Capacity Disruptions and Pricing: Evidence from US Airlines, with Anantha Divakaruni (JMP). Resubmission invited at the American Economic Journal. Microeconomics.
Capacity Disruptions and Pricing: Evidence from US Airlines, with Anantha Divakaruni (JMP). Resubmission invited at the American Economic Journal. Microeconomics.
Abstract: New technology is prone to disruptions. We examine the impact of a supply disruption that simultaneously reduces production capacity and increases operational costs by removing a relatively efficient capital asset. Specifically, we analyse the unexpected regulatory decision to ground the Boeing 737 MAX in 2019, Boeing’s most fuel-efficient narrow-body aircraft at the time. We use a difference-in-differences design, leveraging the differential exposure to the grounding, which we construct using novel data on flight frequency in the U.S. We observe heterogeneous price and cost effects across airlines. For Southwest, the airline most affected by the disruption, the price increase driven by fleet constraints is five times larger than the effect from rising operational costs. These findings show that when firms become capacity constrained due to a drastic reduction in the capital stock, then changes in the operational costs (related to efficiency) become marginal. Instead, the increase in prices will be primarily explained by operating with a diminished production capacity (i.e. less available fleet). Although not being the main relevant aspect for pricing, the change in operational costs have a social cost for society through a rise in emissions.
Pass-through of Environmental Taxes under Price Discrimination, Solo authored.
Abstract: I build a demand and supply structural model that explains how consumer heterogeneity affects the prices and pass-through rate of shocks to consumer prices and to welfare, in the presence of environmental externalities. I rely on price data from the European aviation market, where a per passenger taxes were introduced. I evaluate the welfare and competition effects of the implemented policies and conduct simulations of alternative taxation schemes in which jet fuel is taxed instead of per passenger taxes.
Local Pollution and Electric Vehicles, Morten Saethre and Mateusz Mysliwski
Abstract: What is the effect of vehicle weight on car ownership decisions? This paper examines how preferences for larger vehicles and driving range influence CO2 and non-exhaust emissions, with a particular focus on the electric vehicle (EV) market. We develop a structural model that integrates data on all vehicle registration events in Norway, individual ownership choices, and driving patterns. Using this model, we estimate the welfare losses associated with current policy measures—such as registration taxes and tolls—by comparing them to a counterfactual scenario in which vehicles are taxed based on their actual emissions of greenhouse gases (GHG) and local pollutants during usage. Our results highlight the inefficiencies in current taxation schemes and reveal significant distributional and health consequences. These findings provide important insights for the design of more effective emission reduction policies in the transportation sector.