arXiv subjects

Gaurab Aryal

Publications and source records attributed to Gaurab Aryal.

At least 19 recordsLinked to original sources

arXiv2025

Bridging Quasi-Experimental and Structural Approaches for Robust Evaluation of US Airline Mergers

We bridge quasi-experimental and structural approaches for robust merger evaluation. First, we show that the difference-in-differences (DiD) equation is the "reduced form" of a structural model, where demand and cost parameters identify price effects of mergers even when the DiD approach faces identification challenges. Second, we propose a $\textit{synthetic GMM}$ approach by applying synthetic DiD weights to structural moment conditions to improve estimates when only a few treated markets are available. Applying this methodology to three airline mergers, we find modest efficiency gains entirely offset by increased coordination. The synthetic GMM refinement sharpens findings, uncovering anti-competitive effects standard approaches miss.

econ.GN↗

arXiv2025

The Benefits from Bundling Demand in K-12 Broadband Procurement

We study a new market design for K-12 school broadband procurement that switched from school-specific bidding to a system that bundled schools into groups. Using an event study approach, we estimate that the program reduced internet prices by \$9.17 (55\%) per Mbps per month while increasing bandwidth by 380.06 Mbps (136\%). These benefits resulted primarily from mitigating exposure risk in broadband procurement - the risk that providers win too few contracts to cover their fixed infrastructure costs. Using a bounds approach, we show robustness of our estimates and document that participants saved between \$1.61 million and \$3.48 million, while their existing federal E-rate subsidy was \$2.47 million, and experienced substantial welfare gains.

econ.GN↗

arXiv2024

Identification and Estimation of Multidimensional Screening

We study the identification and estimation of a multidimensional screening model, where a monopolist sells a multi-attribute product to consumers with private information about their multidimensional preferences. Under optimal screening, the seller designs product and payment rules that exclude "low-type" consumers, bunches the "medium types" at "medium-quality" products, and perfectly screens the "high types." Under the assumption that the cost function is quadratic and additively separable in products, we determine sufficient conditions to identify the joint distribution of preferences and the marginal costs from data on optimal individual choices and payments. Then, we propose estimators for these objects, establish their asymptotic properties, and assess their small-sample performance using Monte Carlo experiments.

econ.GN↗

arXiv2024

Econometrics of Insurance with Multidimensional Types

In this paper, we address the identification and estimation of insurance models where insurees have private information about their risk and risk aversion. The model includes random damages and allows for several claims, while insurers choose from a finite number of coverages. We show that the joint distribution of risk and risk aversion is nonparametrically identified despite bunching due to multidimensional types and a finite number of coverages. Our identification strategy exploits the observed number of claims as well as an exclusion restriction, and a full support assumption. Furthermore, our results apply to any form of competition. We propose a novel estimation procedure combining nonparametric estimators and GMM estimation that we illustrate in a Monte Carlo study.

econ.GN↗

arXiv2024

Security Issuance, Institutional Investors and Quid Pro Quo

Securities issuance through intermediaries is subject to agency problems and informational frictions. We examine these effects using SPAC data. We identify ``premium'' investors whose participation is linked to lower liquidation risk, higher returns, and lower redemption rates, consistent with both informational rents and agency frictions. In contrast, ``non-premium'' investors engage in non-agency quid pro quo relationships. Specifically, they receive high returns from an intermediary (quid) in exchange for a tacit agreement to participate in weaker future deals (quo). These relationships serve as insurance for issuers and intermediaries, enabling more issuers to access markets.

q-fin.GN↗

arXiv2023

Common Subcontracting and Airline Prices

In the US airline industry, independent regional airlines fly passengers on behalf of several national airlines across different markets, giving rise to $\textit{common subcontracting}$. On the one hand, we find that subcontracting is associated with lower prices, consistent with the notion that regional airlines tend to fly passengers at lower costs than major airlines. On the other hand, we find that $\textit{common}$ subcontracting is associated with higher prices. These two countervailing effects suggest that the growth of regional airlines can have anticompetitive implications for the industry.

econ.GN↗

arXiv2023

Empirical Framework for Cournot Oligopoly with Private Information

We propose an empirical framework for asymmetric Cournot oligopoly with private information about variable costs. First, considering a linear demand for a homogenous product with a random intercept, we characterize the Bayesian Cournot-Nash equilibrium. Then we establish the identification of the joint distribution of demand and firm-specific cost distributions. Following the identification steps, we propose a likelihood-based estimation method and apply it to the global market for crude-oil and quantify the welfare effect of private information. We also consider extensions of the model to include either product differentiation, conduct parameters, nonlinear demand, or selective entry.

econ.GN↗

arXiv2022

Valuing Pharmaceutical Drug Innovations

We propose a methodology to estimate the market value of pharmaceutical drugs. Our approach combines the event study method with a discounted cash flow model that infers drug values from stock market responses to drug development announcements. We estimate the average value of a drug developed by small firms (those below the 95th percentile of market capitalization) to be \$2.16 billion. At the preclinical stage, the risk-adjusted and present discounted average net value of drugs is \$50 million. Leveraging these estimates, we also determine the expected drug development cost at the start of the discovery stage to be \$38 million. We estimate values and costs for several therapeutic areas (e.g., neoplasm, infections) and explore applying these estimates to design policies that support drug development through drug buyouts and targeted preclinical interventions.

econ.GN↗

arXiv2022

Price Discrimination in International Airline Markets

We develop a model of inter-temporal and intra-temporal price discrimination by monopoly airlines to study the ability of different discriminatory pricing mechanisms to increase efficiency and the associated distributional implications. To estimate the model, we use unique data from international airline markets with flight-level variation in prices across time, cabins, and markets and information on passengers' reasons for travel and time of purchase. The current pricing practice yields approximately 77% of the first-best welfare. The source of this inefficiency arises primarily from private information about passenger valuations, not dynamic uncertainty about demand. We also find that if airlines could discriminate between business and leisure passengers, total welfare would improve at the expense of business passenger surplus. Also, replacing the current pricing that involves screening passengers across cabin classes with offering a single cabin class has minimal effect on total welfare.

econ.GN↗

arXiv2022

Procurements with Bidder Asymmetry in Cost and Risk-Aversion

We propose an empirical method to analyze data from first-price procurements where bidders are asymmetric in their risk-aversion (CRRA) coefficients and distributions of private costs. Our Bayesian approach evaluates the likelihood by solving type-symmetric equilibria using the boundary-value method and integrates out unobserved heterogeneity through data augmentation. We study a new dataset from Russian government procurements focusing on the category of printing papers. We find that there is no unobserved heterogeneity (presumably because the job is routine), but bidders are highly asymmetric in their cost and risk-aversion. Our counterfactual study shows that choosing a type-specific cost-minimizing reserve price marginally reduces the procurement cost; however, inviting one more bidder substantially reduces the cost, by at least 5.5%. Furthermore, incorrectly imposing risk-neutrality would severely mislead inference and policy recommendations, but the bias from imposing homogeneity in risk-aversion is small.

econ.GN↗

arXiv2022

Desirable Rankings

We study the problem of aggregating individual preferences over alternatives into a collective ranking. A distinctive feature of our setting is that agents are matched to alternatives. Applications include rankings of colleges or academic journals. The foundation of our approach is that alternatives agents desire -- that is, those they rank above their match -- should also be ranked higher socially. We introduce axioms to formalize this idea and call rankings that satisfy them desirable. We develop an algorithm to construct desirable rankings and prove that, as the market becomes large, desirable rankings converge to the true underlying ranking of the alternatives by quality. We support this convergence result through simulations and demonstrate the practical usefulness of our approach by ranking Chilean medical programs with data from their centralized admission system. Finally, we compare performance and show that our approach outperforms two benchmarks: revealed preference rankings and Borda counts.

econ.TH↗

arXiv2021

Signaling and Employer Learning with Instruments

This paper considers the use of instruments to identify and estimate private and social returns to education within a model of employer learning. What an instrument identifies depends on whether it is hidden from, or transparent (i.e., observed) to, the employers. A hidden instrument identifies private returns to education, and a transparent instrument identifies social returns to education. We use variation in compulsory schooling laws across non-central and central municipalities in Norway to, respectively, construct hidden and transparent instruments. We estimate a private return of 7.9%, of which 70% is due to increased productivity and the remaining 30% is due to signaling.

econ.GN↗

arXiv2021

Coordinated Capacity Reductions and Public Communication in the Airline Industry

We investigate the allegation that legacy U.S. airlines communicated via earnings calls to coordinate with other legacy airlines in offering fewer seats on competitive routes. To this end, we first use text analytics to build a novel dataset on communication among airlines about their capacity choices. Estimates from our preferred specification show that the number of offered seats is 2% lower when all legacy airlines in a market discuss the concept of "capacity discipline." We verify that this reduction materializes only when legacy airlines communicate concurrently, and that it cannot be explained by other possibilities, including that airlines are simply announcing to investors their unilateral plans to reduce capacity, and then following through on those announcements.

econ.GN↗

arXiv2021

Auctioning Annuities

We propose and estimate a model of demand and supply of annuities. To this end, we use rich data from Chile, where annuities are bought and sold in a private market via a two-stage process: first-price auctions followed by bargaining. We model firms with private information about costs and retirees with different mortalities and preferences for bequests and firms' risk ratings. We find substantial costs and preference heterogeneity, and because there are many firms, the market performs well. Counterfactuals show that simplifying the current mechanism with English auctions and "shutting down" risk ratings increase pensions, but only for high-savers.

econ.GN↗

arXiv2020

Is Collusion-Proof Procurement Expensive?

Collusion among bidders adversely affects procurement cost and in some cases efficiency, and it seems collusion is more prevalent that we would like. Statistical methods of detecting collusion just using bid data, in a hope to deter future collusion, is perilous, and access to additional data is rare and often always after the fact. In this paper, we estimate the extra cost of implementing a new procurement rule proposed by Chen and Micali [2012] that is robust to collusion and always guarantees the efficient outcome. The rule requires bidders to report their coalition and to ensure incentive-compatibility, the mechanism allows them to attain rents. We estimate this rent using data from California highway construction and find it to be anywhere between 1.6% to 5%. Even after we factor in the marginal excess burden of taxes needed to finance these rents, the cost ranges between 2.08% and 6.5%, suggesting that there is a room to think about running this new auction, suggesting we should consider this auction.

econ.GN↗

arXiv2016

Identification of Insurance Models with Multidimensional Screening

This paper addresses the identification of insurance models with multidimensional screening where insurees have private information about their risk and risk aversion. The model includes a random damage and the possibility of several claims. Screening of insurees relies on their certainty equivalence. The paper then investigates how data availability on the number of offered coverages and reported claims affects the identification of the model primitives under four different scenarios. We show that the model structure is identified despite bunching due to multidimensional screening and/or a finite number of offered coverages. The observed number of claims plays a key role in the identification of the joint distribution of risk and risk aversion. In addition, the paper derives all the restrictions imposed by the model on observables. Our results are constructive with explicit equations for estimation and model testing.

q-fin.MF↗

arXiv2015

Semiparametric Estimation of First-Price Auction Models

We propose a semiparametric method to estimate the density of private values in first-price auctions. Specifically, we model private values through a set of conditional moment restrictions and use a two-step procedure. In the first step we recover a sample of pseudo private values using Local Polynomial Estimator. In the second step we use a GMM procedure to estimate the parameter(s) of interest. We show that the proposed semiparametric estimator is consistent, has an asymptotic normal distribution, and attains the parametric ("root-n") rate of convergence.

econ.GN↗

arXiv2015

Empirical Relevance of Ambiguity in First Price Auction Models

We study the identification and estimation of first-price auction models where bidders have ambiguity about the valuation distribution and their preferences are represented by maxmin expected utility. When entry is exogenous, the distribution and ambiguity structure are nonparametrically identified, separately from risk aversion (CRRA). We propose a flexible Bayesian method based on Bernstein polynomials. Monte Carlo experiments show that our method estimates parameters precisely, and chooses reserve prices with (nearly) optimal revenues, whether there is ambiguity or not. Furthermore, if the model is misspecified -- incorrectly assuming no ambiguity among bidders -- it may induce estimation bias with a substantial revenue loss.

econ.GN↗