Recommender systems are ubiquitously used by online vendors as profitable tools to boost sales and enhance the purchase experience of their consumers. In recent literature, the value created by recommender systems are discussed extensively. In contrast, few researchers look at the negative side of the recommender systems from the viewpoint of policymakers. To fill this gap, I critically investigate the welfare impact of recommender systems (RSs) during my Ph.D. study. The main focus of my Ph.D. dissertation is analyzing whether there exists a conflict of interest between the recommendations provider and its consumers in the electronic marketplace. My dissertation is composed of three parts. In Part I, I evaluate empirically whether in the real world, the profit-driven firm will choose a recommendation mechanism that hurts or is suboptimal to its consumers. In Part II, I analyze the role of personalization technology in the RSs from a unique perspective of how personalization resembles price discrimination as a profitable tool to exploit consumer surplus. In part III, I investigate the vendor’s motivation to increase the level of personalization in two-period transactions. As the RSs are designed by the firm, and the firm’s objective is to maximize profits, the RSs might not maximize consumers’ welfare. In Part I of my thesis work, I test the existence of such a conflict of interest between the firm and its consumers. I explore this question empirically with a concrete RS created by our industry collaborator for their Video-on-Demand (VoD) system. Using a large-scale dataset (300,000 users) from a randomized experiment on the VoD platform, I simulate seven RSs based on an exponential demand model with listed movie orders and prices as key inputs, estimated from the experimental dataset. The seven simulated RSs differ by the assignments of listed orders for selected recommended movies. Specifically, assignments are chosen to maximize profits, consumer surplus, social welfare, popularity (IMDB votes and IMDB ratings), and previous sales, as well as random assignments. As a result, the profit-driven recommender system generates 8% less consumer surplus than the consumer-driven RSs, providing evidence for a conflict of interest between the vendor and its consumers. Major e-vendors personalize recommendations by different algorithms that depend on how much and types of consumer information obtained. Therefore, the welfare evaluations of personalized recommendation strategies by empirical methods are hard to generalize. In Part II of my thesis, I base my analysis of personalization in RSs on a conceptual approach. Under an analytic framework of horizontal product differentiation and heterogenous consumer preferences, the resemblance of personalization to price discrimination in welfare properties is presented. Personalization is beneficial to consumers when more personalization leads to more adoption of recommendations, since it decreases search costs for more consumers. However, when the level surpasses a threshold when all consumers adopt, a more personalized RS decreases consumer surplus and only helps the firm to exploit surplus from consumers. The extreme case of perfect personalization generates the same welfare results as first-degree price discrimination where consumers get perfectly fit recommendations but are charged their willingness-to-pay. As shown in Part II, personalization is always profitable for the monopoly seller. In Part III, I investigate the vendor’s motivation to increase the level of personalization in a two-period transactions. In the first period, consumers do not observe the true quality of the recommendations and choose to accept recommended products or not based on their initial guesses. In the second period, consumers fully learn the quality. The settings of consumer uncertainty and consumer learning incentivize the firm to charge lower-than-exploiting price for recommendations to ensure consumers’ first-period adoptions of the RS. Therefore, uncertainties mediate the conflicts of interest from the vendor’s exploitive behavior even though the vendor might strategically elevate consumers’ initial evaluation to reduce such effect.

The United States Health Care sector is a large and growing segment of the US economy. Herein, I present three distinct research projects regarding aspects of that industry, especially how it responds to public policy and government pro- grams. I focus primarily on the hospital sector, and the Medicare Advantage market. Additionally, I explore how ownership type-publicly owned versus for-profits, for example-behave differently. I investigate the relative efficiency of different ownership types in the US hospital industry. Earlier studies neglect the differential ability of the hospital types to choose their own market. We use a Dubin-McFadden approach to solve the endogeneity problem and estimate hospital efficiencies for each ownership type. Efficiencies are estimated using stochastic frontier analysis. Results indicate that accounting for location choice does affect estimates of efficiency and that for-profit hospitals have a relative advantage in smaller markets while public hospitals have a slight edge in larger markets. Next, I study entry decisions of insurance plans participating in the Medicare Advantage program. I use the prevailing models of entry to compare how for profit and non-profit insurance firms differentially emphasize the characteristics of potential markets. I also determine how the preferential treatment of non-profits affects the composition of markets and whether governments should adjust their treatment to encourage or discourage non-profit entry. Results indicate that non-profit insurance companies are more responsive to higher payment rates which suggest that they act more like for-profit firms than altruistic organizations. Finally, I estimate the how much net welfare, Medicare Advantage contributes to the US economy. I use the Medicare Current Beneciary Survey to estimate a discrete choice model of beneciaries' choice of traditional Medicare, Medigap, and Medicare Advantage. I use the results to calculate the net welfare; I find that Medicare Advantages, on net, increased social welfare by 7.76 billion dollars in 2005.

This thesis uses nonparametric revealed preference methods to derive new tests for consistency with models of consumer behaviour, and discuss the implications for welfare analysis. Chapter 1 demonstrates how to conduct revealed preference analysis when prices, and hence budget constraints, are only partially observed. This chapter extends the revealed preference results of Crawford and Polisson (2015), derived for the static case, to dynamic settings, allowing for storability of goods. Necessary and sufficient conditions for consistency with intertemporal models are derived, which do not require the researcher to distinguish between corner solutions and unavailability of the good, or to impute prices. Chapter 2 discusses the validity of using reported happiness measures as proxies of utility or social welfare, by testing for consistency between revealed and reported preference orderings in Japanese household survey data. Although the expenditure behaviour of most households is consistent with standard models of utility maximisation, it is generally inconsistent with the preference ordering given by their reported happiness. This inconsistency is likely due to reporting error in the happiness measure, and suggests that happiness and utility are empirically distinct and noninterchangeable. Chapter 3 investigates the effect of price inattention on inflation misperceptions and cost-of-living indices, by developing a behavioural model in which consumers only notice price changes above a certain threshold. A data application, using supermarket scanner data, demonstrates that this model generates plausible results; in particular, consumers have more accurate perceptions of inflation during periods of high or volatile inflation, but may substantially misperceive inflation when it is low. These results have important implications for conducting welfare analysis when consumers are not fully attentive to price changes.

L’objectif de cette thèse est d’étudier comment les pays membres de l’OMC peuvent gérer leurs différends commerciaux. Dans le premier chapitre, nous analysons empiriquement les déterminants de la participation des pays membres de l’OMC à son organe de règlement des différends (ORD). Nous démontrons que la probabilité qu’un pays porte plainte devant l’ORD dépend de sa structure commerciale, mais également de ses capacités légales et de représailles commerciales. Dans le deuxième chapitre, nous déterminons l’impact du commerce illégal sur le bien-être économique. Pour cela, nous construisons un modèle en équilibre partiel dans lequel nous ajoutons du commerce illégal. De plus, nous appliquons ce modèle au trafic d’avocats au Costa Rica. Nos résultats indiquent que le commerce illégal augmente le bien-être économique par rapport à une situation « sans commerce » illégal. En revanche, par rapport à une situation de « libre-échange », le commerce illégal ne compense pas toujours pour les effets néfastes provenant d’une mesure commerciale restrictive. Dans le troisième chapitre, nous utilisons un modèle en équilibre général afin de déterminer si les États-Unis peuvent bénéficier de la menace et/ou de la mise en place d’une politique commerciale basée sur la réciprocité stricte. Nous démontrons que bien que la menace de représailles puisse générer un gain global, sa mise en place réduirait le bien-être économique des États-Unis et du monde. / The objective of this dissertation is to explore how WTO members may respond to trade disputes. In chapter one, we empirically investigate whether the WTO DSS is beyond reach of developing countries. We find that while the structure of trade plays an important role in explaining the probability that a WTO member initiates a dispute at the WTO DSS, the legal capacity and the trade retaliatory capacity of a country also affects its participation in the DSS. In chapter two, we aim to determine the impact of smuggling on economic welfare. We build a partial equilibrium model of trade in which we introduce illegal trade and apply this model to the smuggling of avocado in Costa Rica. Our results show that smuggling improves welfare compared to the “no-smuggling” situation. Compared to the “free-trade” situation, smuggling does not always compensate for the negative effects arising from the restrictive trade measure. In chapter three, we use a general equilibrium model of trade to determine whether the United States may benefit from the threat and/or application of strict reciprocity against its main trading partners. We demonstrate that while the threat of retaliation through reciprocal taxes may generate a global gain, its effective application would reduce the United States and the world’s welfare.

This thesis examines both conventional and unconventional monetary policies in a DSGE model with an interbank market friction. The recent crisis during 2007-2009 affected economies worldwide and forced central banks to implement not just conventional monetary policies, but also direct interventions in financial markets. We investigate a DSGE model with financial frictions, to test conventional and unconventional monetary policies. The thesis starts by using the Gertler and Kiyotaki (2010)'s modelling framework, to examine eight different shocks under imperfect interbank market conditions. Unlike Gertler and Kiyotaki (2010) who consider the two extreme cases for the banking system, I firstly extend the analysis to a case in between the two extreme cases that they examined. The shocks considered include supply and demand shocks and also two shocks from the financial system itself (an interbank market shock and a shock to the deposit market). It is found that a negative shock to the interbank market has only a moderate impact to the banking system. However, a shock to the deposit market has a much stronger impact. Even though the impacts of these shocks are not large it is shown that thefinancial frictions magnify the effects of other shocks. The model is extended to include price stickiness. A modified Taylor rule is analysed to test how conventional monetary policy should respond to the shocks in the presence of financial frictions. Specifically the credit spread is added as a third term in the monetary policy rule. The stabilising properties of the policy rule are analysed and a welfare analysis is conducted. The model is further developed to include unconventional monetary policy in the form of direct lending to private sector firms from the central bank. A policy rule for unconventional policy is tested and its stabilising and welfare properties are analysed.

Essay 1: Expectation-Driven House Prices, Debt Default and Inflation Dynamics We contribute to the literature on dynamic stochastic general equilibrium (DSGE) models with housing collateral by including shocks to house price expectations. We also incorporate endogenous mortgage defaults that are rarely included in DSGE models with housing collateral. We use this model to study the effects of variations in house price expectations on macroeconomic dynamics and their implications for monetary policy. Model simulations show that an increase in expected future house prices leads to a decline in mortgage default rate and interest rates on household and business loans, whereas it leads to an increase in house prices, housing demand, household debt, business debt, bank leverage ratio and economic activity. In contrast to previous studies, we find that inflation is low during a house price boom. Finally, we show that monetary policy that takes into account household credit growth reduces the volatility of output and dampens a rise in housing demand, household debt and bank leverage ratio that enhances financial stability. However, a central bank that reacts to household credit growth increases the volatility of inflation. / Essay 2: House Price Expectations, Boom-Bust Cycles and Implications for Monetary Policy This essay examines the role of household expectations about future house prices and their implications for boom-bust cycles and monetary policy. Our findings are as follows. First, waves of optimism and pessimism about future house prices generate boom-bust cycles in house prices, financial activities (household debt, business debt, bank leverage, interest rates on household and business loans) and the real economy (housing demand, consumption, employment, investment and output). Second, we find that inflation declines during a house price boom and increases during a house price burst. Third, we find that monetary policy that reacts to household credit growth reduces the magnitude of boom-bust cycles and improves household welfare. Fourth, we find that the case for taking into account household credit growth becomes stronger in an economy in which the bank capital to asset ratio requirement is low, interest rates on loans and deposits adjust immediately to changes in the policy rate, or the household sector is highly indebted. / Essay 3: Credit Disruptions and the Spillover Effects between the Household and Business Sectors This essay examines the effects of credit supply disruptions in a New Keynesian DSGE model with housing collateral and working capital channels. A tightening of business credit conditions creates negative spillovers from the business sector to the household sector through labor income and housing collateral channels. A tightening of household credit conditions has negative spillover effects on the business sector via the housing collateral channel. We find that spillovers are more sensitive to changes in leverage where the shock occurs. A negative business credit shock creates upward pressure on inflation, whereas a negative household credit shock creates downward pressure on inflation. The working capital channel magnifies the response of inflation to a business credit shock, whereas it dampens the response of inflation to a household credit shock.

La tesis consta de dos partes. En la primera parte se analiza la relación entre las fricciones en los flujos de información que llegan a la empresa y la persistencia del patrón de la inflación. En particular, se presenta un nuevo estimador por el modelo de Makiw y Reis (2002) "Sticky Information Phillips Curve", y se aplica usando datos trimestrales de EE.UU. El resultado principal es que el modelo tan solo puede explicar la persistencia de la inflación asumiendo que la variancia de la inflación sea mucho mas grande de la que observamos o, equivalentemente, que el modelo no puede explicar conjuntamente la variancia y la persistencia de la inflación.En la segunda parte se presentan nuevas evidencias sobre la publicidad agregada en EE.UU. y se estudian los efectos de la publicidad en la economía usando un modelo dinámico estocástico de equilibrio general. En particular, el capitulo 2 se enfoca en las relaciones de corto plazo entre las mas comunes variables macroeconómicas - consumo agregado, producto interno bruto, totalidad de horas trabajadas en la economía - y la publicidad agregada, con particular atención a la relación de causalidad entre publicidad y consumo. En cambio, el capitulo 3 se enfoca sobre las relaciones de largo plazo, enseñando como la publicidad agregada afecte el nivel de trabajo de la economía. A través del modelo presentado en el capitulo 2, se demuestra que un mayor nivel de publicidad implica un mayor números de oras trabajadas asociadas con un menor nivel de bienestar por los consumidores. / This thesis is organized in two parts. In the first one, I seek to understand the relationship between frictions in information flows among firms and inflation persistence. To this end, I present a novel estimator for the Sticky Information Phillips Curve (Mankiw and Reis, 2002), and I use it to estimate this model with U.S. postwar data. The main result is that the Sticky Information Phillips Curve can match inflation persistence only at the cost of mispredicting inflation variance. I conclude that the Sticky Information Phillips Curve is a valid model to explain inflation persistence but not an overall valid theory of inflation. The second part presents new evidence about aggregate advertising expenditures in U.S., and analyzes the effect of advertising in the aggregate economy by the mean of a dynamic stochastic general equilibrium model. Chapter 2 focuses on the short run impact of advertising on the aggregate dynamics, and shows that an increase in aggregate advertising significantly increases the aggregate consumption. Chapter 3 focuses on the long run effects of advertising on the labor supply, showing that in economies where aggregate advertising is higher, agents supply more hours of works and are generally worse off in terms of welfare.

The majority of wheat research in the world and in Canada is conducted by the public sector. The government of Canada has introduced legislation to update its plant breeder’s rights (PBR) legislation, making Canada compliant with the International Union for the Protection of New Varieties of Plants (UPOV) 91 convention, with the goal to stimulate private investment in wheat variety research. International experience with UPOV 91 reveals a wide range of outcomes depending on the specific royalty setting mechanisms allowed within their domestic legislation. This thesis compares Canada’s existing policy to three very different international examples (France, United Kingdom, and Australia) of UPOV 91 compliant royalty collection systems for wheat. The model presented is one of a monopolistic competitive wheat-breeding industry with the introduction of a new certified seed variety. Farmers have the option to use farm saved seed (FSS) or certified seed on their farm. The additional economic benefit created from the innovation and its distribution is analyzed and interpreted for both, farmers (social benefit) and breeders (private benefit). The results of the analysis show that while each UPOV 91 compliant model generates more revenue for farmers and breeders than Canada’s current policy, they tend to generate less than expected revenue in the short-run. If a country has strong intellectual property rights (IPRs), it will attract some domestic and foreign investment and possibly a beneficial collaboration between the public, private, and producer sector, also known as P4 (public-private-producer-partnerships).

Suppliers in competitive electricity markets regularly respond to prices that change hour by hour or even more frequently, but most consumers respond to price changes on a very different time scale, i. e. they observe and respond to changes in price as reflected on their monthly bills. This thesis examines mixed complementarity programming models of equilibrium that can bridge the speed of response gap between suppliers and consumers, yet adhere to the principle of marginal cost pricing of electricity. It develops a computable equilibrium model to estimate the time-of-use (TOU) prices that can be used in retail electricity markets. An optimization model for the supply side of the electricity market, combined with a price-responsive geometric distributed lagged demand function, computes the TOU prices that satisfy the equilibrium conditions. Monthly load duration curves are approximated and discretized in the context of the supplier's optimization model. The models are formulated and solved by the mixed complementarity problem approach. It is intended that the models will be useful (a) in the regular exercise of setting consumer prices (i. e. , TOU prices that reflect the marginal cost of electricity) by a regulatory body (e. g. , Ontario Energy Board) for jurisdictions (e. g. , Ontario) where consumers' prices are regulated, but suppliers offer into a competitive market, (b) for forecasting in markets without price regulation, but where consumers pay a weighted average of wholesale price, (c) in evaluation of the policies regarding time-of-use pricing compared to the single pricing, and (d) in assessment of the welfare changes due to the implementation of TOU prices.

Suppliers in competitive electricity markets regularly respond to prices that change hour by hour or even more frequently, but most consumers respond to price changes on a very different time scale, i. e. they observe and respond to changes in price as reflected on their monthly bills. This thesis examines mixed complementarity programming models of equilibrium that can bridge the speed of response gap between suppliers and consumers, yet adhere to the principle of marginal cost pricing of electricity. It develops a computable equilibrium model to estimate the time-of-use (TOU) prices that can be used in retail electricity markets. An optimization model for the supply side of the electricity market, combined with a price-responsive geometric distributed lagged demand function, computes the TOU prices that satisfy the equilibrium conditions. Monthly load duration curves are approximated and discretized in the context of the supplier's optimization model. The models are formulated and solved by the mixed complementarity problem approach. It is intended that the models will be useful (a) in the regular exercise of setting consumer prices (i. e. , TOU prices that reflect the marginal cost of electricity) by a regulatory body (e. g. , Ontario Energy Board) for jurisdictions (e. g. , Ontario) where consumers' prices are regulated, but suppliers offer into a competitive market, (b) for forecasting in markets without price regulation, but where consumers pay a weighted average of wholesale price, (c) in evaluation of the policies regarding time-of-use pricing compared to the single pricing, and (d) in assessment of the welfare changes due to the implementation of TOU prices.