TY - THES T1 - Essays in industrial organization Y1 - 2015 A1 - Bayot, Denrick Go KW - Consumption and Savings KW - Employment and Labor Force KW - Healthcare KW - Methodology KW - Net Worth and Assets KW - Other KW - Risk Taking AB - Chapter 1 considers markets where there are gains to committing to a contract but the contract is not enforceable. Contracts in these markets typically contain some feature that locks the noncommittal agent, such as a penalty for defaulting on a contract. I argue that these lock-in mechanisms might lead to inefficient contract provisions when there is some uncertainty in the agent's valuation of the contract, and such uncertainty cannot be contracted. I then apply this argument when examining the extent to which life insurance contracts drafted today exhibit this form of ex-post inefficiency. There are a few reasons why one would suspect the existence of excessive insurance provisions in the life insurance industry. First, premiums in life insurance contracts are heavily front-loaded to subsidize subsequent premiums. The front-loading of premiums in these contracts and reduction of future premiums, as nicely pointed out by Hendel and Lizzeri (2003), allows firms to insure against rising premiums (insurance against reclassification risk) by reducing the policyholder's incentive to drop a contract and shop for a possibly less expensive policy. Indeed, I find that the level at which these contracts are front-loaded eliminates any future incentive for policyholders to repurchase a contract. I also provide evidence that a policyholder's preference for insuring against mortality risks changes stochastically over time. Despite heavy premium front-loading, almost 40% of policyholders allow their insurance to lapse within the first 10 years. Considering that premiums are lower than the cost of supplying mortality risk insurance and that preferences for such insurance changes over time, one would suspect excessive ex-post life insurance provisions. The core analysis of Chapter 1 discusses why the market for term life insurance contracts fail to fully protect policyholders from reclassification risk. Hendel and Lizzeri (2003) argue that such failure arises from the policyholder's limited-commitment and credit constraints. In particular, they surmise that a policyholder's credit constraint prevents the level of front-loading necessary to prevent all healthy policyholders from eventually walking out. The anticipated default of healthy policyholders then leads to a partial break-down in reclassification risk insurance. I investigate this premise and find that limited commitment alone fails to explain the break-down in full reclassification risk insurance observed in the life-insurance industry. I find that efforts to mitigate ex-post inefficient insurance provisions led to the breakdown of full reclassification risk insurance in this market. Chapter 2 is a joint work with Juliette Caminade and explains why prices of champagne fall during the holiday season. In this chapter, we document countercyclical prices in the sparkling wine market during the holiday season. While quantity demand doubles, prices uniformly decrease and decreases by 16% on average. We examine the role of changes in aggregate elasticity during high demand periods. Using Nielsen retail data, we find that price elasticity for sparkling wine increases by 50% during the holidays. We then use household-level data to document how the change in demand is driven by the entry of a large share of new consumers. These consumers are responsible for a quarter of sales during the holidays and are more price elastic. For instance, they spend less on other alcoholic beverages, and they are more likely to use coupons for their purchases or buy generic products. These suggestive facts are confirmed by the results of our household level demand estimation, where we find that changes to aggregate elasticity is driven by the entry of a more elastic segment. PB - The University of Chicago CY - Chicago VL - 3712084 UR - http://proxy.lib.umich.edu/login?url=http://search.proquest.com/docview/1707673975?accountid=14667http://mgetit.lib.umich.edu/?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&rfr_id=info:sid/Dissertations+%26+Theses+%40+CIC+Institutions&rft_val_fmt=info:of N1 - Copyright - Copyright ProQuest Dissertations Publishing 2015 Last updated - 2015-09-08 First page - n/a U4 - 0501:Economics JO - Essays in industrial organization ER -