Research

Work in Progress

Downstream Concentration in Regulated Vertical Relationships: Car Dealerships in Texas

This paper provides the first merger retrospective of automobile dealerships, using detailed transaction and registration data from Texas to study the competitive effects of increasing downstream concentration under state franchise law. Although acquisitions by dealer groups substantially increase local market concentration, I find little evidence that they raise retail prices or reduce quantities sold.

Instead, the analysis uncovers a previously undocumented mechanism through which manufacturers discipline dealer behavior despite legal restrictions on many traditional vertical restraints. Manufacturers use discretionary vehicle allocations to influence dealers’ product assortments, reallocating high-demand models and trims in ways that affect markups, sales, and investment incentives. Evidence from merger events, spillovers across dealerships, and a legal case study indicates that this allocation mechanism mitigates downstream market power and fundamentally changes the competitive effects of dealer consolidation.

These findings challenge conventional views of dealer consolidation and franchise regulation while highlighting the importance of vertical incentives in regulated distribution networks.

What Is the Value of a Sales Target?

Job market paper

This paper studies how manufacturers use sales targets to coordinate incentives in vertically separated distribution systems. I develop a theoretical model in which manufacturers reward dealerships that meet sales targets with preferential allocations of scarce, high-value vehicles. Although this mechanism distorts production toward lower-value vehicle trims relative to a vertically integrated benchmark, it also reduces the classic double-marginalization problem by aligning manufacturer and dealer incentives.

To quantify these effects, I estimate a structural model of manufacturer-dealer interactions using transaction-level data from the Texas Department of Motor Vehicles. The estimates recover the economic primitives governing allocation decisions and allow me to evaluate how sales targets affect pricing and welfare under alternative contractual arrangements.

What Is the Shape of Demand?

Joint with Eugenio J. Miravete

Demand elasticity determines market power, while demand curvature governs pass-through. Most empirical demand models impose strong restrictions on the relationship between these two objects through functional-form assumptions, yet those restrictions are rarely tested against observed consumer behavior.

We estimate demand nonparametrically for a variety of consumer goods and characterize observed demand on the elasticity-curvature manifold. We then compare these estimates with the predictions of commonly used demand systems to evaluate whether standard functional forms adequately capture economically relevant features of demand. The results provide new evidence on when widely used structural demand models may mischaracterize pricing incentives, markups, and pass-through.