Work in Progress
Work in Progress
Dynamic Yardstick Competition: A Study of Japanese Railway Industry (Job Market Paper)
[Abstract] This study examines the investment and effort decisions of natural monopolies within the context of yardstick regulation. Yardstick regulation involves regulators assessing monopolies by comparing their performance to similar firms in the industry. Theories in mechanism design suggest that yardstick regulation can mitigate cost inefficiencies if there is no collusion. This paper aims to investigate this claim by examining the private rail operators in the Japanese railway industry. To assess the effect of regulation, I formulate a dynamic structural model for natural monopolies and clarify the mechanism behind yardstick competition. By conducting a counterfactual analysis, this paper provides policymakers with empirical evidence for incentive-based regulation.
Keywords: Natural Monopoly; Firm Dynamics; Mechanism Design
Presented at OSU Applied Micro Lunch 2024, SEA Annual Meeting 2025 (Scheduled)
Search and Bargaining in a New Car Market
[Abstract] This paper examines a new car market where consumers cannot always discern their best options due to information frictions. By incorporating search and bargaining into the model, I aim to address the question: How does search friction affect negotiated prices in a new car market? To answer it, I develop a discrete choice model where consumers possess varying search costs. Due to search frictions, consumers incur costs in gathering information. Upon the revelation of car information, consumers update their current best choices and engage in bargaining with dealers over transaction prices. The presence of search costs reduces the price elasticity of consumers. Consequently, dealers may have incentives to raise their prices and enjoy higher markups due to the diminished price elasticity of consumers.
Keywords: Consumer Search; Nash Bargaining; Demand Estimation
Presented at SEA Annual Meeting 2024, Taiwan Economics Research 2025 (Scheduled)