Essays on Applied Microeconomic Theory
thesisposted on 16.01.2013, 13:37 by Miguel Angel Flores Sandoval
This thesis collects three essays in applied microeconomic theory. Chapter 1 studies entry in a market where firms compete in shopping hours and prices. I explore the effect of shopping hours deregulation on social welfare. I show that an incumbent firm can strategically choose its opening hours to deter entry of a new firm, and that shopping hours deregulation can be harmful to consumers and social welfare. Chapter 2 examines the implications of prominence when firms' R&D investment is endogenous and consumers search sequentially. In the benchmark case consumers visit a firm randomly while in the prominence case all consumers visit the prominent firm first. I find that the prominent firm is the most efficient firm. The non-prominent firm is the least efficient firm if R&D cost is high but invests more in R&D than with random search if R&D cost is low. Second, if the efficiency asymmetry is sufficiently low prices with prominence are lower than prices with random search. If the efficiency asymmetry is high prices with prominence are higher than prices with random search. If the efficiency asymmetry is not too low the prominent firm charges a lower price than the non-prominent firm, and the price with random search lies between those prices. Third, when a firm is prominent both consumer surplus and social welfare are higher than with random search. Chapter 3 discusses whether taxes, subsidies and cash incentives are effective in reducing unhealthy food consumption, and which one is the most appropriate policy to tackle the obesity problem in the US and the UK. Cash incentives may be the most effective policy in reducing unhealthy food consumption, yet it can be the most costly one. Taxes are ineffective in reducing unhealthy food consumption. Subsidies have the best balance between effectiveness and monetary benefits to society.