Title: Essays in industrial organization and technological change
Description: This dissertation consists of three independent chapters. In chapter 1 I estimate a model of consumer demand for supermarkets using moment inequalities. This approach allows me to estimate the choice of stores without specifying the utility governing what consumers purchase at the stores. It employes the necessary conditions of optimal choice to estimate parameter sets and allows for measurement and expectational errors. Data on supermarkets and on a panel of households in New England is used to uncover parameters that govern the trade-off between store size, cost and travel time. These parameters are important ingredients in the analysis of store location, competition among supermarkets and welfare implications of policy changes. In chapter 2 a unique data set on the innovational effort of the large pharmaceutical firms is used to analyze how market conditions and competition impact innovational activities when firm can operate in multiple markets. Markets in our application are various therapeutic classes that the firm can operate in. We find that firms have lower innovational efforts in markets with more novel drugs of competitors, but less so in markets where they have a prior presence.

We also find that there is interdependence in innovational efforts across markets: effort in a given market is correlated with the number of novel drugs of other firms in other markets. This suggests interdependencies across markets that should be part of innovation policy analysis. In chapter 3 I study the relationship between firm size and research and development expenditures in the presence of firm level heterogeneity. I test the Schumpeterian hypothesis that larger firms will invest disproportionately more in R&D. I find that there is no evidence of returns to scale in R&D investment. Small firms are investing a larger fraction of their revenues in R&D. I also find that the relationship between firm size and R&D investment is weaker when heterogeneity is taken into account and the focus is on what happens when firm size increases. These results highlight the importance of dimensions of heterogeneity other than firm size per se as determinants of the relationship of firm size and R&D.