[Abstract] This study examines the investment and effort decisions of rail operators under yardstick regulation, a mechanism where regulators assess local monopolies by comparing their performance against industry peers. While mechanism design theory suggests that yardstick regulation can mitigate cost inefficiencies stemming from rate regulation, there is limited empirical evidence on how it affects firms' cost performance through investment and effort. I address this question by developing and estimating a dynamic structural model using data from the Japanese railway industry. The analysis reveals that traditional rate regulation induces a 20% increase in the capital base and a 5% reduction in operational effort compared to the first-best benchmark. In contrast, yardstick regulation restores incentives for cost reduction by introducing indirect competition between firms. Counterfactual simulations demonstrate that yardstick competition results in a 5% increase in effort, a 1% reduction in operating costs, and a 1.2% decrease in total costs relative to rate regulation alone. While yardstick regulation does not achieve the effort level under the first-best, it effectively mitigates the distortions of rate regulation while suppressing prices.

Keywords: Natural Monopoly; Firm Dynamics; Incentive-based Regulation

Presented at OSU Applied Micro Lunch 2024, SEA Annual Meeting 2025, Taiwan Economics Research 2026, Singapore Economic Review Conference 2026

[Abstract] This paper studies how search frictions affect negotiated prices in the new car market. I develop a structural model that combines consumer search with Nash bargaining to characterize vehicle choice and transaction prices. Consumers incur search costs to learn about alternative vehicles and dealerships, and the options discovered through search determine their outside options in subsequent bargaining. Using new-car transactions in Ohio from 2015 to 2021, I estimate consumer preferences, search costs, and bargaining power. Incorporating search frictions reduces the average own-price elasticity and shifts the implied markup distribution upward, suggesting that search costs make consumers less responsive to price differences across alternatives. I then use the estimated search model to construct consumers' outside options and estimate a bargaining primitive. The results show that search frictions affect negotiated prices through two related channels: they reduce consumers' price responsiveness and weaken the outside options they bring into bargaining.

Keywords: Consumer Search; Nash Bargaining; Demand Estimation

Presented at SEA Annual Meeting 2024, Decision Sciences Research Forum 2024, Taiwan Economics Research 2025 

Keywords: Product Availability; Inventory Management; Demand Estimation