Work in Progress

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 tax was introduced. Based on my findings I evaluate the welfare and competition effects of the implemented policies and conduct simulations of alternative taxation schemes.

Abstract: We study pricing responses to shocks that diminish firms’ capital stock by examining implications of the Boeing 737 MAX grounding on US carriers. We find significant pricing response variation among affected carriers based on their pre-grounding MAX utilization rates. Southwest, the most affected carrier, increased fares by 1.7% ($4) on MAX-operated routes, which would have been 17% ($41) had the MAX been used exclusively. These price hikes, attributed to tightened capacity constraints, exceed cost increases from using less fuel-efficient idle capacity. The corresponding rise in carbon emissions from using less efficient aircraft equaled those produced by 104,720 cars.