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User Loyalty and Willingness to Pay for a Music Streaming Subscription

By Nell Jones   

Music streaming has increased industry revenue and displaced piracy, but limited profits for artists. In this thesis, I examine user loyalty to streaming platforms, focusing on the asset specificity of features and estimating what users are willing to pay for each of these features. A structural equation model of survey data shows that feature satisfaction positively affects both asset specificity of and overall satisfaction with streaming platforms, strengthening user loyalty. Using conjoint analysis, I estimate that users are willing to pay at least $14.40 for platforms that offer algorithm, playlist and social features, and the ability to download music.

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Advisors: Professor Michael Munger, Professor Grace Kim | JEL Codes: Z1, Z11, M21

The Impact of Medicare Nonpayment: A Quasi-Experimental Approach

By Audrey Kornkven   

In October 2008, a provision of the Deficit Reduction Act of 2005 known as Medicare “Nonpayment” went into effect, eliminating reimbursement for the marginal costs of  preventable hospital-acquired conditions in an effort to correct perverse incentives in hospitals and improve patient safety. This paper contributes to the existing debate surrounding Nonpayment’s efficacy by considering varying degrees of fiscal pressure among hospitals; potential impacts on healthcare utilization; and differences between Medicare and non-Medicare patient populations. It combines data on millions of hospital discharges in New York from 2006-2010 with hospital-, hospital referral region-, and county-level data to isolate the policy’s impact. Analysis exploits the quasi-experimental nature of Nonpayment via difference-in-differences with Mahalanobis matching and fuzzy regression discontinuity designs. In line with results from Lee et al. (2012), Schuller et al. (2013), and Vaz et al. (2015), this paper does not find evidence that Nonpayment reduced the likelihood that Medicare patients would develop a hospital-acquired condition, and concludes that the policy is not likely the success claimed by policymakers. Results also suggest that providers may select against unprofitable Medicare patients when possible, and are likely to vary in their responses to financial incentives. Specifically, private non-profit hospitals appear to have been most responsive to the policy. These findings have important implications for pay-for-performance initiatives in American healthcare.

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Advisors: Professor Charles Becker, Professor Frank Sloan, Professor Grace Kim| JEL Codes: I1, I13, I18

Hedonic Pricing in the Sneaker Resale Market

By Kevin Ma and Matthew Treiber

This paper explores the secondary resale market for high-end and limited-edition sneakers, specifically analyzing the determinants that affect what value sneakers trade for in the secondary market. While it is common knowledge that the sneaker resale market is a thriving and active secondary market, there is little to no empirical research about what exactly causes such sneakers to sell for exorbitant prices in the resale market. The study utilizes a hedonic pricing approach to investigate the determinants of sneaker resale price. We use a dataset of sneaker resale transactions from the online marketplace StockX between the years of 2016 and 2020 as the basis for our research. After analyzing the results, we have determined that the amount of “hype” that surrounds a sneaker as well as supply scarcity are statistically significant factors when determining the resale price premium a particular sneaker commands in the secondary market. This work adds to the sparse literature on the sneaker resale industry and brings an econometrics-approach to determining the price a given pair of sneakers commands in the resale market.

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Advisors: Professor Kyle Jurado, Professor Michelle Connolly, Professor Grace Kim| JEL Codes: C2, C20, J19

Investigating the Impact of Chinese Financing on Productivity in the African Continent

By Kedest Mathewos   

Given that productivity is a key component of long-term economic growth and that China has become an important source of external financing in Africa, this study aims to investigate the impact of Chinese foreign direct investment and government-to-government loans on productivity. Using a panel of the top fourteen African recipients of Chinese financing during the period 2003-2017, this study employs a two-stage regression process. The first relies on the use of a revised version of the Solow Model that accounts for human capital, natural resource accumulation and country-specific heterogeneity, to generate values of total factor productivity. The second examines the impact of Chinese financing on this generated measure of productivity. After taking into account significant confounding variables such as institutional quality, trade openness and manufacturing value-added, this study finds that Chinese foreign direct investment (FDI) has a significant negative impact on productivity while Chinese government loans are positively associated with productivity. However, consistent with the literature, the impact of Chinese FDI depends on the country’s absorptive capacity – proxied here by the level of human capital accumulation. Therefore, as African countries seek to boost productivity levels, they should continue to attract Chinese government loans while enhancing their FDI absorptive capacity.

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Advisors: Professor Lori Leachman, Professor Grace Kim, Professor Kent Kimbrough| JEL Codes: O4, O47, F21

Private Equity Buyouts and Strategic Acquisitions: An Analysis of Capital Investment and the Timing of Takeovers in the United States

By Anthony Melita   

This paper investigates how motivational differences between agents who execute private equity buyouts and those who execute strategic (corporate) acquisitions may influence the timing of capital investment via takeovers. This paper synthesizes prominent merger theories to inform macroeconomic variables that may drive acquisitions. I find a significant negative expected effect of volatility on capital investment via takeover for each buyer type, a negative expected effect from valuation multiples on capital investment from PE buyouts, and a positive expected effect from debt capacity (EBITDA-CAPEX) on capital investment from PE buyouts.

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Advisors: Professor Grace Kim | JEL Codes: G3, G34, G29

Investigating Underpricing in Venture-Backed IPOs Using Statistical Techniques

By Michael Tan   

This paper concerns applying statistical methods to investigate under-pricing in VC-backed technology Initial Public Offerings (IPOs) since the great recession. In particular, firm, market, and IPO-specific variables were explored to determine if there were any significant relationships to under-pricing. The paper focused on the Bank Preference theory of under-pricing, where under-pricing is said to occur because investment banks running IPO processes are incentivized to under-price to decrease the risk that they will not be able to allocate all the issuance to price-sensitive public markets investors.

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Advisors: Professor Daniel Xu, Professor Shawn Santo, Professor Grace Kim| JEL Codes: G3, G33, G24

How Expensive Is This Suit? An Analysis of Corporate Litigation Settlements and Brand Value

By Jenny Y. Zhang

Two recent corporate trends include a rise in litigation and companies’ increased emphasis on branding. This paper examines whether there is a relationship between the two phenomena by analyzing corporate litigation outcomes and brand value. Specifically, I examine law suits resulting in a settlement in order to determine whether a company’s brand value impacts the settlement amount. I do not find evidence of a relationship between a company’s brand value and the settlement value. Further research is needed in order to more conclusively determine whether a company’s brand value and the resulting settlement are related.

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Advisors: Professor James Roberts, Professor Michelle Connolly, Professor Grace Kim | JEL Codes: K40, K41

For Love of the Game: A Study of Tournament Theory and Intrinsic Motivation in Dota 2

By YAO Shengjie

This paper studies the effect of intrinsic motivation on the extrinsic incentives specified by tournament structure in tournament theory in the context of e-sports. It incorporates tournament theory and motivation crowding theory in the same framework, something that past literature have hinted towards but never formally done so. It also uses an e-sports dataset, a type of dataset that few academics in the past have dealt with, but one that offers many interesting potentials. Results weakly show that crowding-in occurs in e-sports, but the effects of tournament structure on performance are inconclusive in the context of this paper. Implications of this paper lie mainly in the possibility for future academics to utilise e-sports data for research.

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Advisors: Professor Grace Kim | JEL Codes: J31, J33, J41, M51, M52, Z20

Immigrant Workers in a Changing Labor Environment: A study on how technology is reshaping immigrant earnings

By Grace Peterson

This research determines how automation affects immigrant wages in the US and how closely this impact follows the skills-biased technical change (SBTC) hypothesis. The present study addresses this question using American Community Survey (ACS) data from 2012 to 2016 and a job automation probability index to explain technological change. This research leverages OLS regressions to evaluate real wage drivers, grouping data by year, immigration status, and education level. According to the SBTC hypothesis, high skill immigrant wages should be less negatively affected by technological change than low skill immigrant wages. Univariate analysis suggests that the SBTC hypothesis is even stronger for US = immigrants than native-borns, as high skill immigrants have a lower average probability than low skill immigrants of having their jobs automated, and the difference in effect on high versus low skilled workers is larger for immigrant than native-borns. However, multivariate analysis asserts that technological change affects low skill immigrants’ wages less than high skilled individuals’ wages, which counters the SBTC hypothesis.

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Advisors: Professor Grace Kim | JEL Codes: J15, J24, J31, J61, E24

Social Capital and Financial Development after Economic Shocks: Evidence from Italy after the Financial Crisis of 2007-2009

By Sujay Rao & Ethan Lampert

Like traditional forms of capital, social capital – an intangible measure of an individual’s social networks, trust in institutions, and participation in civic life – has implications for personal and financial behavior. Individuals from educated, well established backgrounds with fruitful family ties may be more amenable to opening new lines of credit or investing in stock markets due to their trust in and connectedness with society. But what happens after a major economic shock, such as the financial crisis of 2008? Using Italy as a case study and panel data from the Survey of Household Income and Wealth, we find that social capital has significant effects on an individual’s credit card usage, informal borrowing, and choice to invest in securities.

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Advisors: Professor Grace Kim, Professor Michelle Connolly, Professor Giovanni Zanalda | JEL Codes: G01, G2, O1, D1, D14

Questions?

Undergraduate Program Assistant
Jennifer Becker
dus_asst@econ.duke.edu

Director of the Honors Program
Michelle P. Connolly
michelle.connolly@duke.edu