Javier D. Donna

Howard P. Marvel Scholar Assistant Professor of Economics
PAPERS SUBMITTED AND UNDER REVISION



THE ILLIQUIDITY OF WATER MARKETS:
EFFICIENT INSTITUTIONS FOR WATER ALLOCATION IN SOUTHEASTERN SPAIN 

joint with Jose-Antonio Espin-Sanchez (Yale University)

Revision requested by Econometrica (third round resubmitted).

This paper was awarded the Best Paper in Regulatory Economics at the IIOC, 2016.

I presented this paper at the 2016 NBER Summer Institute Industrial Organization,
at the Barcelona GSE Summer Forum Applied Industrial Organization,
and the Empirical Microeconomics Workshop.

Please read our short essay in Global Water Forum and our short essay in VOX EU.


AbstractWe investigate the efficiency of a market institution (an auction) relative to a non-market institution (a quota) as a water allocation mechanism in the presence of frictions, by exploring a particular historical institutional change in Mula, Spain. We estimate a structural dynamic model under the auction accounting for the three main features in the empirical setting: intertemporal substitution, liquidity constraints, and seasonality. We use the estimated model to compute the welfare under auctions, quotas, and the highest-valuation allocation. We find that the institutional change in Mula, from auctions to quotas, was welfare improving for the apricot farmers considered.
| pdf |       | Online Appendix |       | Note Additional Results |       | Interviews |        |Cite|


MEASURING THE WELFARE OF INTERMEDIATION
IN
V
ERTICAL MARKETS 

joint with Pedro Pereira (Autoridade da Concorrência and CEFAGE),
Tiago Pires (University of North Carolina), and
Andre Trindade (Getulio Vargas Foundation).

Our paper was recently accepted for presentations at IIOCSED, and
Barcelona GSE Summer Forum: Consumer Search and Switching Costs.

This paper was presented at the 2017 Triangle Microeconomics Conference in Honor to Tiago Pires.

A preliminary draft is available upon request.


AbstractWe empirically investigate the welfare implications of intermediaries in oligopolistic markets, where intermediaries offer additional services to differentiate their products from the ones of the manufacturers. Our identification strategy exploits the unique circumstance that, in the outdoors advertising industry, there are two distribution channels: consumers can purchase the product either directly from manufacturers, or through intermediaries. We specify a differentiated products’ equilibrium model, and estimate it using product-level data for the whole industry. On the demand side, the model includes consumers who engage in costly search with preferences that are specific to the distribution channel. On the supply side, the model includes two competing distribution channels. One features two layers of activity, where manufacturers and intermediaries bargain over wholesale prices, and intermediaries compete on final prices to consumers. The other is vertically integrated. The estimated model is used to simulate counterfactual scenarios, where intermediaries do not offer additional services. We find that the presence of intermediaries increases welfare because the value of their services outweighs the additional margin charged.

NETWORKS, FRICTIONS, AND PRICE DISPERSION

joint with Pablo Schenone (Arizona State University) and
 
Greg Veramendi (Arizona State University)

Under review.

This paper was accepted for presentation at the 2017 NBER Summer Institute Macro Perspectives.

An updated version of this paper, with an empirical application, is available upon request.


AbstractThis paper uses networks to study price dispersion in seller-buyer markets where buyers with unit demand interact with multiple, but not all, sellers; and buyers and sellers compete on prices after they meet. Our approach allows for ex post indirect competition, where a buyer who is not directly linked with a seller affects the price obtained by that seller. Indirect competition generates the central finding of our paper: price dispersion depends on both the number of links in the network, and how these links are distributed. Networks with very few links can have no price dispersion, while networks with many links can still support significant price dispersion. We present three main theoretical results. First, for any given network we characterize the pairwise stable matchings and the prices that support them. Second, we characterize the set of all graphs where price dispersion is precluded. Third, we use a theorem from Frieze (1985) to show that the graphs where price dispersion is precluded arise asymptotically with probability one in random Poisson networks, even as the probability of each individual link goes to zero. We also provide quantitative results on the finite sample properties of price dispersion in random networks. Finally, we present an application to eBay to show that: (i) a calibration of our model reproduces the price dispersion documented in eBay quite well, and (ii) the amount of price dispersion in eBay would decrease substantially (35-45 percent as measured by the coefficient of variation) in a counterfactual analysis, where we change eBay’s network structure so that links are drawn with equal probability for all sellers and buyers.

| pdf | | Online Appendix | |Cite|

GENDER DIFFERENCES IN BOOKING BUSINESS TRAVEL DEMAND

joint with Greg Veramendi (Arizona State University)

Please read our white paper and our short essay in Harvard Business Review. Summarized by The Economist, Fortune, Yahoo! Finance, Slate, Business Travel News, CWT Solutions Group, OnCampus.

A preliminary draft is available upon request.


AbstractWe examine a unique database of 6.4 million flight bookings in 2014 to analyze gender differences in the demand for planning business travel. We find that female travelers book 2 days earlier than their male counterparts on average. Female travelers pay on average about $17 less per ticket (about 2%) than their male counterparts. We also find that advance booking improves with age. As age increases from 30 to 70, advance booking increases by 5 days for both genders. As trips become more frequent, advanced booking decreases. For high-frequency travelers who do over 2 trips per month, the gender gap in advanced booking becomes negligible.



TRAVEL DEMAND, HYSTERESIS, AND PRICE ELASTICITIES:
EVIDENCE FROM CHICAGO

A preliminary draft is available upon request.
An updated draft will be available here in June 10.


AbstractThis paper investigates the role of hysteresis in urban travel demand and its implications on price elasticities estimates. To do that I estimate a dynamic discrete choice model with switching costs. To perform the empirical analysis I analyze automobile and public transit use from a panel dataset with market level data for Chicago. I report three main findings. First, for the dynamic model, long run price elasticities with respect to the gasoline cost of driving are more elastic than the short run elasticities. Second, static own (for automobile) and cross (for public transit) price elasticities underestimate the dynamic ones. Myopic estimates also underestimate the elasticities. The bias is larger than for the static model. Finally, in a counterfactual analysis the response to a gasoline tax is investigated. The analysis shows that static or myopic models mismeasure the long run substitution effects. Overall these results indicate that, when hysteresis is present, elasticities from static and myopic models might be biased, and could lead to incorrect policy decisions.


LET THE PUNISHMENT FIT THE CRIMINAL 
joint with Jose-Antonio Espin-Sanchez (Yale University)

A preliminary draft is available upon request.


AbstractWe investigate the role of punishment progressivity and individual characteristics in the determination of crime. To analyze welfare implications we model individuals' response to judges' optimal punishment in a dynamic setting. We introduce two distinctive features motivated by our empirical setting. First, judges rarely imposes maximum punishment for first time offenders. Instead, we observe low fines (or just a warning) even when crime detection technology is efficient and punishment is not costly. We account for this by allowing an unobservable (to the judge) individual state to be correlated with a public signal (the environment). This generates an optimal punishment that is conditional on individual observables. Second, judges punishments follow a progressive system: conditioning on type, recidivists are punished harsher than first-time offenders for the same crime. We account for these dynamics by introducing a persistent unobservable (to the judge) component. Depending on whether the individual committed a crime in the previous period, the judge updates her beliefs about the individual; this gives rise to progressivity in the optimal punishment system. For the empirical analysis we examine a novel trial data set from a self-governed community of farmers in Southern Spain. We find that judges vary the degree of imposed punishments based on individual characteristics—such as when the victim or the accused have a Don honorific title indicating he is a wealthy person. Recidivists are punished harsher than first time offenders.


QUANTIFYING THE WELFARE EFFECTS IN NETWORKED MARKETS
joint with Joern Boehnke (Harvard University),
Dimitriy Masterov (eBay Research Labs), and
Greg Veramendi (Arizona State University).


AbstractWe empirically investigate the welfare implications of a reduction in the level of frictions and price dispersion in online retail markets. Our identification strategy exploits the unique circumstance that, in the online trading platform eBay, we have access to “click-stream” data, that records which listings appear in buyers’ searches, which listings buyers click on, and which listings they bid for, even if they do not end up buying that product. Click-stream data provides the information needed to reconstruct the links (which buyers interact with which sellers) in the network. We perform the welfare analysis using a three-step framework. First, we reconstruct the realized network of buyers and sellers using click-stream data. Second, we develop a tractable empirical networks’ model, and estimate its the primitives (i.e. distribution of buyers’ valuations) that characterize the model?s underlying demand preferences conditional on the realized network. Third, we use the estimated demand preferences and network structure to perform a “counterfactual” analysis. In the counterfactual analysis we compare the actual outcome (i.e. welfare under the actual level of frictions in eBay) to a counterfactual outcome, whereby we will use the estimated demand preferences and the behavioral buyer-seller model to compute the welfare under an alternative policy that would reduce the level of frictions and price dispersion in eBay.

| Extended Abstract | 

CONSIDERATION SETS AND PRICE DISPERSION: EVIDENCE FROM EBAY

joint with Joern Boehnke (Harvard University),
Dimitriy Masterov (eBay Research Labs), and
Greg Veramendi (Arizona State University).

Slides are available upon request.



AbstractWe use click-stream data from eBay to re-construct consumers' consideration sets and the buyers-sellers network. We use the reconstructed network to investigate the role of the consideration sets on price dispersion in the market for homogeneous goods.


WORK IN PROGRESS



ESTIMATING THE NETWORK STRUCTURE OF LABOR MARKETS:
THE EFFECT OF JOB SEARCH ASSISTANCE

joint with Rune M. Vejlin (Aarhus University) and
 
Greg Veramendi (Arizona State University)



QUANTITY DISCOUNTS, PRICE DISCRIMINATION, AND
INCENTIVE COMPATIBILITY CONSTRAINTS

joint with Tiago Pires (University of North Carolina)





PUBLISHED PAPERS AND
BOOKS CHAPTERS


Donna, Javier, Jose Espin-Sanchez. 2018. "Complements and substitutes in sequential auctions: the case of water auctions,RAND Journal of Economics, Vol. 49, No. 1, Spring 2018 pp. 87–127.
|Wiley Online Library |    | pdf | Supplementary Material |Cite|
A version of this paper was my job market paper in 2012, and it was awarded the Best Paper Award at EARIE (2012) and JEI (2012)


Donna, Javier, Pablo Schenone, and Gregory Veramendi. 2016. "Frictions in internet auctions with many traders: A counterexample,Economics Letters, 138 (2016) 81–84.
|https://www.sciencedirect.com/science/article/pii/S0165176515004991 |    | pdf | |Cite|


Di Tella, Rafael, Javier Donna, and Robert MacCulloch. 2014. "Oil, Macroeconomic Volatility and Crime in the Determination of Beliefs in Venezuela." In: Venezuela Before Chávez: Anatomy of an Economic Collapse, chapter 13, edited by Ricardo Hausmann, and Francisco R. Rodríguez, Penn State University Press, Hardcover ISBN: 978-0-271-05631-9.
|
pdf chapter |   | pdf book |   |Cite|


Di Tella, Rafael, Javier Donna, and Robert MacCulloch. 2008. "Crime and Beliefs: Evidence from Latin America." Economics Letters, 99: 566–569. | |    | pdf |  |Cite|