Job Market Paper
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Until Death Do Us Part? The Marriage Model with Divorce
Extended Abstract Full Text
With Korok Ray and Erik Stewart
- We extend the two-sided matching model with search frictions by allowing agents to continue searching for an upgrade while already matched. Numerous previous studies have shown that when matches are permanent and matched agents exit the market, the steady-state equilibrium exhibits a counterintuitive and inefficient phenomenon known as "block segregation." We show that this pathological equilibrium is not sustained when at least one side of the market can choose to dissolve the match. In particular, when both sides are allowed to upgrade, quite weak conditions on payoffs and search technology ensure that the steady state converges to perfect positively assortative matching, which is globally optimal with supermodular payoffs. When one side of the market has the ability to upgrade, higher quality agents match to sets of agents of strictly increasing quality. Allowing agents to separate increases the efficiency of matching.
Doctoral Dissertation
- A Model of Exploration and Site Development in the Petroleum Industry
- I propose an integrated model of the optimizing behavior of a profit-maximizing crude oil producer. I show that the producer's program can be decomposed into an optimal extraction program, which is subject to physical constraints, an optimal development program for known deposits, and an optimal exploration program for new prospects. The joint solution of these programs replicates a number of prominent industry facts. First, crude oil producers respond to price and cost shocks primarily at the extensive margin, by adjusting exploration and development levels. Second, production paths at all levels of aggregation have an inverted-U shape (Hubbert's peak). Third, within each petroleum play the larger deposits tend to be discovered first. Finally, both exploration effort and new discoveries decrease over the lifetime of each exploration region.
Published Papers
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E-commerce and the Market Structure of Retail Industries
With Ali Hortaçsu, Chad Syverson, and Onsel Emre
June 2010, The Economic Journal 120: 651–682.- This paper examines the effect of the advent and diffusion of e-commerce on supply-side industry structure. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous producers. We interpret e-commerce as a reduction in consumers’ search costs. We show how it reallocates market shares from high-cost to low-cost producers. We test the model using US data for three industries: travel agencies, bookstores, and new auto dealers. Each industry exhibits the market share shifts predicted by the model, but the mechanisms vary, ranging from aggregate factors in the travel industry to local-market factors in the other two industries.
Other Papers
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Efficient Cost Allocation
With Korok Ray
Under revision- Firms routinely allocate the costs of common corporate resources down to divisions. The main insight of this paper is that any efficient allocation rule must reflect the firm’s underlying cost structure. We propose a new allocation rule (the polynomial rule), which achieves efficiency and approximate budget balance. We also examine conditions under which simple allocation rules induce efficiency. Finally, we show that welfare losses due to linear allocation rules increase with firm size. Thus polynomial allocation rules should be preferred to linear rules for larger firms.
- Learning to Snipe: An Investigation of Strategy Learning on eBay
- I investigate how individuals learn strategies in complex games, using extensive panel data from eBay auctions, which allows me to track bidder’s histories over time. I find that individual strategies change considerably, as the individuals gain more experience. Learning occurs primarily as a result of direct experience encountering various strategies by opponents. I model the process within the framework of Gilboa and Schmeidler’s casebased decision theory.
Projects in Other Social Sciences
In addition to my work as an economist, I have also participated in social survey analysis as a researcher at the Institute of Philosphy and Sociology and the University of Latvia. Below is a list of the main projects with published results.
- Drug Abuse Prevalence in Latvia. (2008). Riga: SVA.
- Young Adults and the Job Market in Latvia: The Status Quo and Its Determinants. (2007). Riga: SPI.
- The Reasons for and Duration of Unemployment and Social Exclusion Spells in Latvia. (2007). Riga: FSI, BICEPS, SPI.
- The Career Paths of Graduates of Higher and Vocational Educational Institutions in Latvia (2007). Riga: LU, FSI.