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.
Presentations: at the Dynamic Structural Econometrics (DSE) conference (2022), Asia Pacific Industrial Organisation Conference (APIOC 2022), University of Bergen (2022), the seminars at Norwegian School of Economics (2022, 2023), Bergen Center for Competition Law and Economics (BECCLE seminar 2022), University Pompeu Fabra (PhD jamboree) and the multiple presentations at the BSE Energy Group in 2022-2024, 4th Symposium on Aviation Research (SOAR 2023 and 2025), Peder Sather Conference on Industrial Organization, XII Nordic workshop on Industrial Organization (2023), the XXXVII Jornadas de Economía Industrial (2023) and of the 5th Transport Meeting of the IEB at the University of Barcelona (2024), EARIE (2024), European Winter Meeting Econometric Society (Mallorca), University of Baleric Islands, Copenhaguen Business School, Vienna University of Economics and Business (WU), CEMFI.
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. Draft upon request.
Presentations: University of Barcelona (2024), Norwegian School of Economics.
Abstract: I develop a structural supply-and-demand model to explain how consumer heterogeneity influences prices and the pass-through rate of shocks to consumer welfare in the presence of environmental externalities. Using price data from the European aviation market following the introduction of per-passenger taxes, I evaluate the welfare effects of existing policies, focusing on costs to high- vs. low-income consumers. I simulate alternative taxation schemes (e.g., jet fuel taxes) and find that taxes have limited efficacy in internalizing externalities when considering only the "social cost of carbon." However, the policy's corrective value increases substantially when accounting for local pollutants (NOx, PM) and contrail formation.
Local Pollution and Electric Vehicles, Morten Saethre and Mateusz Mysliwski. Draft upon request.
Presentations: Alto University (by a co-author), CEMFI, the Dynamic Structural Econometrics Conference 2025, University of Berkeley (by a co-author), University of Barcelona (forthcoming).
Abstract: We investigate tax instruments for correcting vehicle pollution from both exhaust (CO2, NOx, etc.) and non-exhaust sources (wear-and-tear of brakes, tires, and roads) related to vehicle weight. Using detailed Norwegian registry data, we estimate a model of household driving and purchasing decisions to compare counterfactual tax regimes. We find that while registration taxes based on vehicle characteristics can approximate Pigouvian outcomes in competitive markets, market power complicates this: oligopoly markups already exceed social marginal costs, and corrective driving taxes may exacerbate distortions unless market power is addressed.
Other work in progress:
Pass-Through with Dynamic Demand and Capacity Constraints, Miguel Blanco Cocho.