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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

Investigating a Case of Alleged Collusion in Michigan Public Oil and Gas Lease Auctions

By Lucas Do

The state of Michigan administers oil and gas lease auctions semiannually through the Department of Natural Resources. In June 2012, the international news outlet Reuters published allegations of bid-rigging following the Department’s May 2010 auction. This paper empirically investigates the validity of Reuters’ allegations by analyzing auction bid sheets from 2008 to 2018 as well as other data reflecting market conditions over time. To this end, I first formulate a benchmark structural model of bidders’ valuations and estimate it with auction data from a period during which I assume no collusion occurred. Then, I extend the benchmark model by endogenizing bidders’ decision to collude. Using the extended model and the estimated benchmark parameters, I apply the simulated method of moments to solve for the collusive probability that “best” explains the observed bids during the alleged period of collusion. After discovering strong evidence for bid-rigging, I run counterfactual simulations to estimate the revenue damage caused to the state of Michigan by this non-competitive bidding behavior. I find that the hypothetical revenue damage, summed over the entire alleged collusive period, totals over $450 million. However, although these findings lend support to Reuters’ allegations and are contrary to the Department of Justice’s conclusion in 2014 after they had probed the case, they should be approached only with caution, given the limitations of the available data on the potential bidders.

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Advisors: Professor Jame Roberts, Professor Michelle Connolly | JEL Codes: L4, D44, L71

The Impact of Collegiate Athletic Success and Scandals on Admissions Applications

By William J. Battle-McDonald

This paper examines how the quantity and quality of admissions applications to Division 1 colleges and universities were affected by two non-academic factors: (1) performance of a school’s men’s basketball and football teams; and (2) scandals associated with these athletic programs. Admissions data from 2001 – 2017 were compared to team performance during their football and basketball seasons in order to understand how these non-academic factors contribute to an individual’s decisions to apply for admission. A multivariate linear regression model with school and year fixed effects supported the hypothesis that athletic success positively affects the quantity of applications, increasing them by up to 3% in basketball and 11% in football in the following application period. Seasonal football success was also shown to have negative impacts on the distribution of standardized testing scores of future applicant classes, however these scores were shown to increase when a team played their best season in five or more years. Additional analysis of the effects of athletic program scandals reveals a significant negative effect on the number of applications received, although a deep dive into a few of the most prominent scandals suggests that the benefits associated with violating NCAA rules may, under the right circumstances, be well worth the risk.

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Advisor: Dr. James Roberts | JEL Codes: I23, J24, L82, L83, Z2

The Effect of Competition on Strategic Discharge at Long-Term Acute-Care Hospitals

By Michael Karamardian

Because Medicare’s prospective payment system for long-term acute-care hospitals (LTCHs) makes a large lump-sum form of payment once patients reach a minimum length-ofstay threshold, LTCHs have a unique opportunity to maximize profits by strategically discharging patients as soon as the payment is received. This analysis explores how the level of competition between LTCHs in geographic markets affects the probability of a patient being strategically discharged. The results show that patients at LTCHs in more competitive markets have a lower probability of being strategically discharged than at those in less competitive markets, suggesting increased competition could help save Medicare funding.

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Advisors: Kent Kimbrough and James Roberts | JEL Codes: D22, I11, I18

What Gets Paid? Analyzing the Major League Baseball Contract Market

By Brian Pollack

This paper aims to assess the efficiency of the Major League Baseball contract market in the past decade, given that teams are employing more analytical approaches to player evaluation. First, analysis of team-level data reveals the most important determinants of run scoring and run prevention, respectively. Models of player contract value, controlling for player-specific variables and environmental factors, then determine what is most significantly rewarded on the free agent market. Overall, teams have identified the individual skills that are most important and compensated them accordingly, and there is evidence to suggest teams are becoming smarter about this in recent years.

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Advisor: James Roberts | JEL Codes: D7, O3, Z2

Increased Foreign Revenue Shares in the United States Film Industry: 2000 – 2014

By Victoria Lim

The American film industry, which has historically been driven by the domestic market, now receives an increasing proportion of its revenue from abroad (foreign share)To determine the factors influencing this trend, this paper analyzed data from 11 countries of 2,337 American films released during 2000  2014Both film and country attributes were analyzed to determine each attribute’s effect on foreign share, whether its effect size has changed over time and whether each attribute has changed in frequency amongst films released. The results identified six attributes, star actors, sequels, releases in top markets, release time lag, GDP growth and a match in languagethat contributed to the increase in foreign share over this period

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Advisor: James Roberts, Kent Kimbrough | JEL Codes: F40, L82, Z11 | Tagged: Foreign Share, International Box Office Revenue, Motion Picture Industry

The Effect of Federal Regulations on the Outcomes of Auctions for Oil and Gas Leaseholds

By Artur Shikhaleev

This thesis attempts to analyze the impact of the differences in regulatory frameworks that govern state-owned and federally-owned lands on the outcomes of auctions for oil and natural gas leaseholds in the state of New Mexico. The analysis tries to isolate the effect of ownership by controlling for auction structure, leasehold characteristics, and prices of underlying resources. Given past research, the hypothesis is that stricter regulations carry a heavier cost to buyers, so the expectation is that federally-owned leaseholds, which are more regulated, are traded at a discount to state-owned leaseholds. However, the result of this thesis is contradictory to the hypothesis. The conclusion is that stricter regulations do not lead to a discounted auction price for an oil and gas leasehold.

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Advisor: James Roberts, Kent Kimbrough | JEL Codes: C12, C21, Q35, Q58 | Tagged: Auction, Education, environment, federal, natural gas, Oil, Regulation, State

Resource Adequacy and Energy-Only Market Design: Assessing The Impact of ERCOT’s Operating Reserve Demand Curve1

By Max Lipscomb

I examine the effect of an Operating Reserve Demand Curve (ORDC) which was recently implemented in Texas to assist power producers in recovering their fixed investment costs. I characterize and employ an economic plant dispatch model to examine the ORDC’s effects on representative natural gas plants in Texas, allowing me to determine whether or not the ORDC is likely to induce new capital deployment. I find that the ORDC’s positive effects are minimal and likely negated by the policy’s complexity, sending unclear signals to prospective investors. My results suggest that the policy itself is insufficient to incentivize the construction of new generation capacity in Texas’s electricity market.

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Advisor: James Roberts | JEL Codes: L9, L94, L97 | Tagged: Demand Curve, Electricity, Energy-only Operting Reserve, ERCOT Texas, Resource Adequacy, Utility Power

Competition from Incumbent Firms During Mergers: Estimating the Effect of Low-Cost Carriers on Post-Merger Prices

By Jonathan Gao

In an evaluation of a merger, the type of existing competitors in the market should play a role in constraining market power following the merger. In the airline industry, heterogeneity between low-cost carriers (LCCs) and legacy carriers suggest that the types of airline competitors could affect the price effects of a merger. This paper investigates the pro-competitive effects that existing, non-merging airline carriers have on prices when an airline merger occurs. Using data in the years around the 2008 merger between Delta and Northwest Airlines, the results show that average price levels of Delta and Northwest dropped after the merger, with larger price decreases on routes with LCC competitors. There is evidence that incumbent LCC competitors have a larger influence than legacy competitors in restricting post-merger prices and market power, confirming that the type of competitors matters in assessing the level of competition in a market. This paper also shows that much of the cost efficiencies from the merger were concentrated on routes with a hub of Delta or Northwest.

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Advisor: James Roberts | JEL Codes: L0, L11, L13 | Tagged: Airline Competition, Airline Merger, Market Structure

The Influence Effect of Critics’ Reviews on Foreign and Domestic Movies

By Jayoung Jeon

Critics and their reviews provide crucial information for consumers in many “experience goods” markets, and the movie market is one such market. Through their impact on the consumer’s film selection, critics’ reviews influence the first weekend box office performance (the influence effect). We hypothesize that the influence effect of critics’ reviews is different for foreign and domestic movies. Using the U.S. film industry as our empirical setting, we examine the effects of reviews on opening weekend revenues in the U.S. film industry. We find that, when the critics’ assessment of domestic movies is positive, people are discouraged from watching the movie. On the other hand, for foreign movies, the impact of positive reviews is found to be positive. We interpret this result as arising from the different target audiences for foreign and domestic movies. Further analysis of our data supports this hypothesis. We also find that people are more influenced to watch movies when they see multiple reviews than only a few of them. This positive impact of the number of critics’ reviews is greater for domestic than foreign movies, and greater for domestic art movies than domestic non-art movies.

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Advisor: James Roberts | JEL Codes: L82, M37 | Tagged: Art, Critics, Films, Foreign, Movies, Reviews

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