Job Market Paper
Value of "Availability" during Demand Shocks: Evidence from U.S. Retailers during the Covid Pandemic
Abstract: This paper studies the value of large retail chains in providing product access for consumers during demand shocks. Focusing on U.S. consumers shopping for personal cleaning products during Covid, I evaluate the cost of stockouts across retail chains and the distributional impact of stockouts across markets. Since stockouts are not directly observed from data, I develop an algorithm to quantify the extent of stockouts across stores using weekly sales data. Demand analysis shows that product differentiation is large enough such that the stockouts of popular products have led to significant welfare loss for consumers. Two patterns of product availability emerged among retailf chains: High-Availability Retailers (HARs) such as discount stores and warehouse clubs have greater inventories and lower stockout rates than Low-Availability Retailers (LARs). The uneven distribution of HAR stores across markets drives the inequality in product access during times of scarcity, with shoppers in “availability deserts”—markets scarce in HAR stores—experiencing poorer product access and lower welfare. This paper has strong policy implications for preventing retail store exits from low-income neighborhoods with poor product access.
Keywords: Cost of Stockouts; Product Availability; Retail Chains; Availability Deserts
Working Papers
Who Benefits from Anti-Gouging Laws? The Case of Personal Cleaning Products during Covid -19
Abstract: This paper examines the impact of anti-gouging laws on retail prices, sales, and consumer welfare during demand shocks. Using data on U.S. consumers shopping for personal cleaning products during the early Covid-19 pandemic, I analyze the enforcement of anti-gouging laws across online and brick-and-mortar retail markets, simulate the implementation of the law (in the form of price caps) on Amazon, and quantify the welfare effect. Recognizing that price caps affect supply decisions, I develop a structural model in which supply responds endogenously to pricing constraints. Results show that anti-gouging laws had little impact on brick-and-mortar retailers, which largely adhered to their pre-crisis pricing and inventory strategies. In contrast, there were frequent violations of the law in online markets. The welfare effects of binding price caps depend heavily on market conditions that vary over time, which implies that static, time-invariant price caps are unlikely to deliver optimal welfare outcomes. The findings highlight the value of alternative (more efficient) redistribution mechanisms, such as lump-sum transfers to low-income households through coupons or vouchers.
Keywords: Anti-Price Gouging Laws; Price Caps; Consumer Protection; Shortages; Rationing
Paper available upon request.
“Inventory Acquisition and Distribution by Retail Chains During Times of Shortages”
Abstract: Economists have recognized the heterogeneity in product availability across retail chains during times of scarcity. However, the underlying causes of the heterogeneity remain underexplored: does it stem from high-availability retailers (HARs) having better logistics that enable more efficient distribution of supplies to stores? Or is it driven by HARs’ greater bargaining power in acquiring supplies from upstream manufacturers? This paper seeks to address this question by studying the inventory procurement and distribution behaviors of major retail chains. Since the distribution behavior is not directly observable from data, I quantify the extent of product stockout using weekly sales data, then infer retailers’ distribution strategy from the stockout patterns. Holding fixed total inventory stock, HARs such as discount stores exhibit lower stockout rates and small variations across stores, suggesting more efficient logistics in distributing supplies to each location. In terms of inventory procurement, retailers did not significantly increase their product varieties and prices in response to local demand shocks, but HARs like discount chains and warehouse clubs were relatively more successful in holding prices constant during the crises.
Paper available upon request.
(Masters' Thesis) Does Collusion among Full-service Airlines Affect the Entry Decision of Low-cost Carriers?
Abstract: This paper studies whether the anti-competitive behavior of incumbent full-service airlines (code-sharing, joining alliance, and merging) affects the entry decision of low-cost carriers. I apply the idea of entry threshold ratio in Bresnahan and Reiss (1991) to analyze the competitiveness of U.S. aviation market, as well as whether new entrants face high entry barriers. I tailor the model in Mazzeo (2002) to examine the effects of product differentiation and incumbent collusion on heterogeneous airlines’ profitability and market structure. The results indicate that incumbent collusion reduces the odds of airline entry. US air market is not perfectly competitive and newcomers face high entry barriers. Baseline preference for full-service airlines is high in all markets, and outweighs the effect of demand conditions.
Link to the paper here