Current Version: Nov. 2024
I evaluate the impact of strict exclusionary strategies, where the patent holder maintains monopoly control, versus more flexible licensing strategies that permit market entry through moderate royalty fees. Focusing on the K-Cup single-serve coffee industry, I assess how these approaches affect consumer welfare and the patent holder's profits. The results show that strict monopoly enforcement substantially reduces consumer surplus, especially when indirect network effects are present, due to limited product variety, higher prices, and a reduced installed base. In contrast, a flexible licensing strategy that promotes market entry results in a rapid expansion of the installed base of K-Cup machines, nearly doubling the patent holder's long-term profits. These findings underscore the significant role of indirect network effects in shaping optimal licensing strategies and offer valuable policy insights for patent regulation in networked industries.
Market and Environmental Impact of Reusable Products: An Application to the K-Cup Coffee System, with Rong Yuwen
Current Version: Aug. 2025
We develop an empirical framework to quantify the economic and environmental impacts of reusable products, using the single-serve coffee industry as a case study. Our analysis focuses on Keurig's My K-Cup, a reusable alternative to disposable coffee pods. First, we present reduced-form evidence from a difference-indifferences design, showing that access to reusable pods significantly decreases consumer demand for disposable pods. We then estimate a structural demand model that incorporates consumer ownership of reusable pods to capture substitution patterns between reusable and single-serve products. Using the estimated model, we simulate a counterfactual scenario without the introduction of reusable pods and find that disposable pod sales would have been over 50% higher between 2008 and 2014, generating 1.86 billion additional pods and roughly $93 million in plastic-related environmental externalities. Our findings underscore the role of reusable alternatives in curbing plastic waste and offer a scalable approach for evaluating similar interventions in markets where durable and disposable products coexist.
Tracing US County-to-County Domestic Trade Flows in Grains, with William Ridley, Sandy Dall’erba, Jian Zou, and Noé J. Nava
Current Version: Jul. 2024
Despite the critical importance of the US agri-food supply chain, comprehensive information on domestic agricultural trade at spatial resolutions below the state-to-state level remains limited. We develop a statistical downscaling approach that uses interstate trade data, features of county-level supply and demand for cereal grains, and geographical factors to impute bilateral shipments of cereal grains between each pair of counties in the contiguous United States. In contrast with earlier efforts to map the US domestic trade network, our approach is based on a gravity modeling framework that accounts for the fundamental economic relationships that govern trading relationships. The dataset yielded by our downscaling approach will facilitate research on critical questions related to logistics, food systems, food security, and supply chain disruptions.
Empirical Analysis of Indirect Network Effects in the Video Game Market of Japan
Current Version: Mar. 2021
I estimate the size of indirect network effects in the recent Japanese video game market and find significant effects through both hardware adoption and software provision. By classifying game titles as either exclusive or non-exclusive, the estimation results suggest that the size of indirect network effects is often underestimated, with consumers placing more value on exclusive game titles. The number of non-exclusive titles and the price of hardware have little effect on hardware demand, implying that consumers may prioritize selecting high-quality games before choosing a game console. This suggests that a few key, high-quality games likely drive decision-making in the market.
Disaggregating the US Food Supply Chain from the State to the County Level, with Sandy Dall’erba, William Ridley, Jian Zou, and Xiangwei Sun
Environmentalism or Economics? Understanding the Drivers of Reusable Product Adoption