Date of Award

2016

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Graduate Group

Economics

First Advisor

Holger W. Sieg

Abstract

This dissertation is composed of two essays in the field of empirical industrial organization. They both examine how network structures arise in and affect markets. I focus on two industries. The first one is the airline industry, and the second one is the motion picture industry.

The first essay (chapter) studies airline networks. Airlines often match higher pas-

senger density with higher flight frequency. Meanwhile, a higher frequency reduces schedule delays, creating better service quality. This suggests that, on airline networks, the value of a link to passengers increases with the density on that link. I estimate a discrete choice model for U.S. airlines with endogenous link density. The model allows me to account for changes in frequencies in counterfactual experiments. I derive implications for airline pricing, market concentration and hub-and-spoke networks.

The second essay studies product entry in the presence of firm learning from the market outcomes of past products. Focusing on the U.S. motion picture industry, I construct a network capturing the similarity amongst the movies released in the last decades. I develop and estimate a model of how the network evolves. Risk averse firms make go/no go decisions on candidate products that arrive over time and can be either novel or similar to various previous products. I demonstrate that learning is an important factor in entry decisions and provide insights on the innovation vs. imitation tradeoff. In particular, I find that one firm benefits substantially from the learning by the other firms. I find that big-budget movies benefit more from imitation, but small-budget movies favor novelty. This leads to interesting market dynamics that cannot be produced by a model without learning.

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