Associate Professor of Economics
3220 Market Street, GHall #1043
Philadelphia, PA 19104
Mian.Dai at Drexel dot edu
Research Interest: Industrial Organization, Applied Econometrics, Applied Microeconomics
Ph.D. Managerial Economics and Strategy (2008)
Kellogg School of Management, Northwestern University
Committee: Shane Greenstein (chair), Michael Mazzeo, Justin Lenzo
B.S. Economics and Computer Science (2003)
California Institute of Technology
Published and Accepted Papers:
1. “Product Differentiation and Efficiencies in the Retail Banking Industry” (joint with Yuan Yuan) Journal of Banking and Finance, December 2013, 37 (12): 4907-4919.
Abstract: We empirically quantify the welfare implication of bank entry between 2000 and 2008. A distinctive feature of our framework is to predict the operating decision of single-market and multimarket banks using an equilibrium product type choice model. We find no evidence for under-entry or over-entry. The major source of welfare loss comes from entering the wrong location in product space. The dead weight loss in 2008 is higher than that in 2000. This is primarily driven by the exit of single-market banks and the expansion of multimarket banks. Our estimates also highlight the importance of product differentiation in delivering the efficient outcome. When banks are homogeneous, the consumer surplus drops by is 20%-38% and the bank profits decline by 48-59%.
2. “Product Choice under Price Regulation: Evidence from the Out-patient Dialysis Market” International Journal of Industrial Organization, January 2014, 32:24-32.
Abstract: Using a dataset of dialysis facilities operating in more than 1,000 U.S. counties in 2007, we examine the competition between two types of firms: multiproduct dialysis facilities and single product dialysis facilities. We simulate the effect of a Medicare policy proposal in 2008 which reduces the regulated price for a common product that is produced by both types. We find that the policy decreases the number of single product dialysis facilities but increases the number of multi-product facilities. We also find strong evidence for market segmentation between single product and multiproduct dialysis facilities.
3. “Is the Effect of Competition on Price Dispersion Non-monotonic? Evidence from the U.S Airline Industry” (joint with Qihong Liu and Kostas Serfes), Review of Economics and Statistics, March 2014, 96 (1): 161-170.
Abstract: We investigate the effect of competition on price dispersion in the airline industry. Using panel data from 1993 to 2008, we find a non-monotonic effect of competition on price dispersion. An increase in competition is associated with greater price dispersion in concentrated markets but it is associated with less price dispersion in competitive market (i.e. an inverse-U relationship). Our empirical findings are consistent with an oligopolistic second-degree price discrimination model and reconcile seemingly contradicting findings in the literature.
4. “On the Trade-diversion Effects of Free Trade Agreements” (joint with Yoto Yotov and Tom Zylkin), Economics Letters, February 2014, 122(2): 321–325.
Abstract: Standard trade theory suggests that Free Trade Agreements (FTAs) could disrupt trade between members and non-members. However, the trade diversion effects of FTAs have not been thoroughly examined empirically. Using a novel empirical approach, we confirm that FTAs that entered into force during the 1990s diverted trade away from non-member countries. Interestingly, we find that diversion from internal trade due to FTAs was significantly stronger than diversion from external trade.
5. “Regulation and Capacity Competition in Health Care: Evidence from Dialysis Markets” (joint with Xun Tang). This version: June 2013, (Accepted at Review of Economics and Statistics).
Abstract: This paper studies entry and capacity decisions by dialysis providers in the U.S. We estimate a structural model where providers make strategic continuous choices of capacities based on private information about own costs and beliefs about competitors' behaviors. We evaluate the impact on market structure and provider profits under counterfactual regulatory policies that increase per capacity cost or reduce per capacity payment. We find that these policies reduce the market capacity of dialysis stations. However, the downward sloping reaction curve shields some providers from negative profit shocks in certain markets. The paper also has a methodological contribution in that it proposes new estimators for Bayesian games with continuous actions, which differ qualitative from discrete Bayesian games such as those with binary entry decisions.
Completed Working Papers:
6. “Competition and Specialization: A Non-Monotonic Relationship” (joint with Christos Cabolis and Kostas Serfes). This version: Sept 2014. (Under Review)
Abstract: We investigate the relationship between competition and firm specialization in the venture capital (VC) market. Staged financing motivates VC firms to fund entrepreneurs in various states of maturity: startup/seed, early, growth, and so forth, and leads to stage specialization. Contrary to the conventional wisdom that competition always promotes specialization, we find an inverted-U relationship, using panel data on VC funding rounds in the U.S. between 1980 and 2006. We develop a matching model with two-sided vertical heterogeneity, bilateral bargaining and moral hazard to demonstrate that the non-monotonicity is driven by the expected utility VC firms offer to entrepreneurs, via equity stakes, where higher quality entrepreneurs (with more promising business plans) receive greater utility. Competition shifts and rotates the utility schedule, which gives rise to two opposing forces on the returns to specialization as competition intensifies. We also find empirical support for the mechanism we propose.
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(Last updated: Oct 6, 2014)