Essays on the Economics of Suspense, Surprise, Superstars, and Soda

Economists have always been interested in understanding and estimating demand for different goods. Demand is affected by a number of factors, but one that is very important is information. In this work, I estimate the impacts of both instrumental and non-instrumental information on demand for important and commonly consumed products. Instrumental information is information received by an agent that leads to a contingent action. For instance, receiving information about the negative health effects of consuming sugar sweetened-beverages may affect an agent's decision about how many sugar-sweetened beverages they consume. On the other hand, non-instrumental information is information consumed for the sake of entertainment and attention-capture. For example, information disseminated through the news or a novel may not lead to any direct actions, but is enjoyable and welfare improving nonetheless. My dissertation aims to explore the economic implications of demand in response to information./nChapter one, titled Entertainment Utility from Skill and Thrill, uses revealed preference methods to estimate demand for non-instrumental information in entertainment. I do this by examining the "thrill" associated with the trajectory of an event, which includes both suspense and surprise, and the "skill" of performers in an event. I apply the theory presented in Ely et al. (2015) to conduct an empirical analysis that examines the effect of thrill on consumer attention. I extend the Ely et al. (2015) framework by examining spectator preferences for characteristics of the performers themselves, which I call "skill." I use game-specific, high-temporal frequency television ratings data from the National Basketball Association (NBA) to measure spectator responses to skill and thrill. First, I find that a doubling of skill present in a game leads to an approximately 11% increase in initial viewer turnout, while the expected thrill of a game has no statistically significant impact. Next, I show that thrill during a game increases viewership by 7-30%, while a doubling of skill on the court during a specific portion of a game leads to a 1.9-2.4% increase in viewership, depending on specification. Interestingly, I find a negative interactive effect between suspense and skill, suggesting that heightened suspense leads to differentially higher viewership with lower skill on the court. The findings suggest that skill of information-conveying agents primarily impacts viewership on the extensive margin (across games), while thrill is highly time-dependent and primarily impacts viewership on the intensive margin (within games). These findings have important implications for entertainment media companies, including leagues and television broadcasters, and advertisers./nChapter two, titled The Economic Value of Popularity: Evidence from Superstars in the National Basketball Association, estimates spectator willingness-to-pay for superstars in the National Basketball Association. Using microdata from an online secondary ticket marketplace and exogenous player absence announcements, I find 4-16% ($7-$42) reductions in prices when superstars are announced to miss games. Additionally, LeBron James and Stephen Curry exhibit even larger impacts in away game absences--21% ($75/ticket) for LeBron and 18% ($55/ticket) for Curry. The results suggest popularity is a more significant determinant of WTP than ability, and in line with existing superstar literature, popularity predicts price impacts convexly. This paper provides a novel methodology to estimate superstar value, generating implications for the entertainment industry./nChapter three, titled Soda Wars: The Effect of a Soda Tax Election on University Beverage Sales, examines how soda sales changed due to the campaign attention and election outcome of a local excise tax on sugar-sweetened beverages (SSB), commonly referred to as a soda tax. Using panel data of beverage sales from university retailers in Berkeley, California, we estimate that soda purchases relative to control beverages significantly dropped immediately after the election, months before the tax was implemented in the city of Berkeley or on campus. Supplemental scanner data from off-campus drug stores reveal this result is not unique to the university setting. The findings suggest soda tax media coverage and election outcomes can have larger effects on purchasing behavior than the tax itself.

Advisor: Zilberman, David
Sallee, James