Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, c1999. / Includes bibliographical references (p. 171-178). / This thesis presents three empirical studies based on regulatory and institutional changes in the US hospital and pharmaceutical industries. Chapter 2 reports the results of an empirical study on changes in quality of health care after hospitals have undergone ownership conversions. Theoretical work on not-for-profit institutions has hypothesized that not-for-profit firms exist as a response to high contracting costs in markets with asymmetric information. If a firm knows more than its customers about the quality of the goods or services it sells, then the firm could cut costs by delivering lower-quality goods than it promises. Not-for-profit organizations serve as a solution to this problem by allowing managers to hold the firms in trust for their customers. Using readmission and mortality rates for heart and stroke patients as measures of quality of care, I find increases in mortality rate as well as readmission rate for heart attack patients after not-for-profit to for-profit conversions and after public to not-for-profit conversions. The deterioration in health care quality did not seem to be attributable to changes in the patient pool, but may be associated with changes in the number of procedures performed. The reduction in care for the uninsured after not-for-profit to for-profit hospital conversions may also point to the importance of legal enforcement and oversight as well as private contracts in ownership transfer. Chapter 3 considers altruistic behavior by not-for-profit, for-profit and public hospitals. Economic theories have hypothesized that not-for-profit organizations act in response to insufficient provision of social or collective consumption goods by private for-profit entities or by the government. I find support for not-for-profit hospitals behaving in an altruistic manner. Nevertheless, there is mixed evidence of both pure and impure altruism for not-for-profits. Similarly, public hospitals also exhibit behavior consistent with both pure and impure altruism. During the period of May 1995-June 1997, four former prescription-only drugs (Pepcid, Tagamet, Zantac and Axid) were introduced to the nonprescription market. Chapter 4 reports the impact of these introductions on thirteen similar incumbent products in the nonprescription drug market. I also analyze firms' use of advertising to compete and to increase demand for their products. / by Davina C.Y. Ling. / Ph.D.

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, c1999. / Includes bibliographical references. / Chapter 1: I study the design and functioning of self-enforcing incentive contracts under imperfect observability, using a model of repeated agency that allows for both common and private performance monitoring. When performance measures are mutually observed, optimal relational agreements always keep the parties on the Pareto frontier. When performance measures are privately observed, self-enforcing agreements involve the possibility of separation on the equilibrium path, but optimal contracts still take a basic "termination" form. Using these results, one can view optimal long-term contracts as the solution to a static optimization problem. I use this static program to describe the shape of optimal contracts and the nature of second-best inefficiencies. Under standard conditions, optimal moral hazard contracts are "one-step" - a fixed discretionary transfer is made to the agent any time performance is above some cut-off. Hidden information contracts are also characterized and it is shown that optimal contracts call for effort distortion by all types. Chapter 2: This chapter considers self-enforcing relational contracts between a firm and many agents. Even when contracting opportunities are technologically independent, firms will benefit from reaching multilateral contracts that link their transactional arrangements. Optimal multilateral contracts equalize the shadow cost of incentive constraints on each relationship, something bilateral contracts will generally fail to do. I derive some novel implications for asset ownership and ex ante investment, and consider ways in which firms might be able to use existing relationships as "leverage" in reaching new agreements. I also investigate conditions under which firms might want to refrain from multilateral contracting and conduct relationships separately - this may be the case if firm is concerned about a breakdown in one relationship acting as a catalyst that brings down others. The results are applied to discuss two-tier workforce arrangements, supplier associations and the prevalence of diversified business groups in developing countries. Chapter 3: A seminal theorem due to Blackwell (1951) shows that every Bayesian decision-maker prefers an informative signal Y to another signal X if and only if Y is statistically sufficient for X. Sufficiency is an unduly strong requirement in most economic!'problems because it does not incorporate any structure the model might impose. This chapter develops a general theory of information that allows a characterization of the information preferences of decision-makers based on how their marginal returns to acting vary with the underlying (unknown) state of the world. The analysis focuses on "monotone decision problems," in which all decision-makers in the relevant class choose higher actions when higher values of the signal are realized. This restriction allows a characterization of information preferences in terms of stochastic dominance orders over distributions of posterior beliefs. Conditions are also given under which one decision-maker has a higher marginal value of information than another decision-maker, and thus will acquire more information. The results are applied to oligopoly models, labor markets with adverse selection, hiring problems, and a coordination game. (This chapter is co-authored with Susan Athey.) Chapter 4: This chapter revisits Akerlof's classic adverse selection market and asks the following question: do greater information asymmetries reduce the gains from trade? Perhaps surprisingly, the answer is no. Greater asymmetries worsen the "buyer's curse," thus lowering the demand curve, but may shift the supply curve as well. Whether trade increases or decreases depends on where the information impacts the market. A characterization is given for the case of partition information and then for the general case using a definition of information formulated in the previous chapter. / by Jonathan David Levin. / Ph.D.

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This thesis is composed by three different studies on oligopolies. The first chapter is on oligopolies with perfect complements; the second chapter studies oligopolies with positive network effects and incompatible networks, and the last one deals with a polluting duopoly subject to environmental regulation. Specifically, the first chapter provides a thorough characterization of the properties of Cournot's complementary monopoly model (or oligopoly with perfect complements) in a general setting, including existence, uniqueness and the comparative statics effects of entry. As such, this serves to unify various results from the extant literature that have typically been derived with limited generality. Several studies have suggested that Cournot's complementary monopoly model is the dual problem to the standard Cournot oligopoly model. This result crucially relies on the assumption that the firms have no production costs. The first chapter shows that if the production costs of the firms are different from zero, the nice duality between these two oligopoly settings breaks down. One implication of this breakdown is that, in contrast to the Cournot model, oligopoly with perfect complements can be a game of strategic complements in a global sense even in the presence of production costs. The second chapter models symmetric oligopolies with positive network effects where each firm has its own proprietary network. That is, each firm's network is incompatible with that of its rivals. This chapter provides minimal conditions for the existence of (non-trivial) equilibrium in a general setting; in this model, the equilibria may be either symmetric or asymmetric. For the symmetric equilibria, this chapter analyzes the comparative statics effects of entry. In addition, it compares the equilibrium outcomes of oligopoly markets with compatible and incompatible networks. It shows that firms with compatible networks produce higher quantities than firms with incompatible networks. However, the relationship between prices, profits and consumer surplus is ambiguous, but social welfare is always higher in markets with completely compatible networks. Finally, the third chapter analyzes the incentives to invest in R&D under two environmental policy instruments: the emission and performance standards, in a Cournot model of competition between two symmetric firms. These firms are subject to environmental regulations as their production of a homogeneous good entails pollution. Unlike a few models of output market available in the literature, this approach does not measure the environmental incentives using firms' aggregate cost savings. Instead, it compares the levels of social welfare obtained under both policy instruments. From the derived subgame perfect equilibria of the two games, each game associated with a different instrument, this chapter shows that social welfare under performance standard dominates that under emission standard. It also finds that further comparisons, in particular, the comparison of the investment in R&D, are ambiguous and not aligned with the welfare comparison.

In this dissertation, I develop methods for Bayesian inference in dynamic discrete choice models (DDCMs.) Chapter 1 proposes a reliable method for Bayesian estimation of DDCMs with serially correlated unobserved state variables. Inference in these models involves computing high-dimensional integrals that are present in the solution to the dynamic program (DP) and in the likelihood function. First, the chapter shows that Markov chain Monte Carlo (MCMC) methods can handle the problem of multidimensional integration in the likelihood, which was previously considered infeasible for DDCMs with serially correlated unobservables. Second, the chapter presents an efficient algorithm for solving the DP suitable for use in conjunction with the MCMC estimation procedure. The algorithm utilizing random grids and nearest neighbor approximations iterates the Bellman equation only once for each parameter draw. The chapter evaluates the method's performance on two different DDCMs using real and artificial datasets. The experiments demonstrate that ignoring serial correlation in unobservables of DDCMs can lead to serious misspecification errors. Experiments on dynamic multinomial logit models, for which analytical integration is also possible, show that the estimation accuracy of the proposed method is good. Chapter 2 presents a proof of the complete (and thus a.s.) uniform convergence of the DP solution approximations proposed in Chapter 1 to the true values under mild assumptions on the primitives of DDCMs. It also establishes the complete convergence of the corresponding approximated posterior expectations. Chapter 3 proposes a method for inference in DDCMs that combines MCMC and artificial neural networks (ANN.) MCMC is intended to handle high dimensional integration in the likelihood function of richly specified DDCMs. ANNs approximate the DP solution as a function of the parameters and state variables beforehand of the estimation procedure to reduce the computational burden. Potential applications of the proposed methodology include inference in DDCMs with random coefficients, serially correlated unbservables, and dependent observations. The chapter discusses MCMC estimation of DDCMs, provides relevant background on ANNs, and derives a theoretical justification of the method. Experiments suggest that application of ANNs in the MCMC estimation of DDCMs is a promising approach.

My thesis offers one example of a cost associated with hypocrisy, environmental loss. Hypocrisy is defined as “the practice of professing standards, beliefs, etc., contrary to one’s real character or actual behavior” (Collins Dictionary, 2003). In order to measure hypocrisy two types of data are needed: (1) a measure of a person’s “professed standards” and (2) a measure of “actual behavior.” A study of the various ways in which hypocrisy affects an individual’s entire life is obviously beyond the scope of any single study. Therefore, my thesis demonstrates how hypocrisy, or hypocritical bias, can be measured with a single professed standard and actual behavior, namely environmental concern and use of non-reusable coffee/ tea cups (i.e., cardboard and plastic cups). A coffee or tea drinker who is very concerned for the environment should, if he eschews hypocritical bias, avoid the use of non-reusable cups when he purchases coffee/tea at a coffee shop. Individuals are given a hypocrisy score, calculated as a weighted average of non-reusable cups per number of trips to coffee shop per week and a respondent’s general concern for the environment (0=”unconcerned”, 0.25, 0.5, 0.75, 1 = “very concerned”). A higher score (i.e., greater hypocrisy) is given to individuals who use relatively more non-renewable cups and yet profess to have a relatively higher concern for the environment. Controlling for need for convenience, laziness, and ignorance, in the econometric analysis we are able to isolate the marginal effect of hypocrisy on environmental cost of using non-reusable cups.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2018 / Cataloged from PDF version of thesis. / Includes bibliographical references (pages 209-213). / Establishing the link between a cause and effect is a fundamental question in social science. Standard assumptions about human behavior (e.g., rationality) imply restrictions on the plausible values of the causal effect. In addition to this effect, these restrictions may depend on additional summaries of human behavior. Estimation of these additional parameters presents a trade-off between capturing the complexity of human's decision-making yet constraining it to deliver precise estimates. I resolve this tension by incorporating modern machine learning tools into the estimation of the additional parameters and deliver high-quality estimates of the causal effect and counterfactual outcomes. I estimate the causal effect in a two-stage procedure. At the first stage, I estimate the additional summaries of human behavior by modern machine learning tools. At the second stage, I plug the first-stage output into the sample analog of the restriction that identifies the causal effect. I modify the second-stage restriction to make it insensitive to any regularization biases present in the first-stage components. The second-stage estimate of the causal effect is of high-quality: it converges at fastest rate and can be used to test the hypotheses and build the confidence intervals for the values of the causal effect. I apply this idea in a wide class of economic models, including dynamic games of imperfect information, treatment effect in the presence of endogenous sample selection, and reduced-form demand estimation. / by Vira Semenova. / Ph. D. / Ph.D. Massachusetts Institute of Technology, Department of Economics

One of the main concerns about immigration is knowing whether immigrants will assimilate into American society. To assess whether immigrants have fully assimilated, the economic outcomes of their children must be analyzed. Previous research have shown that there are generational differences in economic outcomes of immigrants. These differences can be explained by differences in cognitive and noncognitive skills. The second and third chapters of this dissertation explore the relationship between immigrant status, behavioral traits and economic outcomes of young adults. In Chapter 2, I focus on earnings as the economic outcome. The analysis takes advantage of measurement of behaviors in the form of motivation, effort and control expectation from the Education Longitudinal Study of 2002 to assess the relationship between these behaviors and immigrant status on earnings of a nationally representative sample of young adults. I also examine whether differences in earnings are explained by differences in behaviors that are attributed to immigrant status. I find that being born in a foreign country positively affects earnings and motivation is the behavior that has a significant positive effect on earnings. Immigrant-native earnings differences are not explained by differences in behaviors characterized by immigrant status. These results differ by gender. In Chapter 3, I extend the analysis by focusing on the education assimilation of immigrants. I analyze the relationship between immigrant status, behavioral traits and education attainment. In contrast to Chapter 2, I find that being foreign-born and being U.S.-born with immigrant parents positively affect education attainment. Motivation, effort, and control expectation significantly affect education attainment. Differences in effort and control that are characterized by being foreign-born explain differences in education. These results differ for men and women. Lastly, in Chapter 4, I examine the role of parental wealth in mitigating the effect of immigrant status and behavioral traits on education attainment. I find that parental wealth is a significant factor determining education attainment. More importantly, wealth is a moderating factor for the effect of race on education. While controlling for wealth and behavioral traits, Asians and Blacks see considerable increase in their education attainment. / A Dissertation submitted to the Department of Economics in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Fall Semester 2018. / November 9, 2018. / Includes bibliographical references. / Patrick L. Mason, Professor Directing Dissertation; Katrinell Davis, University Representative; Carl Schmertmann, Committee Member; Gary Fournier, Committee Member.

My dissertation investigates the dynamics of international capital flows, distinguishing between net and gross flows. Chapter One considers both net and gross capital flows. I develop a small open economy model which endogenous sudden stops in net capital inflows. I then show how a second electronic currency can be used as a policy tool to reduce the volatility of capital flows. I also examine the empirical regularities of gross capital flows for the G7 countries and the implications for gross flows from a data set of investment decisions from a selection of large U.S. public pension funds. I document three important patterns in the aggregate data. First, gross capital flows are highly volatile. Second, there is a strong positive relationship between capital inflows and outflows. Third, gross capital flows are acyclical when accounting for the global financial cycle; global factors, rather than the domestic business cycle, account for a significantly greater proportion of the variation in gross flows. From firm-level pension fund data, I find that international investment decisions are large enough to contribute to gross flow volatility. For periphery economies which are the recipient of these firms' equity investments, participation in those economies is variable with firms entering, exiting, and changing the mix of markets in which they invest. The cost structure of foreign investing suggests that fixed participation costs are statistically significant and quantitatively important. The stylized facts I document are at odds with the economic theory regarding capital flows, therefore, in Chapter Two, I develop a large open-economy portfolio choice model and solve it globally with a novel solution algorithm. Using this model I show that fixed participation costs for investing abroad of less than ten basis points is sufficient to reproduce both the observed volatility of gross capital flows and the correlation between inflows and outflows. / A Dissertation submitted to the Department of Economics in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Spring Semester 2019. / April 5, 2019. / Dynamic Stochastic General Equilibrium, Gross Capital Flows, Portfolio Choice / Includes bibliographical references. / Manoj Atolia, Professor Directing Dissertation; Alec Kercheval, University Representative; Mikhail Dmitriev, Committee Member; Jonathan Kreamer, Committee Member.

This dissertation is a collection of three independent chapters on topics in applied microeconomic analysis, focusing on issues in urban and education economics. The first chapter examines local housing values in Dallas after the repeal of the Wright Amendment, legislation that limited activity at the neighborhood airport Love Field. I find that, on average, the repeal of the Wright Amendment led to a 11% increase in rents and a 10\% increase in housing values for units less than 6 miles of the Love Field Airport. The second chapter examines interest in the education industry following Act 10, a Wisconsin legislative act that limited the collective bargaining power of teachers' unions in the state. Comparing the share of postsecondary students enrolled in a teacher preparation program in Wisconsin before and after Act 10 and relative to similar states, we find that on average Act 10 lead to a 12% increase in teacher preparation enrollment. Finally, the third chapter examines spatial crime activity in cities when hosting large events, such as college football games. Using geo-located daily level crime data from college towns, I estimate that crime increases in census tracts closer to the event by approximately 44% relative to tracts farther away on days with a football game, and is spatially concentrated in areas near the stadium. / A Dissertation submitted to the Department of Economics in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Spring Semester 2019. / April 15, 2019. / act 10, airports, applied microeconomics, teachers unions, wright amendment / Includes bibliographical references. / Shawn Kantor, Professor Directing Dissertation; Toby Park, University Representative; Carl Kitchens, Committee Member; Tom Zuehlke, Committee Member.