Essays in industrial organization and political economy
OA Version
Citation
Abstract
My dissertation studies two topics in industrial organization and political economy. The first two chapters investigate the difference between joint and solo bidders in their bidding strategies and winner’s curse levels in common value auctions. The third chapter examines how the political strategies of the ruling party change in response to the weakening of its control over localities. Chapter 1 performs a reduced-form analysis of joint bidding and the winner’s curse in first-price common value auctions, using data for the Outer Continental Shelf oil and gas leases auctions. My coauthor, Kippeum Lee, and I introduce a novel instrument utilizing a new dataset of firms' office addresses recorded in lease contract agreements. We then examine the impact of joint bidding on bid levels, revealing that joint bidders submit approximately 75% higher bids than solo bidders on average. We further study the effect of bidder structure and competition on average bids and show that one more joint bidder (and hence one less solo bidder) leads to an around 30% increase in the average bid for an auction, controlling for the overall competition level. Chapter 2 constructs a model of common value auctions with bidder asymmetry arising from joint bidding and measures the winner’s curse. My coauthor, Kippeum Lee, and I build a model of asymmetric common value auctions by dividing bidders into joint and solo types. We then consider a myopic-bidder model where bidders do not account for the winner’s curse. To quantify the winner's curse for both joint and solo bidders, we compare the expected common value of myopic bidders to that of rational bidders who internalize the “bad news” associated with winning for each bidder type. Based on the estimation of the winner’s curse, we find that solo bidders experience a more substantial winner’s curse relative to joint bidders. Chapter 3 studies the political manipulation of central-to-local transfers in the context of Japan. I build a theoretical model of budget allocation with imperfect local monitoring, predicting changes in allocation strategies in response to municipal consolidation. The empirical analysis finds that the long-ruling Liberal Democratic Party adjusted its distributional politics in response to the weakening of its control over localities, as observed during massive municipal mergers. The party favored locally aligned villages and competitive constituencies before the merger period. However, the party shifted its allocation strategy by providing more funds to highly competitive constituencies during the merger period without differentiating between villages based on local alignment.
Description
2023