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.


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.
| pdf | 

NETWORKS, FRICTIONS, AND PRICE DISPERSION

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

Updated version submitted.

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 WITHIN THE FIRM:
EVIDENCE FROM TWO MILLION TRAVELERS

joint with Greg Veramendi (Arizona State University)

Submitted.


AbstractWe document gender differences in the behavior of similar workers within a firm when they book business air travel. We show that women pay consistently less per ticket than men, after accounting for a large set of covariates that include the characteristics of the traveler, the routes and class they travel on, the firms that employ them, and the position that the traveler holds in the firm. A large proportion of the lower fares paid by women are explained by women booking flights earlier than men. We find significant variation in gender differences across the regions of the world. Using country-level data on preference differences, we show that gender differences in both positive and negative reciprocity are an important factor associated with the documented gender differences. In particular, negative reciprocity alone is able to explain the gender difference in paid fare: women (men) are less (more) willing to trade the firms’ money for their own utility when they feel they have been treated unfairly. The documented gender differences have both important monetary implications for firms and implications for the role of morale within the firm.

| pdf |


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

An updated draft is available upon request.

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:
PUNISHMENT PROGRESSIVITY IN A LET SELF-GOVERNED COMMUNITY IN SOUTHEASTERN SPAIN

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

Submitted.


AbstractWe investigate the roles of individual characteristics and punishment progressivity on crime and efficiency. Our analysis reconciles low crime rates with light punishments in self-governed communities (Ostrom, 1990), using formal punishments to deter crime (Becker, 1968). We present a model in which individuals respond to judges’ optimal punishment in a dynamic setting, and in which a positive amount of crime is socially efficient. For the empirical analysis we use a novel dataset of trials from a self-governed community of farmers in Mula, Spain. We show that the predictions of the model are consistent with farmers’ behavior in Mula: (i) judges trade off crime deterrence and insurance, recognizing that minimizing crime could be socially inefficient; (ii) punishments are larger during a dry month, reflecting the need for harsher punishment due to the larger benefits of stealing; (iii) punishments depend on the defendant’s characteristics, i.e., recidivists are punished more harshly than first time offenders for the same crime; (iv) punishments depend on the victim’s characteristics.

| pdf |


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.
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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|