| n the US-China international flight market, airlines sell the same ticket at two different prices, one at the published fare level and the other with deep discounts. Though the former price is available to all travelers, the latter can only be accessed by consumers who purchase through travel agents. This provides us a rare opportunity to examine how airlines exploit imperfect information and consumers' search costs as a fence to segment consumers and price discriminate. Using a unique dataset collected from this market, we find evidence that third-degree price discrimination with respect to costly consumer search increases with market competition.;While the price dispersion of airline tickets across consumer groups positively relates to market competition, the relationship between price discrimination within a consumer group and market competition unnecessarily follow the same pattern. When airlines cannot segment consumers into smaller groups, they offer a menu of price-ticket quality/restriction combination to make the consumers self-select, and practice second-degree price discrimination. This part of my dissertation offers new evidence on the relationship between competition and second-degree price discrimination in the airline industry, using the same unique micro dataset on the flight market between the US and China. Consistent with the conventional wisdom, the results show that, for most of the ticket restrictions/qualities (e.g., Advance, Duration, Weekend, Stops and Direct), marginal prices and hence second-degree price discrimination decrease with market competition. This indicates that the capability for firms to price discriminate against consumers within the same group is deteriorated when there are more competitors.;Energy and environmental regulations often result in the generation of unforeseen marketable by-products that can reduce costs of compliance. The second part of my dissertation evaluates a unique case in which the marketability of by-products produces positive external benefits. Specifically, this paper focuses on flue-gas desulfurization (FGD) gypsum by-product produced by coal-fired electric plants using sulfur dioxide (SO2) scrubbing technology to comply with the emission standards set by the 1990 Clean Air Act Amendment (CAAA). Intuitively, the ability to market FGD gypsum provides incentives for electricity generating plants to operate their scrubbers more efficiently by providing gypsum revenues, and lowering gypsum disposal costs. Increased operating efficiency creates external benefits attributed to reduced SO2 emissions that would otherwise not have occurred. In order to estimate the impact of FGD gypsum marketability on SO2 emissions, a unique longitudinal database is constructed that merges electricity plants' boiler-level SO2 emissions data from the U.S. Environmental Protection Agency (EPA) with data on scrubber operations and coal quality available from the U.S. Energy Information Administration (EIA). Boiler fixed-effect estimations suggest annual SO2 emissions decline by 3,494 tons as a result of gypsum marketing. This corresponds with a 39% average reduction in SO2 emissions at boilers marketing FGD gypsum. The total benefits associated with the reduced SO2 emissions are estimated between... |
