Research
Published and Accepted Papers
One Size Fits All? The Value of Standardized Retail Chains
RAND Journal of Economics, 55(1), Spring 2024, 55-86
Multi-outlet firms, or chains, make up a large and growing part of the US retail sector and are the subject of important local policy; over 30 US cities ban or restrict the entry of chain firms. This paper quantifies the welfare and profit effects of standardized chains: chains face higher demand than independent firms, but at the same time chains are less flexible in customizing product selection or prices across locations. I quantitatively assess the effects of this tradeoff on firm revenue and consumer welfare in the restaurant industry using a large credit card dataset that covers 20% of US consumption. I find that on average chains could earn 19% higher variable profits if they could customize their product optimally to local tastes, but they would lose 28% of their variable profits if they were to lose their demand advantages. Policies that ban chain restaurants would result in a loss of consumer welfare equivalent to 1.5%-5.4% of restaurant spending and would disproportionately impact lower income consumers.
Assessing the Gains from E-Commerce (with Paul Dolfen, Liran Einav, Pete Klenow, Jon Levin, Larry Levin, Wayne Best) [Appendix]
American Economic Journal: Macroeconomics, 15(1), January 2023, 342-370
E-Commerce represents a rapidly growing share of consumer spending in the U.S. We use transactions-level data on credit and debit cards from Visa, Inc. between 2007 and 2017 to quantify the resulting consumer surplus. We estimate that E-Commerce spending reached 8% of consumption by 2017, yielding consumers the equivalent of a 1% permanent boost to their consumption, or over $1,000 per household. While some of the gains arose from saving travel costs of buying from local merchants, most of the gains stemmed from substituting to online merchants. Higher income cardholders gained more, as did consumers in more densely populated counties.
Working Papers
Selling Subscriptions (with Liran Einav and Neale Mahoney)
R&R at American Economic Review
Coverage in Financial Times (August 15, 2023), Fortune (August 15, 2023), SIEPR (August 15, 2023), MarketWatch (August 16, 2023), NPR (August 30, 2023), Financial Times (October 5, 2023), New York Times (November 19, 2023), USA Today (December 3, 2023), Wall Street Journal (January 19, 2024), The Atlantic (June 5, 2024)
Firms are increasingly selling products via subscriptions. In this paper, we study one benefit to firms of selling subscriptions: the prospect that consumers continue to pay for subscriptions they no longer value. We use comprehensive data from a large payment card network and focus on credit and debit cards that get replaced (e.g., due to expiration). Replaced cards require an active subscription renewal decision, and we document much higher cancellation rates in replacement months for the ten subscription services we study. We specify and estimate a stylized model of subscription renewals in which consumer inertia is driven by inattention. Relative to a counterfactual in which consumers are fully attentive, inattention raises seller revenues by 89% on average with substantial variation across the ten subscription services. We use the estimated model to explore the impact of possible regulatory remedies.
Broad and Narrow Price Parity Agreements: Evidence from European Hotels (with Nicola Pierri)
R&R at International Journal of Industrial Organization
This paper investigates the effect of "price parity" clauses in contracts between hotels and online travel agencies (OTAs). These restrictions require a hotel to set its lowest prices for a given room on a travel agency's website and have come under recent scrutiny by antitrust regulators. We use a difference-in-differences strategy based on a series of policy changes in Europe. Our analysis finds that (i) restricting the broadest form of parity clauses, but leaving in place a more limited version, reduced prices by 3.2%; (ii) a complete ban on parity clauses reduces prices by 6.9%. We then investigate the mechanisms behind these findings; we provide suggestive evidence that both increased inter-OTA competition, as well competition between OTAs and hotels' direct channels, played a role in reducing prices.
Fueling Expectations: The Causal Impact of Gas Prices on Inflation Expectations and Consumption (with Yoon Jo)
We investigate the effects of temporary state-level gas tax suspensions on inflation expectations and consumption. Using a difference-in-differences strategy, we show that households in states that lower the gas tax reduce both their inflation expectations and consumption, but that the impact of the policy depends on the pass-through rate. We also show experimental evidence that informing households about the tax reduction leads them to adjust their inflation expectations downward. Our results provide new causal evidence of the link between gas prices and household inflation expectations and high- light the potential for alternative policy levers to impact household beliefs and behavior.
Measuring Local Consumption with Payment Cards and Cell Phone Pings (with Fernando Luco)
We compare two widely used sources of consumption data: payment card transactions (from credit and debit cards) and cell phone location pings. We find they are positively but imperfectly correlated; payment card usage is higher among higher-income consumers, while cell phone pings only loosely track consumer spending. We develop a methodology that combines both sources to measure local retail spending and illustrate its use by quantifying local fiscal multipliers. Our results show that the impacts of government spending shocks are highly localized, decay quickly in space, and are heterogeneous across store categories.
Strategic Default, Loan Modification, and Foreclosure (with Nicola Pierri)
We study borrower strategic default in the residential mortgage market. We exploit a discontinuity in the eligibility criteria of the Home Affordable Modification Program (HAMP), a large federal government program that incentivized lenders to renegotiate mortgages for borrowers who were more than 60 days delinquent on their loans. In contrast to prior literature, we find that HAMP increased rates of delinquency by about 0.5% among eligible borrowers with much larger effects for underwater loans. At the same time, the program succeeded in its stated purpose of lowering foreclosure rates among borrowers that were already delinquent and increasing the likelihood that they return to making payments. Our results suggest that borrower strategic response is an important consideration in designing debt relief policies.
Work in Progress
The Impact of Natural Disasters on Businesses and Consumers (with Eric Lewis and Fernando Luco)
Supported by NSF award #2242349.
The Effects of Hospital Closures on Patients and Hospitals (with Ben Ukert and Paula Zamora-Riaño)