Essays on Industrial Organization and Game Theory

This dissertation consists of three essays on Industrial Organization and Game Theory. The first chapter examines the effect of increased cash availability on cash inventories. Individuals incur a withdrawal cost from accessing their bank balances to re-stock their cash inventory for daily consumption needs. While larger cash inventories reduce the number of withdrawals a consumer makes from the bank, it comes at the cost of lost interest on bank balances. I estimate the benefit of new ATM and branch locations to consumers using individual panel data of withdrawals in the period 2002-2006 from a private bank in Vietnam. A rapid growth of available withdrawal locations reduces the non-monetary costs of making withdrawals for some individuals by nearly 50%. In equilibrium, agents adjust to these reduced costs by making slightly more frequent withdrawals and holding more bank inventory. The second chapter, co-authored with Julie Mortimer, Harvard University, and Katherine Ho, Columbia University, provides an empirical study of bundling in a supply chain, referred to as full-line forcing. We use an extensive dataset on contracts between video retailers and movie distributors to analyze the choices made on both sides of the market: which distributors offer full-line forcing contracts, which retailers take them up, and whether their decisions are profitable. Most large distributors offer full-line forcing contracts in our data. Our simulations indicate that their choices of which contracts to offer are profit-maximizing. However, many retailers prefer to utilize linear pricing contracts even when our model indicates that this may not be profit-maximizing. The third chapter incorporates positive feedback reciprocity in a repeated moral hazard game In this environment, buyers observe feedback left for them before reporting feedback to the mechanism. Buyer feedback reports depend jointly on feedback received and the actual outcome of the transaction. Reciprocal preferences influence buyers and lead to inaccurate feedback reports that deviate from actual outcomes. Contrary to intuition, inaccurate feedback does not always harm equilibrium payoffs. If the feedback remains sufficiently informative, positive reciprocity increases the efficiency of the mechanism by reducing the amount of punishment that occurs in equilibrium.