| dc.description.abstract | This dissertation is about the U.S. automobile industry. In the first part, I study an environmental
policy that ascribes a fee or a rebate to each new vehicle in the marketplace, depending on the
vehicle’s fuel economy rating; thus, it is called a ’feebate’. Feebates can be designed to reach optimal
outcomes given assumptions on people’s preferences and welfare from buying cars. Since a
feebate is a function from fuel economy ratings to cash, I study how feebate functional form affects
the efficacy of the policy as well as some distributional outcomes. I conclude that a feebate policy,
represented by a logistic functional form in which larger portions of consumers face high marginal
incentives to increase fuel economy, brings about improved outcomes over other functional forms.
The second part of this dissertation explores the nature of local competition and tests the existence
of local market power held by car dealerships. In the empirical model, I exploit variation in
local competition that is caused by factors external to the dynamics of local demand and supply.
I compare the pricing response of dealerships in affected local markets relative to the pricing behavior
of dealerships in markets which were not affected. I find that decreased competition caused
consumers to pay higher prices for their vehicles both through a sales mix, as well as a negotiations,
mechanism. I find evidence that dealers target consumers strategically, as the incidence of the price
increases falls disproportionately on buyers of SUVs who engaged in a secondary transaction of
a trade-in. I conclude that dealers exercise local market power when afforded by consumers who
signal higher willingness to pay and bargaining disutilities. | en |
