Essays on Mechanism Choice and Auctions

This dissertation consists of three chapters relating to various topics in empirical Industrial Organization. The first two chapters deal with the empirical treatment of sales in online markets. The third chapter explores the level of pass-through for taxes on soft drinks. In the first chapter I demonstrate that when dealing with online market places it is important to take into account the fact that multiple listings coexist. Traditionally, the economic literature has treated listings as independent. In reality, however, buyers often have the choice between multiple contemporaneous listings. I demonstrate that it is important to take this fact into account since sellers who list their items simultaneously are in direct competition. More specifically, I show that the sale probability of a given item decreases when the number of simultaneous listings increases. Thus, the aforementioned assumption of independence can lead to wrong results. In the second chapter, I specify and estimate a structural model of mechanism choice in online markets. I consider both sides of the market: On the demand side, buyers' choices among available listings are equilibrium outcomes of an entry game. On the supply side, sellers take competition into account and make equilibrium decisions when choosing sales mechanisms and prices. I estimate this model using data from sales of baseball tickets on eBay. I find that sellers' outside options, dynamic incentives, and risk preferences affect mechanism choice. Using the estimation results from my model I analyze the welfare effects of a hybrid mechanism (buy-it-now auctions) eBay offers. I find that the existence of buy-it-now auctions increases the consumer surplus and reduces the producer surplus. The reason for this is that buy-it-now auctions diminish sellers' potential for diversification via mechanism choice and thus strengthen competition. The third and last chapter focuses on the incidence of soda taxes by studying the pass-through level of these taxes. It lays out a framework for thinking about the determinants of the pass-through level. More specifically, it builds theoretical models that examine the pass-through under more complex supply structures with multiple manufactures and retailers. In addition to providing some intuition behind theoretical predictions of the models, this chapter also presents empirical results found in the data along with their implications.