Empirical studies of microeconomic agents' behavior

• Main Author: Byun, Hae Won
• Format: Dissertation
• Language: English
• Subjects: economics, general
• ISBN: 9780549921684; 0549921680

The economic decisions of rational agents can be analyzed by theoretical models and/or empirical models. This dissertation consists of two different applications of empirical models on two different economic conundrums, both based on theoretical hypotheses. The first chapter introduces the related literatures and background of each paper. In the second chapter, I analyze the concert ticket market by extending the theory present in the economic literature and estimating a parametric empirical model. In the third chapter we estimate the affiliation effect (Pinkse and Tan [26]) in a specific common value auction setting.
The second chapter investigates promoters' and bands' ticket price decisions and presents a theoretical model that demonstrates how their seemingly suboptimal decisions can be profit-maximizing. Here, I model the ticket price decision of a promoter and an artist based on two potential explanations: the effects of an artist's future profit as well as merchandising profit on the pricing decision. When artists or promoters consider their future profit as well as their current profit, or they consider merchandising revenue as well as ticket revenue, they may charge a price lower than the price which maximizes only their static ticket profit. In order to test the credibility of these potential explanations, I estimate a ticket supply equation with Pollstar Boxoffice historical data. The estimation results suggest that both the future profit of an artist and merchandising profit are credible explanations as to why promoters and bands set the ticket price lower than the static ticket profit maximizing price.
The third chapter estimates the affiliation effect defined in Pinkse and Tan [26] in which they showed that bids can be decreasing in the number of bidders in private value auctions provided that the bidders' private values are affiliated. We use the Outer Continental Shelf auction data set to estimate three effects nonparametrically: the affiliation effect, the competition effect, and the winner's curse effect. We find that the affiliation effect is in fact the smallest of the three.