June 2013, forthcoming, Journal of Political Economy.
This paper considers when a firm's deliberately chosen name can signal meaningful information about its quality, focusing specifically on a setting in which it does: plumbing firms with names that begin with an "A" or a number receive five times more service complaints, on average. In addition, firms use names beginning with an "A" or a number more often in larger markets, and those that do have higher prices. These results reflect consumers' search decisions and extend to online platforms: plumbing firms that advertise on Google receive more complaints, which contradicts prior theoretical predictions but fits the setting considered here.
April 2013, with James Roberts, forthcoming, The RAND Journal of Economics.
This paper considers the relationship between market structure and health outcomes in a setting where patients have stark preferences: urology patients disproportionately match with a urologist of the same gender. In the United States, however, fewer than 6% of urologists are women despite women constituting 30% of patients. We explain a portion of this disparity with a model of imperfect competition in which urology groups strategically differentiate themselves by employing female urologists. These strategic effects may influence women's health, as markets without a female urologist have a 7.3% higher death rate for female bladder cancer, all else equal.
August 2011, American Economic Journal: Microeconomics, 3:3, 193-209.
This paper tests several predictions from the literature on firm reputation, and confirms a main result: poor performance leads a firm to conceal its reputation. A residential plumbing firm with a record of complaints one standard deviation above the mean is 133.2 percent more likely to change its name. In addition, firms with longer track records are less likely to change their names or exit, while firms with more firm-specific investments, such as advertising, are more likely to change their names than exit. Finally, firms in small markets value their reputations comparatively more than firms in large markets.
August 2011, with Shane Greenstein, Telecommunications Policy, 35:7, 617-632.
How much economic value did broadband Internet create? Despite the importance of this question for national policy, no research has estimated broadband's incremental contribution to U.S. GDP by calibrating against historical adoption and incorporating counterfactuals. This study provides benchmark estimates for 1999 through 2006 and finds that broadband accounts for $28 billion of the $39 billion observed in 2006. Depending on the estimate, households generated $20-$22 billion of broadband revenue and approximately $8.3-$10.6 billion was additional revenue created between 1999 and 2006. Consumer surplus accounted for $4.8-$6.7 billion of this amount, which is not measured in GDP. An Internet-access consumer price index would have to decline by 1.6-2.2% per year for it to reflect this unmeasured value. These estimates differ from existing benchmarks by an order of magnitude and relate to several policy debates.
June 2011, with Shane Greenstein, Information Economics & Policy, 23:2, 200-211.
In this paper, we construct a consumer price index for broadband services in the United States using over 1500 service contracts offered by DSL and cable providers from 2004 through 2009. This exercise frames a range of open questions about measuring price changes in a manner that informs policy discussions about U.S. broadband services. We employ approaches used commonly for constructing a consumer price index by using a mix of matched-model methods and hedonic price index estimations to adjust for qualitative improvements. We find a quality-adjusted price decline, but the evidence points towards a modest decline at most. Our estimates of the price decline range from 3% to 10% in quality-adjusted terms for the 5-year period, which is faster than the BLS estimates for the last 3 years. In contrast to other innovative industries that experience rapid price declines, such as computers or integrated circuits, the modest price decline for broadband services raises many questions.
March 2013, with Paul Grieco, revision requested, The Review of Economic Studies.
We develop an empirical framework to measure the impact of firms' endogenous quality choices on their production. Our approach provides unbiased estimates of productivity, whereas traditional methods would misattribute lower-quality output to higher productivity. In our application, we find a significant quality-quantity tradeoff for dialysis treatments: facilities may treat 1 percent more patients by allowing their expected infection rate to increase by 0.8 percentage points (roughly 6 percent), holding inputs and patient characteristics fixed. We also find (i) extensive quality-adjusted productivity dispersion across providers, (ii) better outcomes among non-profit entities, and (iii) comparatively little effect from competition.
March 2013, with A. Goldfarb, S. Samila, & B. Silverman, revision requested, Management Science.
We show that social interaction reduces the diversity of products purchased by consumers in two retail settings. First, we consider a field experiment conducted by Sweden's monopoly alcohol retailer and find that moving purchases from behind the counter to self-service disproportionately increases the sales of difficult-to-pronounce products. Second, we use individual-level panel data from a pizza delivery restaurant to show that online orders have more complexity and more calories, and measure the consequences for consumer and producer surplus. Combined, these results suggest that social frictions can substantially affect market outcomes.
December 2011, with Y. Hochberg & M. Mazzeo, revision requested, Review of Industrial Organization.
An important type of product differentiation in the VC market is industry specialization. We estimate a market structure model to assess competition among differentiated participants in the VC industry. The impact of a competitor's presence on profits appears markedly different than in other industries with differentiated competitors. Consistent with the presence of network effects that soften competition, these patterns are concentrated in markets that exhibit dense organizational networks among incumbent VC firms. Markets with sparser incumbent firm networks, by contrast, exhibit competitive patterns that resemble those of other, non-networked industries.
August 2011, with Shane Greenstein, in K. Schinasi, B. van Ark & R. Weiss (eds.), The Linked World: How ICT Is Transforming Societies, Cultures and Economies (pp. 35-52). Madrid: Ariel and Fundacion Telefonica.