline in the US. We use these estimates to decompose the airline performance into ``luck'' and ``ability.'' We further use these estimates to describe how network topology and other airline network characteristics (such as aircraft fleet heterogeneity) affect the expected delays. Finally, we propose a model of aircraft scheduler who allocates effort to minimize costs of delay on a network and show how the effort cost can be estimated. We then use the estimated effort cost to evaluate counterfactual scenarios of investments in airport infrastructure in terms of their impact on delays.
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- Getting More from Less: Understanding Airline Pricing, under review [PDF] [Slides].
Motivated by pricing practices in the airline industry, the paper studies
the incentives of players to publicly and independently limit the sets of
actions they can play later in a game. I find that to benefit from
self-restraint, players have to exclude all actions that create temptations
to deviate and keep some actions that can deter deviations of others. I
develop a set of conditions under which these strategies form a subgame
perfect equilibrium and show that in a Bertrand oligopoly, firms can
mutually gain from self-restraint, while in a Cournot oligopoly they cannot.
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- The Identification Power of the Markov Assumption in Dynamic Discrete Choice Models, under revision [Slides]
This paper studies the identification power of the Markov assumption in dynamic discrete choice models with unobserved heterogeneity. Based on the fact that a mixture of Markov processes violates the Markov property, I propose a test for the presence of unobserved heterogeneity and show how to recover individual policy functions from a mixture of Markov processes. This result extends the set of dynamic discrete choice models to which the two-step estimator of Bajari, Benkard, and Levin (2007) can be applied.
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