Essays in Empirical Industrial Organization

Abstract

My dissertation consists of three chapters that address important questions in the U.S. Dungeness crab fishery and general aviation aircraft manufacturing industry. I employ causal inference and structural estimation methodologies to empirically evaluate policy interventions' consequences on market participants. The first chapter evaluates the price impacts of the evisceration order policy, which is one of the management's main response strategies to Harmful Algal Blooms (HAB) that have chronically affected the U.S. Dungeness crab fishery. HABs significantly impact the Dungeness crab fishery due to the accumulation of harmful toxins in shellfish, making human consumption unsafe. The evisceration order policy allows the harvest of crabs during HABs; however, it restricts the types of products that Dungeness crab can be processed into, which decreases Dungeness crab prices. We investigate the impacts of the evisceration order on Dungeness crab ex-vessel prices using quasi-experimental data from HAB events in Washington and a generalized difference-in-differences empirical strategy. We estimate that the evisceration order decreased ex-vessel prices by 28.2% during the 2021 Washington HABs. Additionally, we assess the welfare impacts of this event on harvesters. The second chapter builds on the first chapter by analyzing the impact of the price gap created by the evisceration order resulting from the lower crab value on harvesters' participation in the fishery and their choice of harvesting location. Understanding the drivers influencing harvesters' decisions is crucial for managing the fishery during HABs, as it enables predicting how harvesters will respond to policies implemented in response to HABs. For instance, if harvesters have an inelastic supply, their revenue decreases proportionally as the price drops. However, if some harvesters choose to move to an alternative fishery due to the price decline, the average revenue for those who remain in the fishery increases. Additionally, it is important for management to understand the impact on areas that are not subject to the evisceration order. We estimate a model of how harvesters maximize their profits by deciding (1) whether to participate in harvesting on a given week and (2) if they decide to harvest, which harvest area to go to. We use the model to simulate the harvesters' choices in a hypothetical scenario if there was no evisceration order, and therefore no price dispersion among catch areas, during 2021 HABs in Washington. We find that overall participation in the fishery would be higher by 10.4% in the absence of the evisceration order. Regarding harvesters' distribution across areas, we find that participation would be higher by 17.6% in the area under the evisceration order and lower by 6.3% in the area with no evisceration order. We also find that the impact of the price gap diminishes over time due to decreasing harvest volume as the season goes on. The third chapter looks into the U.S. general aviation aircraft manufacturing industry and assesses the welfare implication of its major policy that was passed in 1994. In 1994, Congress passed a major controversial product liability reform, the General Aviation Revitalization Act, which states that the manufacturer can no longer be sued for damages resulting from aircraft defects after 18 years from the aircraft's delivery date to the original purchaser. This liability reform aimed to revitalize the declining general aviation manufacturing industry. By structurally estimating demand and supply functions in the market, we study whether the reform succeeded and evaluate the welfare implications of this policy through 2000. In particular, we evaluate how reducing manufacturers’ liability affected aircraft prices, firm profits, and consumer welfare. We find that in the absence of the GARA, industry profits would be lower by 58% on average, average markup would be lower by 22.57%, and consumers’ welfare would be 3.1% lower on average over five years after the introduction of GARA. The findings support the claim that the GARA significantly revitalized the general aviation industry.