Essays on Empirical Industrial Organization and Environmental Economics

Abstract

This dissertation contributes to two major research areas: the analysis of endogenousproduct characteristics in structural models of demand and dynamic models of invasive species management. In the first chapter, I analyze claims of falling business travel demand in the US following the COVID-19 pandemic. I focus on the US domestic airline market in between 2019 and 2022 and construct a structural model of air travel demand that assumes heterogeneity in consumers takes two forms: business travellers and leisure travellers. I endogenize the number of daily departures on a given route to account for changes in fuel cost that may affect carriers’ flight frequency decisions. I find that both consumer “types” became less price-sensitive and average price elasticity increased. There was a large shift in the share of passengers from “leisure”-type to “business”-type. I interpret this as evidence that many leisure travellers behaved as business travellers during 2022 – forgoing their usual concerns about price to partake in revenge travel.. In the second chapter, I examine common ownership, or the phenomenon of several diversified, institutional investors owning overlapping shares in competing firms. Existing research has thus far highlighted the common ownership effects on pricing and entry, but the effects on non-price product characteristics has not drawn significant attention. I aim to fill this gap by analyzing deposit market competition. I build a structural model of bank branching decisions in the United States and estimate the cost of a bank branch implied by two different modes of conduct: own-profit maximization and common ownership. I find that if banks internalize the competitive effect of their branch networks on commonly-owned firms’ profits, the difference in implied branch cost is small. Indeed, a Vuong-type model selection test does not find a statistically significant difference between the two models’ ability to explain the observed data. In the third chapter, we study invasive aquatic plants (IAP) and their harmful effects on river ecosystems. Managing invasive aquatic plant species is complicated by their inherent downstream dispersal patterns, and likely recurrence in already-treated invaded patches. Furthermore, as climate change alters riparian environments, the cost and spatial dispersion of species management will likely change as both growing conditions and control efficacy shift. To address how costs and optimal management strategies change with a changing climate, we develop a model of IAP management that incorporates spatial heterogeneity and downstream dispersal and can be calibrated to habitat suitability data at a coarse scale. We utilize parametric dynamic programming techniques to quickly and efficiently compute an approximation to the optimal policy. As a case study, we calibrate the model to simulate the management of water-primrose (Ludwigia spp.) in the Willamette River basin, Oregon, USA using data from a climate-sensitive habitat suitability model trained on occurrence data for water-primrose. We find the climate change model implies differential changes across different segments of the river system. Accounting for spread in the management model leads to an optimal management policy that differs from the naive one that allocates management in proportion to the climate change-induced differences.