This thesis contributes to the empirical literature about how uncertainty affects firm-level investment behavior and capital accumulation using a structural econometric approach. Chapter 2 surveys the literature and highlights that there are two key channels through which uncertainty may affect investment decisions. One reflects the non-linearity of operating profits in stochastic demand or productivity parameters, summarized as the Hartman-Abel-Caballero (HAC) effect. Another reflects frictions in capital adjustment, summarized by different forms of capital adjustment costs: partial irreversibility, a fixed cost of undertaking any investment and quadratic adjustment costs. Chapter 3 presents simulation evidence about the effects of uncertainty on investment dynamics and capital accumulation through different forms of adjustment costs. Using the Method of Simulated Moments, Chapters 4 and 5 estimate fully parametric structural investment models, for panels of Brazilian and UK manufacturing firms, respectively. Chapter 4 investigates the effects of reducing capital adjustment costs. Counterfactual simulations indicate that investment would be much more responsive to new information about profitability if firms in Brazil faced a lower level of adjustment costs. A lower level of adjustment costs would also induce firms to operate with substantially higher capital stocks. Both these effects are mainly due to the importance of the estimated quadratic adjustment costs. Chapter 5 then investigates the effects of changing the level of uncertainty. The estimated investment models predict a small effect of uncertainty on investment dynamics in the short-run, and a negative and potentially large effect of uncertainty on capital accumulation in the long-run. The long-run effect of uncertainty operates through the negative effect of quadratic adjustment costs in the baseline model, or through a richer combination of effects in an extended model that allows discount rates to vary with the level of uncertainty.

The dominant role of credit ratings, along with the failure of important FIs, exacerbated the 2008 crisis and caused further damage to European economies, which highlighted the need for effective regulation to prevent a reoccurrence. This thesis investigates the effect of EU and US recent regulatory reforms of the rating industry on the quality of credit ratings of financial institutions (FIs), as well as the impact of the new EU financial regulatory initiatives on the performance of FIs. The first empirical Chapter focuses on the EU reforms of credit rating agencies (CRAs) and provides evidence supporting the presence of a conservative rating bias in the post regulatory period, as increased scrutiny, fines and liability increase the cost of over rating. CRAs exhibit an unwarranted decrease in EU FI ratings, evidenced by an increase in false warning and a fall in the informativeness of FI rating downgrades in the post regulatory period. A subsequent rise in stock market responses to rating upgrades is consistent with CRAs expending greater effort to ensure they are justified. The second empirical Chapter focuses on the US reforms of CRAs and reports no significant impact on FI ratings, rather each CRA has responded differently to the passage of the US Dodd-Frank Act (DFA). There is, however, a significant reduction in stock market reactions to FI credit rating signals, consistent with diminishing reliance on credit ratings by market participants in the US. The third empirical Chapter builds and estimates a dynamic model of FI behaviour using discrete choice dynamic programming (DCDP). The model is used to simulate and examine the impact of regulations, including EU reforms of CRAs, capital adequacy regulation (Basel III), and the bail-in regime, on FIs' behaviour in the real economy. The results show that the shift to increasingly conservative rating behaviour triggered by the CRA reforms has caused FIs to respond by manipulating their capital ratios and to reduce lending activities. The results also show that more stringent capital requirements stimulate FIs to hold more capital, reduce lending and reveal a positive influence in reducing bank insolvency rates, particularly during the crisis period. The introduction of a bail-in regime reveals similar results, but crucially stimulates the adoption of a stable equilibrium (unlike Basel III). This thesis highlights drawbacks with the current regulatory reforms of the EU and US FI rating industries and suggests potential solutions. The thesis also informs the policy debate surrounding the best way to regulate both CRAs and FIs and ensure that there is not a reoccurrence of the problems present in the 2008 financial crisis.

abstract: This dissertation applies the Bayesian approach as a method to improve the estimation efficiency of existing econometric tools. The first chapter suggests the Continuous Choice Bayesian (CCB) estimator which combines the Bayesian approach with the Continuous Choice (CC) estimator suggested by Imai and Keane (2004). Using simulation study, I provide two important findings. First, the CC estimator clearly has better finite sample properties compared to a frequently used Discrete Choice (DC) estimator. Second, the CCB estimator has better estimation efficiency when data size is relatively small and it still retains the advantage of the CC estimator over the DC estimator. The second chapter estimates baseball's managerial efficiency using a stochastic frontier function with the Bayesian approach. When I apply a stochastic frontier model to baseball panel data, the difficult part is that dataset often has a small number of periods, which result in large estimation variance. To overcome this problem, I apply the Bayesian approach to a stochastic frontier analysis. I compare the confidence interval of efficiencies from the Bayesian estimator with the classical frequentist confidence interval. Simulation results show that when I use the Bayesian approach, I achieve smaller estimation variance while I do not lose any reliability in a point estimation. Then, I apply the Bayesian stochastic frontier analysis to answer some interesting questions in baseball. / Dissertation/Thesis / Doctoral Dissertation Economics 2014

<div>This dissertation expands on the economics of labeling products with credence quality attributes. Specifically, it aims at incorporating recent discussions in the food markets regarding 1) consumers' difficulty of perceiving the exact quality that labels try to communicate and 2) imperfect competition on quality and price between firms providing these labeled products. These items are important because consumers and firms have to navigate a market environment in which there exist many quality labels competing for consumers' preferences (e.g., nonGMO, USDA organic, Bioengineered label, local) with many of these labels offering different grades of quality (e.g., 100\% organic, organic, made with organic ingredients). While more quality label may match consumers' heterogeneous preferences, they may cause confusion and misperception among buyers, ultimately impacting efficiency and distribution of surplus in the market. More quality labels also may impact firms' decisions as firms can select themselves into different poles of the quality spectrum and avoid price competition by doing so. Finally, governmental policies that aim at educating consumers or provide them with more options (e.g., informational-based policies, graded USDA organic certification program) can have unintended consequences under an environment in which there exist market failures related to information or competition.</div><div><br></div><div>My goal is to evaluate this complex environment in three interconnected studies. The first study is an applied theory paper in which I show how curbing consumers' misperception about quality in a market of labeled credence attributes may decrease welfare if firms imperfectly compete in quality and prices. I show that this is true if consumers' misperception offers incentives for firms to either expand the size of the market or increase the average quality of products offered. The second essay empirically tests these insights in controlled laboratory experiments in which subjects act as sellers that compete along quality and price dimensions. I show that the insights of the theory paper hold particularly when consumers overvalue a high-quality product that holds a large market share. Finally, in the last study of this dissertation, I show that the rank-order of the USDA organic certification program may not hold in all markets, as consumers may not have a high willingness to pay for 100\% organic products. In the study, I show that consumers in the market of organic ground coffee market could be better off if USDA ditched the quality grade \textbf{100\% organic} of its program. Doing so would also benefit the most profitable firms in the market and increase welfare.</div><div><br></div><div>This dissertation shows that label programs and food policies that tackle quality in credence attributes must be designed with two main market characteristics in sight. The first is how well consumers understand the information in labels. The second is what is the degree of competition in the market and how firms can use the certification program to extract further rents from consumers.</div><div><br></div>

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<p>This dissertation contributes to the rapidly growing empirical research area in the field of operations management. It contains two essays, tackling two different sets of operations management questions which are motivated by and built on field data sets from two very different industries --- air cargo logistics and retailing. </p><p>The first essay, based on the data set obtained from a world leading third-party logistics company, develops a novel and general Bayesian hierarchical learning framework for estimating customers' spillover learning, that is, customers' learning about the quality of a service (or product) from their previous experiences with similar yet not identical services. We then apply our model to the data set to study how customers' experiences from shipping on a particular route affect their future decisions about shipping not only on that route, but also on other routes serviced by the same logistics company. We find that customers indeed borrow experiences from similar but different services to update their quality beliefs that determine future purchase decisions. Also, service quality beliefs have a significant impact on their future purchasing decisions. Moreover, customers are risk averse; they are averse to not only experience variability but also belief uncertainty (i.e., customer's uncertainty about their beliefs). Finally, belief uncertainty affects customers' utilities more compared to experience variability. </p><p>The second essay is based on a data set obtained from a large Chinese supermarket chain, which contains sales as well as both wholesale and retail prices of un-packaged perishable vegetables. Recognizing the special characteristics of this particularly product category, we develop a structural estimation model in a discrete-continuous choice model framework. Building on this framework, we then study an optimization model for joint pricing and inventory management strategies of multiple products, which aims at improving the company's profit from direct sales and at the same time reducing food waste and thus improving social welfare.</p><p>Collectively, the studies in this dissertation provide useful modeling ideas, decision tools, insights, and guidance for firms to utilize vast sales and operations data to devise more effective business strategies.</p> / Dissertation

Thesis advisor: Andrew Beauchamp / Thesis advisor: Peter Gottschalk / This dissertation examines how caregiving for an elderly parent affects an adult child's labor supply and wages. In the first chapter (co-authored with Courtney H. Van Houtven and Norma B. Coe) we identify the relationship between informal care and labor force participation in the United States, both on the intensive and extensive margins, and examine wage effects. We control for time-invariant individual heterogeneity; rule out or control for endogeneity; examine effects for men and women separately; and analyze heterogeneous effects by task and intensity. We find modest decreases--1.4-2.4 percentage points--in the likelihood of working for caregivers providing personal care. Male and female chore caregivers, meanwhile, are more likely to retire. For female care providers who remain working, we find evidence that they decrease work by 3-10 hours per week and face a 2.3-2.6 percent wage penalty. We find little effect of caregiving on working men's hours or wages except for a wage premium for male intensive caregivers. In the second chapter I formulate and estimate a dynamic discrete choice model of elder parent care and work to analyze how caregiving affects a woman's current and future labor force participation and wages. Intertemporal tradeoffs, such as decreased future earning capacity due to a current reduction in labor market work, are central to the decision to provide care. The existing literature, however, overlooks such long-term considerations. I depart from the previous literature by modeling caregiving and work decisions in an explicitly intertemporal framework. The model incorporates dynamic elements such as the health of the elderly parent, human capital accumulation and job offer availability. I estimate the model on a sample of women from the Health and Retirement Study by efficient method of moments. The estimates indicate that intertemporal tradeoffs matter considerably. In particular, women face low probabilities of returning to work or increasing work hours after a caregiving spell. Using the estimates, I simulate several government sponsored elder care policy experiments: a longer unpaid leave than currently available under the Family and Medical Leave Act of 1993; a paid work leave; and a caregiver allowance. The leaves encourage more work among intensive care providers since they guarantee a woman can return to her job, while the caregiver allowance discourages work. A comparison of the welfare gains generated by the policies shows that half the value of the paid leave can be achieved with the unpaid leave, and the caregiver allowance generates gains comparable to the unpaid leave. / Thesis (PhD) — Boston College, 2012. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

The dissertation is comprised of three papers. In the first two Chapters, I analyze the importance of competition, preference heterogeneity, and socio-economic/country-specific factors to explain the differences in penetration rates of mobile phone services across EU Member States. Chapter 1 presents a model of demand and supply for mobile phone services in which products are perceived as homogenous but consumers are heterogeneous with respect to their valuation of the services. Once a service is purchased, consumers (temporarily) leave the market. The parameters which govern the distribution of preferences are allowed to vary by country and will be estimated as part of the demand specification. The model matches the data well and is able to replicate the observed u-shape in the coefficient of variation in penetration rates over the sample period. Using the demand parameters, consumer acquisition costs are backed out and counterfactual experiments performed. I find that preference heterogeneity and differences in the cost of consumer acquisition explain most of the variation in penetration rates across countries. Competition and other control variables, such as the price of fixed-line calls, play only a minor role. In Chapter 2 I relax the assumption that firms are perceived as homogenous and model them as differentiated products. I incorporate endogenous population weights in a standard random coefficients logit model to capture changes in the demographic composition of potential buyers over time due to the (temporary) market exit of adopters. Compared to the results of Chapter 1, I find a larger role of competition and a smaller impact of the (net) cost of consumer acquisition in explaining differences in mobile phone services diffusion. In the third Chapter, I analyze the effect of a product introduction on labor supply. I demonstrate that it is possible to overcome many of the limitations associated with the lack of individual level purchase data by focusing on teenage labor supply and the introduction of video game consoles. I find that 16- to 17-year old male teenagers significantly increase their hours of work in the months prior to video console introductions beyond the usual male-female difference.

The dissertation is comprised of three papers. In the first two Chapters, I analyze the importance of competition, preference heterogeneity, and socio-economic/country-specific factors to explain the differences in penetration rates of mobile phone services across EU Member States. Chapter 1 presents a model of demand and supply for mobile phone services in which products are perceived as homogenous but consumers are heterogeneous with respect to their valuation of the services. Once a service is purchased, consumers (temporarily) leave the market. The parameters which govern the distribution of preferences are allowed to vary by country and will be estimated as part of the demand specification. The model matches the data well and is able to replicate the observed u-shape in the coefficient of variation in penetration rates over the sample period. Using the demand parameters, consumer acquisition costs are backed out and counterfactual experiments performed. I find that preference heterogeneity and differences in the cost of consumer acquisition explain most of the variation in penetration rates across countries. Competition and other control variables, such as the price of fixed-line calls, play only a minor role. In Chapter 2 I relax the assumption that firms are perceived as homogenous and model them as differentiated products. I incorporate endogenous population weights in a standard random coefficients logit model to capture changes in the demographic composition of potential buyers over time due to the (temporary) market exit of adopters. Compared to the results of Chapter 1, I find a larger role of competition and a smaller impact of the (net) cost of consumer acquisition in explaining differences in mobile phone services diffusion. In the third Chapter, I analyze the effect of a product introduction on labor supply. I demonstrate that it is possible to overcome many of the limitations associated with the lack of individual level purchase data by focusing on teenage labor supply and the introduction of video game consoles. I find that 16- to 17-year old male teenagers significantly increase their hours of work in the months prior to video console introductions beyond the usual male-female difference.

The first chapter of this thesis gives a detailed picture of commonly used structural estimation techniques for several types of auction models. Next chapters consist of essays in which these techniques are utilized for empirical analysis of auction environments. In the second chapter we discuss the identification and estimation of the distribution of private signals in a common value auction model with an asymmetric information environment. We argue that the private information of the informed bidders are identifiable due to the asymmetric information structure. Then, we propose a two stage estimation method, which follows the identification strategy. We show, with Monte-Carlo experiments, that the estimator performs well. Third chapter studies Outer Continental Shelf drainage auctions, where oil and gas extraction leases are sold. Informational asymmetry across bidders and collusive behavior of informed firms make this environment very unique. We apply the technique proposed in the second chapter to data from the OCS drainage auctions. We estimate the parameters of a structural model and then run counterfactual simulations to see the effects of the informational asymmetry on the government's auction revenue. We find that the probability that information symmetry brings higher revenue to the government increases with the value of the auctioned tract. In the fourth chapter, we make use of the results in the multi-unit auction literature to study the Balancing Energy Services auctions (electricity spot market auctions) in Texas. We estimate the marginal costs of bidders implied by the Bayesian-Nash equilibrium of the multi-unit auction model of the market. We then compare the estimates to the actual marginal cost data. We find that, for the BES auction we study, the three largest bidders, Luminant, NRG and Calpine, have marked-down their bids more than the optimal amount implied by the model for the quantities where they were short of their contractual obligations, while they have put a mark-up larger than the optimal level implied by the model for quantities in excess of their contract obligations. Among the three bidders we studied, Calpine has come closest to bidding its optimal implied by the Bayesian-Nash equilibrium of the multi-unit auction model of the BES market.