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NEWS
06.01.10
A rescue of an old paper on Total Positivity and preservation of nice statistical properties under convolution or composition. Blame my taste for nonlinear pricing models and secuential screening for this due update. It is just a warning that I am going to come back on price discrimination soon.
05.21.10
A major revision of our paper on Medicare part D. This time we are a little less confrontational and in addition to clearly distinguishing between the behavior of poor individual on low income subsidies and the rest, we focus on the learning of individual as they repeatedly choose their insurance option among dozens of them. To bad for those who believe that individual behavior is plagued with anomalies. They will not find comfort in reading it. We also learn and changed the title of the paper from "Free and Able to Choose: Evidence from Medicare Part D" to "Sinking, Swimming, or Learning to Swim in Medicare Part D. I hope that the changes in the content are at least as meningful.
03.26.10
A group of twenty-five, mostly Spanish, concerned economists got together and analyzed the current proposed bill to foster sustainable economic growth in Spain. Fearing that in its current version it is a far cry from the deep reforms that Spain needs to avoid a lost decade or more to recover from the ongoing crisis. This effort was coordinated through FEDEA and today we presented the corresponding eBook. I was in charge of Title II, Chapter V of the bill on "Society of Information" i.e., regulation of telecommunications, universal service requirement and alike. You can find my contribution here (in Spanish).
10.20.09
Some years ago I wrote a paper where I showed that individuals switched telephone plans with the explicit goal of saving money on their monthly bills. That was when I was not aware of the "Behavioral Revolution" that was on its way. I always felt that that paper was somewhat ignored because I only dealt with consumers who learned to choose over time and responded to incentives of no more than 5 dollars a month when choosing among not very complex options. But of course it applied to local telephony and not to an "important" application. Well, I guess that nobody will dispute that Medicare is not an economically relevant application. Here is a new paper where it appears that elders are not reasoning impaired and indeed learn to choose among complicated options. Furthermore we show that their willingness to switch plans increases with the potential savings and more importantly that inertia is not present. And the icing of the cake: we can control for individual heterogeneity.
09.14.09
Many years after I shoud have done it, here it is my first paper estimating a discrete choice model of competiton with horizontally differentiated products. The application deals with the fast adoption of diesel vehicles in Spain during the 1990s but we use this study case to evaluate the likelihood that the 2009 U.S. Cash-for-Clunkers program may succeed in shifting demand towards fuel efficient cars on a permanent basis. We conclude that the recent program took place too early in the process of diffusion of new fuel efficient engines.
09.02.09
A little drop in the draught. Now people in strategy should learn the limits of testing for the existence of complementarity among strategies that are not continuous. This little note is forthcoming in Economics Letters.
07.30.09
A revision of the last paper on complementarity, although with a slightly different title. Minor corrections may follow over the next few weeks.
07.05.09
Yet another revision of my paper on foggy pricing. Now I address the behavior of incumbents and entrans separately. Incumbents increase fogginess after the entry of the second firm but entrants offer much simpler and transparent tariff option. Results are robust to the existence of individual heterogeneity in use and expectations.
06.12.09
A much overdue revision of my paper on rational attention co-authored with Ignacio Palacios-Huerta is now available. It will slightly edited over the next couple of weeks.
04.14.09
A revision of the paper on Sarmanov regression models is now available. Relative to the previous one, this computes inference properly: I use a 2,000 replication, 10-step version of a scaled bootsrap (random subsampling).
02.18.09
My paper on competing with menus of tariff options is finally available in the March 2009 issue of the Journal of the European Economic Association.
12.29.08
A short article on the infant industry argument (growing from some old work I did in graduate school) has now appeared at the Princeton Encyclopedia of World Economy.
10.29.08
A new paper on complementarity. This time the focus is on the effect of competitive pressure on innovation. The role of complementarities is to identify the transmission channel of incentives: French car dealers adapt to a more competitive environment by increasing their optimal size. This triggers an increase in product innovation but a reduction in process innovation. Both Arrow's and Schumpeter's views hold for product and process innovation, respectively. However, the effect of competition on innovation is not direct, but rather indirect through the complementarity relationships with the scale of production.
10.22.08
A short note that we hope stop people from estimating bivariate discrete choice models when they want to test for the existence of complementarity among strategies that are not continuous.
08.20.08
My paper on competing with menus of tariff options is now forthcoming in an special (refereed) Symposium Issue on "Complementarities and Information" in the Journal of the European Economic Association.
07.30.08
Hopefully, the last revision of my paper on competing with menus of tariff options is now available.
07.28.08
And here you have one more revision of my paper on foggy pricing. The paper returns to the original 0-1000 monthly minutes of monthly usage of cellular phones. However, I now evaluate how results vary after changing the disperson of the distribution of usage. I also test whether results are robust to the existence of individual uncertainty regarding future usage at the time of subscribing to a particular tariff option. Most notably, the new version adopts a diff-in-diff approach (my first time in this alien territory) and evaluates not only average but also dynamic competitive effects on the use of foggy pricing.
06.27.08
Here is an unexpected incursion into the applied econometrics literature. Trying to overcome some comments by a referee I encountered the Sarmanov distribution some few years ago. This distribution was recently rediscovered in the biostatistical literature but as far as I know, has never been used in economics. I immediately saw the possibility of applying it to address a flexible (and hopefully robust) estimation of multivariate count data and duration models. I leave the latter for somebody else to write. I had enough with these two multivariate Sarmanov count data models.
01.08.08
Yet another revision of my paper on competing with menus of tariff options is now available.
12.10.07
After maturing/struggling for four years and once we tried to burn several computers in three continents, the first final version of the our nonlinear pricing model with random participation is finally available. The paper, co-authored with Gabriel Basaluzzo, estimates a flexible specification of the Rochet-Stole (2002) model of multidimensional pricing. The estimates are used to evaluate the efficiency loss and effectiveness of universal service requirements..
09.23.07
Almost four years after the first version, I am glad to announce that my paper on single-dimensional multipart tariff is finally complete. I have now addressed directly the problem of offering a menu of self-selecting two part tariffs rather than my initial approximation by means of a quadratic function. The estimates of the average foregone profits of a firm that only offers a single two part tariff are now 35 cents per potential customer instead of the 33 cents of the first version. The shadow cost of these 2 cents improvement in precision is enormous: three years of work and a heavily intensive computation procedure instead of the original OLS regressions. I guess that this is the price we pay for the advance of science.
09.20.07
Yet another revision of my paper on foggy pricing is now available. I discoverd a minor mistake in the code that defined one of the variables and decided to run all the programs again. Now I am including an additional robustness check: I consider that the maximum usage may add up to 1000 and 239 minutes a month, respectively. The latter generates an average monthly usage of 160 minutes, which happened to be the average cellular telephone usage in 1992.
08.17.07
A minor revision of my paper on competing with menus of tariff options is now available.
02.28.07
A revision of my paper on foggy pricing is now available. Relative to the previous one (see below), I am now able to show that results are robust to the existence of individual uncertainty regarding future telephone usage when consumers subscribe to particular tariff plans. Thus, competition appears to turn tariffs more complicated in the short term. In the long run mighty competition save us again and the menus of competing tariffs become simpler to understand.
01.15.07
I have combined in this new paper two lines of research, one on nonlinear pricing and another on strategic complementarities. The paper studies how firms compete with tariff options, i.e., whether the tariff options offered to consumers incorporates any strategic value. Do firms offer many options only to imitate competitors or because they need it to screen consumers? The answer is mixed: effective tariffs are not strategic complements but when we include dominated tariff options, then there is evidence that strategic effects arise. This closes the full circle by connecting this paper to my other one on foggy pricing. This project was funded by the NET Institute.
11.22.06
Another paper using the tariff experiment in Kentucky is set to see the light, this time in a marketing journal. This is a discrete/continuous model that addresses consumers' uncertainty on future consumption at the time of subscribing their tariff plans. In addition to what I did in my dissertation, the paper incorporates the possibility of learning depending on the type of tariff plan subscribed. Another contributon to be ignored by behavioralists who prefer to deal with irrational agents...
05.04.06
A new paper after a long period of intelectual drought. This one deals with the issue of foggy pricing, or the art of taking advantage of consumers by offering obscure contracts that induce them to choose wrongly among the many options. But mighty competition save us again!!! The paper shows that entry of new firms simplify tariffs and move away from foggy tactics. Not much support for the Co-opetition argument of Brandenburger and Nalebuff. This is a major-major revision of a previous project funded by the NET Institute.
04.16.06
Well, it happened. It appers that some of the things that I do attracts the attention of normal people and not only academic economists. Yesterday, my work on tariff choice and screening was mentioned in the Financial Times and Slate. I hope it helps people the time of reading the nonsense of idiotic customers who make uninformed and systematic wrong choices, so common out there.
03.23.05
Major revision of the empirical implementation of the Rochet-Stole model of monopoly pricing with random participation finally available. It is not yet the final version, but we are much closer.
03.13.05
Finally, a readable version of a paper that started many years ago in the surroundings of the Fontainebleau forest: another twist to the estimation of demand when consumers face optional tariffs.
01.21.05
Almost seven years after we started the project, the paper on empirical complementarities co-authored with J.C. Pernías has been finally accepted for publication. This was among the first works to address the testing of complementarities. Let's hope it is not the last one.
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