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Essays in Industrial Organization and Econometrics

Kim, Minhae
http://rave.ohiolink.edu/etdc/view?acc_num=osu1649936421230761

Abstract Details

2022, Doctor of Philosophy, Ohio State University, Economics.
This dissertation uses econometric methods to introduce an estimator and develop models to estimate the effect of the internet on bank branches. Chapter 1 introduces the nested pseudo likelihood estimator to estimate dynamic discrete choice models in continuous time. Chapter 2 uses this estimator to estimate the impact of the internet penetration on brick-and-mortar bank branches. In Chapter 3, I provide additional evidence on the effect of the internet in banking industry by examining the effect of Community Connect Broadband Grant Program, which helps rural areas to establish broadband service, on bank branches. In Chapter 1, we introduce a sequential estimator for continuous time dynamic discrete choice models (single-agent models and games) by adapting the nested pseudo likelihood (NPL) estimator of Aguirregabiria and Mira (2002; 2007), developed for discrete time models with discrete time data, to the continuous time case with data sampled either discretely (i.e., uniformly-spaced snapshot data) or continuously. We establish conditions for consistency and asymptotic normality of the estimator, a local convergence condition, and, for single agent models, a zero Jacobian property assuring local convergence. We carry out a series of Monte Carlo experiments using an entry-exit game with five heterogeneous firms to confirm the large-sample properties and demonstrate finite-sample bias reduction via iteration. In our simulations we show that the convergence issues documented for the NPL estimator in discrete time models are less likely to affect comparable continuous-time models. We also show that there can be large bias in economically-relevant parameters, such as the competitive effect and entry cost, from estimating a misspecified discrete time model when in fact the data generating process is a continuous time model. Chapter 2 examines the effect of the internet on market structure and consumer welfare in the US retail banking industry. The internet is expected to be a substitute for bank branches as consumers can use more online banking and this effect can lead to branch closures. On the other hand, the internet can be a complementary to branches because consumers can more easily make deposits or open a new bank account online when more high-speed internet is available which can expand markets, and in turn, increase the number of bank branches. Observing the changes in the number of rival bank branches after the change in the internet, banks can open or close more branches. I estimate a dynamic branch opening-closure game in continuous time to quantify these opposing effects. The results show that more internet connections can cause consumer welfare loss due to branch closures when the internet penetration is not sufficiently high. However, if internet connections are provided to more than 80% of households, consumers experience a welfare gain. The gains are especially large in small and low-income markets. Lastly, Chapter 3 explores the effect of Community Connect Grant Program on bank branches. The Community Connect Broadband Grant Program was created in 2002 to provide financial assistance for the provision of broadband service in rural areas. Although it was launched to strengthen the rural economy, it is possible that an increase in internet usage due to the program could have induced bank branch closures, which could have had unintended effects on the economy. This chapter discusses the mechanism by which the program affects bank branches and estimates the magnitude of its effects using an event study model and find that receiving benefits from this program decreases the number of bank branches.
Jason Blevins (Advisor)
Adam Dearing (Committee Member)
Matthew Weinberg (Committee Co-Chair)
Economics
continuous time; dynamic discrete games; dynamic discrete choice; nested pseudo likelihood; entry games; Internet; bank branch; broadband grants; rural economics; event study

Recommended Citations

Citations

  • Kim, M. (2022). Essays in Industrial Organization and Econometrics [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1649936421230761

    APA Style (7th edition)

  • Kim, Minhae. Essays in Industrial Organization and Econometrics. 2022. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1649936421230761.

    MLA Style (8th edition)

  • Kim, Minhae. "Essays in Industrial Organization and Econometrics." Doctoral dissertation, Ohio State University, 2022. http://rave.ohiolink.edu/etdc/view?acc_num=osu1649936421230761

    Chicago Manual of Style (17th edition)

osu1649936421230761
157
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This open access ETD is published by The Ohio State University and OhioLINK.