Essays on Competition and Regulatory Oversight

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  • Essays on Competition and Regulatory Oversight Book Detail

  • Author :
  • Release Date : 2015
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  • Pages : 71
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  • File Size : 97,97 MB
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Essays on Competition and Regulatory Oversight by PDF Summary

Book Description: Government benefits and services are increasingly provided though private markets, with firms competing to provide services to individuals. Under perfect competition, the most productive firms survive and serve the market. However, with imperfect information and minimal out-of-pocket costs, competitive pressures may be weakened and less productive firms can maintain market share. Insufficient oversight of eligibility rules or quality standards exacerbates this problem. In Chapter 1, I study the 2008 expansion of the Lifeline program, which subsidizes phone service for low-income households, and show how oversight influences both the composition of providers in a market and their post-entry behavior. Lifeline's state-level variation in regulatory environments makes for an ideal test case in how regulatory oversight influences the entry decisions of heterogeneous firms. Firms with low quality and compliance select into loose-oversight markets, and their entry drives the large state-level differences in wasteful or inefficient program spending. The evidence of these dynamics is presented here for the Lifeline program, but similar forces are likely to be a factor in many other markets for government funded products and services. In Chapter 2, I address the possibility of crowd-out due to the Lifeline expansion. One of the program's stated goals is to ensure that households have affordable access to phone services. In this context, crowding out households' out-of-pocket spending may in fact be desired. I exploit geographic differences in the timing of provider entry to estimate the expansion's effect on households' wireless service spending. The results indicate that although the extensive margin reduction in the number of households reporting any wireless spending represents only 10-15% of program enrollments, the reduction in the level of spending may exceed 100% of subsidy payments. Two factors make this result possible: quality competition between providers, and price discrimination based on ability-to-pay. Consequently, the quality of Lifeline services paid for by the monthly subsidy exceeds that of similarly priced unsubsidized plans. By crowding out lower quality unsubsidized plans, households could save more than an equivalent cash transfer. The results highlight the potential for market segmentation and competition to magnify the impact of a targeted subsidy program.

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This dissertation consists of an introductory chapter and three distinct yet thematically related papers. The purpose of the dissertation is to explain variatio