Dissertation/Thesis Abstract

Essays in Applied Theory
by Figer, Vivian, Ph.D., New York University, 2014, 114; 3665246
Abstract (Summary)

This thesis is concerned with two different topics in applied theory. Chapter 1 studies the economics of affirmative action policies of institutions of higher education. Chapter 2 analyzes the effects of increasing switching costs.

Chapter 1 outlines a model in which rich students face lower costs to acquire human capital than poor students. Both rich and poor students compete for a spot in the public university. Rich students may also pursue placement in a private university. Universities select students according to their human capital. Wages depend on the quality of the university, which in turn is a function of its students' average human capital. I show that a high mandatory quota for poor students always have a negative impact on the quality of the public university. Moreover, it may even harm the targeted group. However, if the quota is low, incentives to invest in human capital may increase for both beneficiaries and non beneficiaries. Two types of equilibrium may arise: one in which the quality of the public university is higher and, and another in which the private university is superior attracting the ablest rich students. Policy-makers may also consider the use of vouchers to increase ex ante investment incentives. This is a costly and much more limited policy to increase the share of poor students. The use of vouchers may work better when combined with a quota mandate.

In Chapter 2, I investigate the effect of consumer's switching costs when those increase with the number of purchases. To do so, I consider a dynamic duopoly model of price competition in a customer market. I find that if the increase in switching cost per purchase - ISCPP - is low, the buyer changes supplier with a high frequency. In contrast, if ISCPP is high, the buyer will likely concentrate his purchases in one firm and become highly locked-in. In the first case, when ISCPP is low, switching costs are pro competitive in the long run. In the second case, when ISCPP is high, the reverse is true. However, even if switching costs increase prices in the long-run, they may reduce them in the short-run. The main result is that the higher the ISCPP, the fiercer is the competition after the first purchases are made. In fact, if in addition firms are sufficiently patient, the competition can be so aggressive that a price reversion may occur. In this case, the insider charges a lower price than the outsider.

Indexing (document details)
Advisor: Bisin, Alberto
Commitee: Cabral, Luis, Lizzeri, Alessandro, Thom, Kevin
School: New York University
Department: Economics
School Location: United States -- New York
Source: DAI-A 76/04(E), Dissertation Abstracts International
Subjects: Economic theory
Keywords: Affirmative action, Customer market, Dynamic competition, Incentives, Switching cost, University
Publication Number: 3665246
ISBN: 978-1-321-37549-7
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