Essays on Empirical Market Design

Author:

Kuno, Kan

Graduate Program:

Economics

Degree:

Doctor of Philosophy

Document Type:

Dissertation

Date of Defense:

April 24, 2024

Committee Members:

Marc Henry, Professor in Charge/Director of Graduate Studies
Ran Shorrer, Major Field Member
Karl Schurter, Chair & Dissertation Advisor
Paul Grieco, Major Field Member
Chloe Tergiman, Outside Unit & Field Member

Keywords:

market design
industrial organization
school choice
bargaining
search
childcare
online marketplace

Abstract:

This dissertation is a collection of empirical analyses of market design. Chapter 1 investigates the strategic behavior of applicants in the Japanese daycare market, where waitlisted applicants are granted additional priority points in subsequent application rounds. Utilizing data from Tokyo's Bunkyo municipality, I provide evidence of parents strategically choosing to be on the waitlist to enhance the likelihood of their child's admission into more selective daycare centers. I extend the static framework of school choice by Agarwal and Somaini (2018) to incorporate dynamic incentives and estimate a structural model that allows for reapplication if waitlisted. Empirical findings indicate that approximately 30% of applicants forgo listing safer options in their initial application, a behavior significantly pronounced among those who stand to benefit from the waitlist prioritization. Counterfactual simulations, conducted under the scenario of no additional waitlist priority, predict a 17.7% decrease in the number of waitlisted applicants and a 1.2% increase in overall welfare. The next two chapters focus on the design of online markets: Chapter 2 presents a theoretical analysis, while Chapter 3 offers an empirical analysis. Price negotiations are commonplace on online marketplaces; however, unpaid items have emerged as a significant issue. Sellers often accept negotiated offers only to face delayed payments or complete non-payment. This issue stems from the lack of buyer commitment following negotiations. I aim to quantify the welfare implications of such commitment issues by addressing the question: can market welfare increase with a full commitment policy for buyers? To investigate this, I estimate a structural model of search and bargaining that encapsulates the commitment issue, using data on used 64GB iPhones from Japan's leading online C2C marketplace, Mercari. The results show that the buyer search cost is approximately 1,689 yen, which is about 13% of the average list price. Counterfactual simulations reveal that under a full commitment policy, overall welfare decreases by about 1,477 yen per listing. This decrease is primarily driven by the welfare loss of sellers, who have to set lower list prices to compensate for the reduced frequency of arrivals from buyers who would make a purchase.