Price Determinants and Depreciation of Used Cars Post-COVID-19
by Ayaan Sundeep Patel
Abstract
Throughout the COVID-19 pandemic, the price of used cars has fluctuated greatly due to
numerous factors. Inflation and supply chain issues have been at the forefront of the news and
have affected not only cars but most consumer goods. While the majority of society has
seemingly progressed past COVID-19, its effects still linger in the used car market, as prices rose
4.6% from January 2023 to February 2023. Therefore, in an effort to study this phenomenon, I
scraped data from autotrader.co.uk on February 23, 2023. This study aims to understand the
effect of various factors, including mileage, age, and engine size, on various classes of used cars.
The five classes being studied are compact cars, luxury sports sedans, luxury mid-size sedans,
luxury full-size sedans, and luxury SUVs. A log-linear model is used to model the price
determinants of the used cars. A linear model is incorporated to model the depreciation rate of
the cars in the dataset. Lastly, this model is used to predict the three-year depreciation rate for
each car model, which is then compared to the pre-COVID-19 three-year depreciation rate to see
the inflated prices in the UK used car market.
Professor Michelle Connolly, Faculty Advisor
Professor Andrea Lanteri, Faculty Advisor
JEL Codes: D12, J11, L62
Reconstruction following Destruction: Entrepreneurship in the Aftermath of a Natural Disaster
by Richard Lombardo
Abstract
Entrepreneurship is thought to be the engine of growth in many developing countries. There is, however,
a paucity of evidence on the role that entrepreneurship plays in rebuilding economic livelihoods both in
the short and longer-term in the aftermath of a large-scale shock. This is an important gap in the literature
given the increasing frequency and severity of shocks across the globe. This paper contributes to filling that
gap by investigating the evolution of entrepreneurial success following the 2004 Indian Ocean tsunami, a
large-scale and unexpected shock. Using longitudinal survey data, the Study of the Tsunami Aftermath and
Recovery (STAR), I find large declines in business ownership, profits, and capital for those most exposed
to the tsunami that persisted through 10 years following the tsunami. These estimates can be given a causal
interpretation under the plausible assumption that exposure to the tsunami can be treated as exogenous after
taking into account individual-specific unobserved heterogeneity with fixed effects, including pre-tsunami
geographical features that drove exposure. Individuals living in rural areas and individuals with the least
resources pre-tsunami fared the worst in terms of developing new businesses. However, the massive Build
Back Better reconstruction program promoted entrepreneurship. Receipt of housing aid as part of that
program is linked to an increase in the development of non-agricultural businesses that spurred gains in real
profits.
Professor Duncan Thomas, Faculty Advisor
Professor Michelle Connolly, Faculty Advisor
JEL Codes: D1; H84; L26; Q54
What Affects Post-Merger Innovation Outcomes? An Empirical Study of R&D Intensity in High Technology Transactions Among U.S. Firms
by Neha Karna
Abstract
High levels of global M&A activity have characterized the past decade, making the policy debate over the impact of mergers on innovation even more pertinent. Innovation is a significant driver of economic growth and therefore a negative effect of mergers on innovation outcomes may have detrimental consequences. Nevertheless, the existing literature demonstrates mixed results leaving it unclear whether the overall effect is positive or negative. This paper contributes to existing literature on the relationship between mergers and innovation and examines the effects of M&A on the subsequent innovative activity of acquiring firms that operate in high technology (high-tech) industries. I construct a sample of U.S.-based public-to-public deals from 2010-2019 involving high-tech acquiring firms. Using multivariable regression with robust considerations, I analyze factors that may explain post-merger R&D intensity defined as the merged entity’s R&D expenditure divided by its total assets one year after deal completion. I consider firm characteristics of the target and acquirer, including size, industry, and age, and industry competition. I find potential positive impact of relative target size on post-merger R&D intensity and significant interaction effects between relative target size and firm age, relative target size and industry relatedness, and target industry competition and industry relatedness. My results suggests that beyond the occurrence of a merger, specific deal characteristics may affect postmerger innovation outcomes.
Professor Grace Kim, Faculty Advisor
Professor Kent Kimbrough, Faculty Advisor
JEL Codes: G3; G34; L40; O31; O32;
Bias in Fact Checking?: An Analysis of Partisan Trends Using PolitiFact Data
by Thomas A. Colicchio
Abstract
Fact checking is one of many tools that journalists use to combat the spread of fake news in American politics. Like much of the mainstream media, fact checkers have been criticized as having a left-wing bias. The efficacy of fact checking as a tool for promoting honesty in public discourse is dependent upon the American public’s belief that fact checkers are in fact objective arbiters. In this way, discovering whether this partisan bias is real or simply perceived is essential to directing how fact checkers, and perhaps the mainstream media at large, can work to regain the trust of many on the right. This paper uses data from PolitiFact, one of the most prominent fact checking websites, to analyze whether or not this bias exists. Prior research has shown that there is a selection bias toward fact checking Republicans more often and that they on average receive worse ratings. However, few have examined whether this differential treatment can be attributed to partisan bias. While it is not readily apparent how partisan bias can be objectively measured, this paper develops and tests some novel strategies that seek to answer this question. I find that among PolitiFact’s most prolific fact checkers there is a heterogeneity in their relative ratings of Democrats and Republicans that may suggest the presence of partisanship.
Professor Peter Arcidiacono, Faculty Advisor
Professor Michelle Connolly, Faculty Advisor
JEL Codes: D83, D84, L82
Generic Entry and The Effect on Prices in the Prescription Drug Market
by Sahana Giridharan
Abstract
Drug firms have utilized a variety of strategies that contribute to rising drug prices in the
U.S. for the last few years. Strategic entry timing and number of indications a drug is approved
might be two factors that contribute to this rise in prices. While there have been some studies
uncovering a positive relationship between generic entry and branded prices, there has been little
research done on the effects of generic entry on generic prices thus far. This work can impact
policy aimed at decreasing generic drug prices and increasing competition in the generic drug
market.
Oncology and inflammatory bowel disease (IBD) are two disease areas that have a high
price burden to patients in the U.S. today, hence using Medicare Part B Average Sales Price
(ASP) data, I analyze the effect of entry timing on the price of 24 drugs in these two indication
areas. Using the Drugs@FDA Database, I collect data on the FDA approval date of a drug, and
on the indications a drug is approved for. Utilizing OLS, my results suggest that later entry times
lead to lower drug prices, with a 1 year increase in entry time resulting in a 6.99% increase in
prices. Results also suggest that an increase of 1 in the number of indications a drug is approved
for leads to a 49.79% decrease in drug price. This could suggest that having existing generic
competitors in the pharmaceutical market decreases generic prices, and that number of
indications is a strong indicator of drug price.
If the current work is confirmed by future studies similar to this studying entry time and
price in the generic pharmaceutical market, it is possible that future drug policy should focus on
promoting competition within the pharmaceutical market to lower generic prices.
Professor Frank Sloan, Faculty Advisor
Professor Grace Kim, Faculty Advisor
Professor Kent Kimbrough, Faculty Advisor
JEL Codes: L11; I11; C3
Municipal and Cooperative Internet on Broadband Entry and Competition
by Tianjiu Zuo
Abstract
The broadband market is unique for municipal (government-owned) and cooperative (member-owned) competitors. Their participation, however, raises conflict of interest concerns. Both municipalities and cooperatives are often owners of utility poles that are an essential input for broadband deployment. Internet service providers (ISPs) must lease pole attachment space. While most pole attachment rates are regulated, municipal and cooperative pole owners are exempt by Section 224 of the Telecommunications Act. This paper, therefore, studies the competitive effects of municipal and cooperative ISPs, and the effect of potential entry by municipal and cooperative electric utilities (non-ISPs), on broadband entry and quality. I add to the existing literature by building a dataset of municipal and cooperative non-ISP service areas, designing a method to clean the Federal Communications Commission’s (FCC) broadband data, developing a novel geographic entry threat model, and analyzing municipalities and cooperatives in conjunction. I categorize markets into three types: rural, urban clusters (2,500 to 50,000 people), and urbanized areas (≥ 50,000 people). Looking at Illinois from June 2015 to June 2018, I find that the presence of a municipal ISP lowers the probability of market entry and service quality in urbanized areas. The presence of a cooperative ISP lowers the probability of market entry and service quality in rural areas and urban clusters. The presence of a municipal non-ISP has little to no effect on the probability of market entry or service quality. The presence of a cooperative non-ISP appears to increase the probability of market entry in rural and urbanized areas, but depress service quality in urbanized areas, though these effects could be attributed to bad data.
Professor Michelle Connolly, Faculty Advisor
JEL Codes: L32, L41, L96
Taxing Marijuana and the Road to Reparations: Comparing the Colorado and Illinois Cannabis Markets
by Tommaso Carlo Filippo Babucci
Abstract
Although still prohibited at the federal level, cannabis can now be found on the shelves of recreational dispensaries across thirty-three U.S states. This thesis examines the development of this legal market from both historical and empirical perspectives. Using a new data set, it estimates the determinants of cannabis sales and tax revenues in the Colorado market and analyzes the incidence of a single tax increase. The results, which suggest that legal cannabis behaves like a luxury good, are used to analyze the potential for cannabis-funded reparations programs in Illinois, which recently approved recreational sales of cannabis.
Advisor: Connel Fullenkamp | JEL Codes: H2, R50, L15
Nonprofit Location, Survival, and Success: A Case Study of El Sistema USA
By Andie Carroll
As nonprofits work to serve their communities, they must choose a place to locate that best suits their needs and the needs of the population they aim to serve. Locational characteristics such as median income and population density have been shown to impact how many nonprofits choose to locate in a given area. However, few studies have examined the impact of locational characteristics on how nonprofits survive and thrive. This study examines the impact of geographic and demographic factors on nonprofit survival and success through a case study of El Sistema USA (ESUSA), a nationwide network of music education programs with the goal of helping underserved youth. The study analyzes panel survey data from 131 El Sistema-inspired programs in the U.S. from 2005 to 2018 along with demographic data from the American Community Survey, charitable giving data from the IRS, and GIS data compiled through a review of ESUSA program websites. By using regression models of ESUSA program survival and success (defined by more students served and higher program budgets), this study found that ESUSA programs in areas of more need are more likely to survive and thrive.
Advisors: Professor Lorrie Schmid, Professor Michelle Connolly | JEL Codes: L3, L31, D23
The Upstream and Downstream Effects of Government Industrial Policy in the Rare Earth Elements Industry
By Charles Daniel
The Chinese government has found considerable success in stimulating economic modernization through its industrial policy. The development of the rare earths industry, in both upstream and downstream markets, exemplifies this success. Rare earths are a group of metals whose natural properties make them critical for many pieces of modern technology. Upstream, Chinese raw rare earth producers extracted minimal output in 1985; by 2001 they accounted for more than 90 percent of global production. China stimulated this growth beginning in 1990 with implicit and explicit subsidies for rare earth producers, which enabled them to enter the market and produce at lower marginal costs than other world firms. These lower costs enabled Chinese producers to assume a market-leading position, and this paper explains the resulting developments in the upstream rare earth market through the Stackelberg model, which describes sequential quantity competition. In 2006, China introduced an additional policy of export quotas on rare earths, intended to benefit downstream Chinese firms. These firms depend on rare earths as inputs for the final goods (such as batteries and personal electronics) they produce. After the quota announcement, Chinese downstream firms benefitted from continued unrestricted access to rare earths, while non-Chinese downstream firms faced higher costs on the world market for rare earth inputs. This paper uses the Bertrand model, in which firms compete on prices, to examine the subsequent effects on these downstream markets. While Chinese rare earth producers were harmed by the export quotas, the combination of the subsidy and the export quotas enabled China to complete its economic goals: to first gain leverage in the rare earths industry, and to second transition its economy toward higher-value products and services.
Advisors: Professor Alexander Pfaff, Professor Michelle Connolly | JEL Codes: L5, L52, L13
Competition and Innovation: Evidence from Third-Party Reprocessing in the Medical Device Industry
By Varun Prasad
Healthcare is projected to soon become the industry with the largest amount of spending on research and development in the world. While competition has the potential to catalyze the development of new healthcare technologies and drive down costs, increases in competition have also been thought to hinder innovation as a result of thinner profit margins and reduced incentives. I estimate whether and to what extent competition in the medical device industry promotes innovation. Using Food and Drug Administration data on medical device applications from 1976 to 2019, I examine how original equipment manufacturers respond to the entry of third-party reprocessed devices. I find that, when controlling for year and medical specialty, the introduction of a reprocessed device leads to an almost five-fold increase in new device applications by original manufacturers after both one and two years. These results suggest that an increase in competition within the medical device market has spurred innovation and the development of new technologies.
Advisors: Professor James Roberts, Professor David Ridley | JEL Codes: L1, D22, L65
