Essays in Industrial Organization and Political Economy
By: Vinayak Iyer
Publisher: [publisher not identified]
Published: 2022
Place of publication: [New York, N.Y.?]
Language: eng
Description: In this dissertation, the first two chapters seek to understand and quantify how different types of frictions shape individual and market outcomes. This strand of my current research studies questions in urban settings such as the role of ridesharing platforms in mitigating the search and match frictions prevalent in taxi markets and how information frictions can hinder the growth small and medium sized firms in developing countries. The final chapter of my dissertation studies the consequences of electoral accountability in democracies. This strand of research studies the role of electoral incentives in shaping the allocation and provision of effort by politicians. The first chapter of my dissertation, co-authored with Motaz Al-Chanati, studiesthe sources of efficiency gains in ridesharing markets. The key motivation arises from the fact that in many decentralized transportation markets, search and match frictions lead to inefficient outcomes. Ridesharing platforms, who act as intermediaries in traditional taxi markets, improve upon the status quo along two key dimensions: surge pricing and centralized matching.

We study how and why these two features make the market more efficient; and explore how alternate pricing and matching rules can improve outcomes further. To this end, we develop a structural model of the ridesharing market with four components: (1) dynamically optimizing drivers who make entry, exit and search decisions; (2) stochastic demand; (3) surge pricing rule and (4) a matching technology. Relative to our benchmark model, surge pricing generates large gains for all agents; primarily during late nights. This is driven by the role surge plays in inducing drivers to enter the market. In contrast, centralized matching reduces match frictions and increases surplus for consumers, drivers, and the ridesharing platform, irrespective of the time of the day. We then show that a simple, more flexible pricing rule can generate even larger welfare gains for all agents. Our results highlight how and why centralized matching and surge pricing are able to make the market more efficient. We conclude by drawing policy implications for improving the competitiveness between taxis and ridesharing platforms.

My second chapter, co-authored with Jonas Hjort and Golvine de Rochambeau, studies the role of information frictions amongst firms in developing countries. Evidence suggests that many firms in poor countries stagnate because they cannot access growth-conducive markets. We hypothesize that overlooked informational barriers distort market access. To investigate, we gave a random subset of medium-sized Liberian firms vouchers for a week-long program that exclusively teaches “sellership”: how to sell to corporations, governments, and other large buyers. Firms that participate win three times as many formal contracts a year later. The impact is heterogeneous: informational sales barriers bind for about a quarter of firms. Three years after training, these firms continue to win desirable contracts, are more likely to operate, and employ more workers. In my final chapter, I analyze how politicians in Canada allocate their time and effort when faced with competitive elections. In particular I study how well the so-called discipline effect work in democratic elections and how does it affect the allocation of time and resources of politicians.

To do this, I present causal evidence of the effect of electoral vulnerability on subsequent performance of Canadian Members of Parliament along various dimensions. More specifically, I document a politician’s substitution of effort across different tasks in response to plausibly exogenous variation in electoral vulnerability. Using party opinion polls on the day before the election as an instrument, I estimate that more electorally vulnerable politicians substitute effort away from attending the parliament and instead spend more money in their constituency and more money in the following election campaign. These MPs spend more on salaries to their staff, travel to and from the constituency and advertising to constituents. I also find evidence that electorally vulnerable MPs find it harder to raise money for their next election but are compensated by transfers from the political party they belong to. This substitution of effort towards constituency and campaign activities is rationalized with a simple political economy model where politicians can influence a voter’s belief about their ability by exerting effort on more costly, but informative actions.
Notes: Department: Economics.

Thesis advisor: Bernard Salanie.

Thesis advisor: Donald R. Davis.

Thesis (Ph.D.)--Columbia University, 2022.