A Franchise Education: The Impact of High School Quality on the Operations of Quick Service Restaurant Franchises in Texas
By Joseph Yetter
While the franchise business model provides customers with a certain level of consistency, there is still considerable variation in service quality across locations. Among other factors, a franchise’s quality of human capital (i.e., its workers) contributes to the quality of its operations, one of the strongest determinants of its revenue. Assuming that low wage workers have minimal geographical mobility, this paper studies how worker education impacts operation scores at the Texas locations of a quick service restaurant franchise brand by studying local school quality. This analysis controls for internal and external operations influences, such as the franchisee, designated market area, retail location type, the location’s proximity to a highway, and per capita income of the area to isolate the effect of school quality on operations. Ultimately, this study finds that higher school quality ratings have a significant and positive impact on the operations of franchises, and that operations have a significant and positive impact on sales revenue. Decomposing operations scores, this study finds that school quality ratings primarily impact operations by reducing customer complaints.
Advisor: Michelle Connolly, Ryan Mcdevitt | JEL Codes: J24, L8, L83 | Tagged: Business Operations, Education Quality, Franchise, Worker Productiviity
Video Game Sales: Does Diversity Pay?
By Hai Lin “Helena” Wu
The video game industry has grown into a mature market in the past decade, surpassing the size of the U.S. film industry in 2009. As a result of the rise in popularity of video gaming amongst many demographic groups of the American population, the underrepresentation of female and ethnic minorities in video games has become an increasingly relevant topic of discussion. This paper empirically examines the effects of including female and ethnic minority lead characters on the equilibrium sales volume of video games. Through the use of a reduced-‐form regression, the equilibrium quantity is regressed on a list of exogenous variables pertinent to the interest of this study. The findings suggest that the inclusion of female and minority lead characters affects sales of different genres of games in distinct manners, suggesting that the video game market has a heterogeneous consumer base with a diverse range of preferences. In addition to empirical work, one of the main contributions of this paper is creating a new and unique dataset (N=712) on game attributes, especially with regard to character gender and ethnicity. This paper’s findings have implications on the game design decisions for video game producers.
Advisor: Kent Kimbrough, Lori Leachman | JEL Codes: D00, L1, L82 | Tagged: Entertainment, Ethnicity, Gender, Sales, Video Game
The Impact of Online Streaming on Primetime Viewership An Econometric Analysis of Technological Change, Network Practices and Audience Behavior
By Yeshwanth Kandimalla
This study considers the impact of online streaming on the viewership of popular primetime programs aired on four major U.S broadcast networks: ABC, CBS, FOX and NBC. The time period considered will begin with the 2004-2005 TV season through the 2011-2012 season. Technological change, primarily with faster Internet speeds, spurred some growth of online video streaming. Furthermore, over this time period, the four major networks all authorized streaming at different levels. This variation in availability provides the heterogeneity needed to compare the effect of making programs available
online. The existing literature has posited two effects of online streaming: substitution away from traditional TV viewing due to lower costs or complementarity by drawing in additional viewers. Using this framework, this study conducts an empirical analysis of TV viewership and online availability with a panel of more than 3,500 episodes across 8 seasons and 42 programs. The results strongly suggest that online streaming options drive statistically significant substitution away from traditional TV viewing, a trend that can have major consequences for the distribution of TV programs and the broadcast TV business as a whole.
Advisor: Michael Munger, Michelle Connolly | JEL Codes: D12, D22, L82 | Tagged: Big Four, Cable Cord-cutting, FOX, Hulu, Network Television, Networks, Online Streaming
Debunking the Cost-Shifting Myth: An Analysis of Dnamic Price Discrimination in California Hospitals
By Omar Nazzal
Cost-shifting, a dynamic form of price discrimination, is a phenomenon in which hospitals shift the burden of decreases in government-sponsored healthcare reimbursement rates to private health insurers. In this paper, I construct a data set spanning 2007 – 2011 that matches financial metrics of California hospitals to hospital- and market-specific characteristics with theoretical implications in price discrimination. The subsequent analysis is split into three stages. In the first and second stages, I use a fixed-effects OLS model to derive a point estimate of the inverse correlation between private revenue and government revenue that is consistent with recent empirical work in cost-shifting, a body of literature almost entirely reliant upon fixed-effects and difference-in-difference OLS. These types of models are encumbered by the inherent causality loop connecting public and private payment sources. I address this endogeneity problem in the third stage by specifying a fixed-effects 2SLS model based on an instrument for government revenue constructed with data from the California Department of Health Care Services and the U.S. Census. This instrument performed well in canonical tests for relevance and validity. I find that an increase in government payments causes an increase in private payments, and that the relationship is statistically-significant at all reasonable levels. In addition, I comment on properties of the data set that suggest that the original inverse correlation was due to inadequate measurements of market power. I conclude with policy implications and suggestions for future research.
Advisor: Frank Sloan | JEL Codes: I11, I13, I18, L11, L80 | Tagged: Health Insurance, Market Structure, Medicaid, Medicare, Price Discrimination
The Effects of Digital Media on Advertising Markets
By Bradford Lightcap and William Anthony Peek
This paper examines the viability of sustained advertising spending in an increasingly digital age. Beginning with print media and through the advent of television, the ad market has seen vast evolution in information consumption. The result has been a creative adaptability by advertisers to keep pace with said change. However, growth in ad spending has not significantly outpaced GDP growth, as documented in the Relative Constancy Hypothesis. RCH asserts that both ad spending and consumer expenditure as a percent of GDP remain steady over time. This paper focuses on whether the advertising claim holds up through the rise of the Internet. How this powerful medium may alter traditional advertising trends remains unclear. The answer could have implications for both advertisers and parties that rely on them
Advisor: Connel Fullenkamp | JEL Codes: L82, M3, M37, O39 | Tagged: Digital Media, Relative Constancy Hypothesis
Price Partitioning and Consumer Rationality in Internet Retail Markets
By Katherine Bodnar
This paper seeks to further understand the bounds of consumer rationality and search on the Internet. Specifically this paper focuses on how consumers respond to partitioned prices when making their purchasing decisions. The goal of the paper is to determine if consumers are as sensitive to explicitly stated shipping prices, as they are to list prices, in an environment where items are sorted by list prices. After evaluating the data using a non-linear regression model, the results suggest that consumers do not weight partitioned prices (taxes or shipping prices) as much as they do list prices, contradicting the standard economic model about consumer rationality. The results imply that price partitioning is an effective obfuscation method that is allowing retailers to continue to maintain mark-ups and profit margins in Internet settings.
Advisor: Andrew Sweeting | JEL Codes: L1, L11, L81 | Tagged: E-‐Commerce, Obfuscation, Price Partitioning, Retail Competition, Search, Shipping Price
The Influence Effect of Critics’ Reviews on Foreign and Domestic Movies
By Jayoung Jeon and Luxuan Jiao
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.
Advisor: James Roberts | JEL Codes: L82, M37 | Tagged: Art, Critics, Films, Foreign, Movies, Reviews
Game Theory and The World Marathon Majors
By Benjamin Jones
The World Marathon Majors (WMM) Series Prize was enacted in 2006 as a million dollar prize handed out annually to the top man and woman competing at five of the most important marathons. This paper considers the motivations behind setting up this prize, as well as the theoretical rationale for its existence and whether the empirical data supports these results. We find that the game theory model supports the ideas that the World Marathon Majors organizers state as their goals in creating the prize, but at the same time, there is not much empirical support as of yet to support any quantifiable changes within marathoning in the past few years. The regressions do not produce statistically significant data for finishing times decreasing even though the world record has been broken three times in these races since the implementation of the WMM. This may be due to the small number of observations and the fact that the series is so new. However, there are other areas of interest, such as an increase in World Record-breaking times or an increase in overall publicity, that may justify such a lucrative prize for these races. These topics are not included within the regressions and could be an area for further study.
Advisor: Curtis Taylor, Michelle Connolly | JEL Codes: C7, C73, L83 | Tagged: Game Theory, Marathon, Sports Economics, Tournament Theory
