Empirical Studies of Microeconomic Agents' Behavior

The economic decisions of rational agents can be analyzedby theoretical models and/or empirical models. This dissertationconsists of two different applications of empirical models on twodifferent economic conundrums, both based on theoretical hypotheses.The first chapter introduces the related literatures and backgroundof each paper. In the second chapter, I analyze the concert ticketmarket by extending the theory present in the economic literature andestimating a parametric empirical model. In the third chapter we estimate theaffiliation effect (Pinkse and Tan [2005]) in a specific common value auction setting.The second chapter investigates promoters' and bands' ticket pricedecisions and presents a theoretical model that demonstrates howtheir seemingly suboptimal decisions can be profit-maximizing. Here, Imodel the ticket price decision of a promoter and an artist based ontwo potential explanations: the effects of an artist's future profit aswell as merchandising profit on the pricing decision. When artists or promotersconsider their future profit as wellas their current profit, or they consider merchandising revenue aswell as ticket revenue, they may charge a price lower than the pricewhich maximizes only their static ticket profit. In order to testthe credibility of these potential explanations, I estimate a ticketsupply equation with Pollstar Boxoffice historical data. Theestimation results suggest that both the future profit of an artistand merchandising profit are credible explanations as to whypromoters and bands set the ticket price lower than the staticticket profit maximizing price.The third chapter estimates the affiliation effect defined in Pinkse and Tan (2005)in which they showed that bidscan be decreasing in the number of bidders in private value auctionsprovided that the bidders' private values are affiliated. We use the Outer Continental Shelf auction data set to estimatethree effects nonparametrically: the affiliationeffect, the competition effect, and the winner's curse effect. Wefind that the affiliation effect is in fact the smallest of thethree.