This dissertation consists of three essays in applied microeconomics. The first essay investigates the effects of generic entry on post-patent price competition in the prescription drug market using NDC Health data on 18 oral solids that lost their patent sometime between February 1998 and 2002. I am able to characterize the impact of endogenous generic entry on branded and generic prices, conditional on payment type (i.e., cash, Medicaid, third party). Based on the findings in this paper, the overall, long-term impacts of the 1984 Drug Price Competition and Patent Term Restoration Act (Waxman-Hatch Act) are yet to be determined. The second essay develops a theoretical model of earnings where human capital is the central explanatory variable. The analysis and estimation strategy stems from the Mincerian simple schooling model. Human capital investments (i.e., schooling) are incorporated into a model based on individual wealth maximization. We utilize the conventional economic models of supply and demand to derive an optimal level of schooling function. Using the NLSY79, we stratify our sample into one-year work experience intervals for 1985-1989 to identify the "overtaking" cohort (i.e., the years of work experience at which an individual's observed earnings approximately equal what they would have been based on schooling and ability alone). We employ the AFQT score as an ability proxy and consider its possible endogeneity for several estimation strategies. The third essay attempts to address the bias inherent in the use of potential, as opposed to actual, work experience measures in human capital models. While such a proxy is often deemed reasonable for males, problems still exist---specifically, unemployment spells manifesting themselves as active job searches or withdrawal from the labor market. Presumably, such activities have different effects on one's work experience. Potential work experience measures also abstract away from employment status, over-time work, moonlighting, and multiple-job holding. We employ actual work experience data from the NLSY79 and the PSID and extend our findings to a data set in which actual measures of work experience are not available---specifically, the IPUMS, with the creation of predicted work experience measures.

This thesis examines several issues that arise in restructured electricity markets. These issues include production, scheduling and forward contract decision making, capital investment decisions in uncertain environments, and equilibrium bidding in wholesale electricity auctions. In the chapter, "Supply Function Equilibria with Pivotal Suppliers", we study the impact of pivotal suppliers in supply function bidding settings. Observers of these markets have noted the important role that pivotal suppliers, those who can substantially raise the market price by unilaterally withholding generation output, sometimes play. However the literature on SFE has not considered the potential impact of pivotal suppliers on equilibrium predictions. This is a potentially important deficiency of applications of SFE to electricity markets, given the large role that pivotal suppliers sometimes play in these markets. We formulate a model in which generation capacity constraints can cause some suppliers to be pivotal. In symmetric and asymmetric versions of the model we show that when pivotal suppliers are present, the set of SFE is reduced relative to when no suppliers are pivotal. In the chapter, "Dynamic Oligopolistic Games Under Uncertainty: A Stochastic Programming Approach", we study several stochastic programming formulations of dynamic oligopolistic games under uncertainty. It is well known that if the number of state variables increases, dynamic programming becomes computationally intractable. For such games, we show that under certain symmetry assumptions, players earn greater expected profits as demand volatility increases. The key to our approach is the "scenario formulation" of stochastic programming. The examples presented in this paper illustrate that this approach can address dynamic games that are clearly out of reach for dynamic programming, the common approach in the literature on dynamic games. In the chapter, "Scenario-based Electricity-Gas Forward and Spot Pricing and Load Formulations", we propose load models and price and return formulations in specific energy markets. Existing energy models do not consider inter-relations between the trio: spot price, derivative price and electric load. Also these models, which are in the spirit of the models proposed in financial and commodity markets, ignore special characteristics of electricity, which may make the proposed models useless. In our formulations we consider these characteristics and correlations between these variables. Simulation results that we run support our modeling approaches.

This dissertation examines how governmental policies and other incentives have shaped the health insurance market over the period 1900-1960. The dissertation opens with an examination of the early health insurance market, and identifies key factors that contributed to both the initial development of the health insurance market, as well as to its development over time. While rising medical expenditures are usually posited as the catalyst for the initial development and the later growth of the market, results suggest that the true story of market development is more detailed. Strategic behavior on the part of hospitals affected health insurance markets, as did state-level regulatory policies. In addition to state-level government policies, policies at the federal level also had a fundamental impact on the development of health insurance in the United States. A major portion of the dissertation is devoted to examining the impact of the 1954 tax subsidy of employer-provided health insurance. For the first time, the tax subsidy can be analyzed using data that span the period of its implementation. Analysis conducted with these data indicates that the implementation of the tax subsidy generated an increase in the amount of health insurance coverage purchased by lowering its relative price. Perhaps more importantly, the tax subsidy encouraged the development of group health insurance. This partially tax-induced institutional change made health insurance available to more people, and affirmed the development of employer-based health insurance in the United States. The dissertation also focuses on two aspects of the relationship between health insurance and medical expenditures. First, what affect did the tax subsidy have on medical expenditures? Insured households spent more on medical care than their uninsured counterparts. Since the tax subsidy generated an increase in the number of people with insurance, it also contributed to a corresponding increase in medical expenditures. Second, since health insurance coverage during the 1950s was much more heterogeneous than it is today, the dissertation is able to examine the effect of increasing the comprehensiveness of coverage on medical expenditures. Surprisingly, increasingly comprehensive insurance coverage did not necessarily lead to higher medical expenditures in the 1950s.

Exergoeconomic analysis of a nuclear power plant is a focus of this dissertation. Specifically, the performance of the Palo Verde Nuclear Power Plant in Arizona is examined. The analysis combines thermodynamic second law exergy analysis with economics in order to assign costs to the loss and destruction of exergy. This work was done entirely with an interacting spreadsheets notebook. The procedures are to first determine conventional energy flow, where the thermodynamic stream state points are calculated automatically. Exergy flow is then evaluated along with destruction and losses. The capital cost and fixed investment rate used for the economics do not apply specifically to the Palo Verde Plant. Exergy costing is done next involving the solution of about 90 equations by matrix inversion. Finally, the analysis assigns cost to the exergy destruction and losses in each component. In this work, the cost of electricity (exergy), including capital cost, leaving the generator came to 38,400 $/hr. The major exergy destruction occurs in the reactor where fission energy transfer is limited by the maximum permissible clad temperature. Exergy destruction costs were: reactor--18,207 $/hr, the low pressure turbine--2,000 $/hr, the condenser--1,700 $/hr, the steam generator--1,200 $/hr. The inclusion of capital cost and O&M are important in new system design assessments. When investigating operational performance, however, these are sunk costs; only fuel cost needs to be considered. The application of a case study is included based on a real modification instituted at Palo Verde to reduce corrosion steam generator problems; the pressure in the steam generator was reduced from 1072 to 980 psi. Exergy destruction costs increased in the low pressure turbine and in the steam generator, but decreased in the reactor vessel and the condenser. The dissertation demonstrates the procedures and tools required for exergoeconomic analysis whether in the evaluation of a new nuclear reactor system concept, or in the assessment of the economic performance in operating plants.

An attempt is made to create a model of exchange rates that explains the short term, daily levels of the foreign exchange spot market. The model is a monetary type that focuses on the eurocurrency markets and the current account. It has a liquidity preference form and employs daily data. The futures rate, the euro interest rate, the eurocurrency money stocks and a current account variable are the individual variables of the model. The futures rate and the euro interest rates are from the assumed Fisher's 'Covered Interest Rate Paradigm'. The eurocurrency money stock variable's justification is based on the real world structure of the spot market where the foreign exchange desks of the major world commercial banks are the dominant players. The current account variable, which is motivated by a desire to improve on the short run performance of the Purchasing Power Parity variable of other monetary models, is justified by trade theory. The liquidity preference form of the model is in keeping with current monetary models. The econometric results show that the model is better than the random walk model. However the results of the individual variables are mixed. The futures rate accounts for the vast majority of the model's success. Although the eurocurrency variable is as statistically significant as the interest rate differentials from the widely accepted Fisher's Covered Interest Rate Parity paradigm, neither was as significant as the futures rate. The current account variable results are not statistically significant. Thus, the current account variable may be discarded while the eurocurrency interest rates and euromoney variables warrant further study. As a result of the dominance of the futures rate variable, models that cry to capture rational expectations such as the News or Chaos Models are appealing. This rational expectations characteristic of the market combined with the dominance of speculation over economic fundamentals also points toward game theory as a good candidate for further study.

Chapter one of this dissertation provides an experimental test of a joint hypothesis implied by the constant relative risk averse model of first price sealed bid auction theory and standard risk preference theory. This test will be used to determine whether observed risk attitude is solely a characteristic of the individual (as conventional economic theory has it) or jointly a characteristic of the individual and the environment (as some cognitive psychologists maintain). It also presents a simple adjustment to first price auction experiments which causes "throw away" bidding behavior to be dramatically decreased and makes empirical estimation more precise. Standard theoretical search models assume that agents behave as if they search optimally. The second chapter of this dissertation reports the experimental results of a test of whether agents maximize their payouts by optimally searching for the best of n candidates in what has been called the "Secretary Problem." The novelty of this design is that the optimal search rule is invariant to agents' risk attitudes. This is made possible by implementing a binary payout schedule in which stopping at the best candidate pays a positive amount and stopping at any other candidate pays nothing. On average, subjects chose the best candidate slightly less often than an optimal searcher, while the El-Gamal and Grether (1995) estimation procedure suggests that subjects were either using a sub-optimal rule or just randomly guessing.

Tournament incentives have been extensively analyzed, and recommended as policy, by economists and compensation consultants alike. Analysis of tournaments typically looks at the effect of tournament contracts for individuals on individual behavior in non-market settings (public good provision, team tasks, etc.). In contrast, this work investigates the effect of tournament contracts for individual agents on market performance. In particular, this work investigates the effect on asset market performance of individual contracts that reward "beating the market". To this end, both theory and laboratory experiments are employed. The theoretical prediction that the rational expectations equilibrium is destroyed by the introduction of "beat the market" contracts is overwhelmingly supported by the experimental data.

Each chapter of this dissertation focuses on a different aspect of strategic behavior. The first chapter presents research in which humans play against a computer decision maker that follows either a reinforcement learning algorithm or an Experience Weighted Attraction algorithm. The algorithms are more sensitive than humans to exploitable opponent play. Further, learning algorithms respond to calculated opportunities systematically; however, the magnitudes of these responses are too weak to improve the algorithm's payoffs. Additionally, humans and current models of their behavior differ in that humans do not adjust payoff assessments by smooth transition functions but when humans do detect exploitable play they are more likely to choose the best response to this belief. The second chapter reports research designed to directly reveal the information used by subjects in a game. Human play is often classified as adhering to reinforcement learning or belief learning. This is typically due to using subjects' observed action choices to estimate the learning models' parameters. We use a different, more direct approach: an experiment in which subjects choose which kind of information they see--either the information required for reinforcement learning, or the information required for belief learning. Results suggest that while neither kind of information is chosen exclusively, subjects most often choose information that is consistent with belief learning and inconsistent with reinforcement learning. The third chapter discusses the Groves-Ledyard mechanism. In economics we typically rely on continuous analysis, however doing so may not lead to an accurate assessment of a discrete environment. The Groves-Ledyard mechanism is such a case that demonstrates a drastic divergence of results between continuous and discrete analysis. This chapter shows that given quasi-linear preferences, a discrete strategy space will not necessarily yield a single Pareto optimal Nash equilibrium, but typically many Nash equilibria, not all of which are necessarily Pareto optimal. Further, the value of the mechanism's single free parameter determines the number of Nash equilibria and the proportion of Pareto optimal Nash equilibria.

This dissertation is a comparative study of the approach taken to biotechnology innovation markets by competition law. / The biotechnology innovation market has recently boomed and, by its very nature, raises new and challenging issues in competition law. / Economic theorists have closely followed this phenomenon and have constructed a new theory around it. Known as the "innovation markets theory", it is thoroughly revolutionary inasmuch as it allows the competition authorities to act in markets for which products do not yet exist. It is part of the trend in economic analysis favoring a dynamic approach to the market, while continuing to respect intellectual property rights. / While this theory has become established with the US antitrust authorities, it has not as yet gained a foothold in EU law, which has integrated economic analysis teachings in its own unique way.

<p> The global crisis has turned the spotlight on the channels of shock transmission across countries, sectors, and markets. Particular emphasis has been placed on the role of interconnectedness and systemic vulnerabilities in the crisis propagation. The crisis has also rekindled efforts to re-examine the existing financial stability framework, which in many countries includes financial stability reports published by central banks with the aim to monitor systemic risks. I examine three questions that aim to broaden our understanding of the shock transmission channels during the crisis and the effectiveness of financial stability reports as a risk-monitoring tool: (1) What was driving the shock propagation in international interbank markets? (2) Are nonfinancial firms that operate in countries with banking problems more prone to financial distress? (3) Is there an empirical link between the publication of financial stability reports and financial stability?</p>