Research papers

This paper computes and compares alternative quality-adjusted price indexes for new cars in Spain in the period 1990-2000. The proposed hedonic approach simultaneously controls for time-invariant unobserved product effects and time-variant unobserved quality changes, that are assumed to be captured by model age effects. The results show that the non-adjusted price index largely overstates the increase in the cost of living induced by changes in car prices and that previous evidence for this market have not measured the real extent of that bias, probably due to the omission of controls for unobservables. It is also shown that omitting age effects can also lead to misleading conclusions. The estimated price indexes give also some insights on what could have been the determinants of price evolution in the Spanish car market.

In oligopolistic markets where firms sell multiple products in different segments the nested logit framework is a common approach to model demands, specially in the case of durable goods. In these type of settings, multi-stage oligopoly models are used to study relevant firm decisions, such as entry in a market or the relation between competition and location. The rationale for making decisions in these contexts is comparing the profitability of the alternative choices. However, solving these models to obtain profitability measures easily becomes a complex task when using nested logit demands. This paper shows that when within-segment firm shares are equal across segments, the analytical expression for equilibrium profits can be substantially simplified, being as tractable as the expressions that would obtain from a simpler multinomial logit setting. The size of the approximation error arising when this condition does not hold perfectly is also computed. Through numerical examples, it is shown that in general the approximation can be safely used because the corresponding approximation error is rather small in most cases. Therefore, this approach allows to gain analytical tractability in a popular class of models for multi-product firm demand. The validity of the method proposed in the paper is also illustrated using real data from the Spanish car market, showing that the approximation errors are very small or even negligible in that industry.

In this paper, we develop a structural model to analyze the market power of the retail industry in the French fresh tomato market. The analysis is based on aggregate data on final consumption and prices at both shipper and consumer levels for the two main varieties of tomatoes in France. The structural model is composed of a system of demand equations, supply equations and pricing equations which include terms capturing the oligopoly and oligopsony power of the retail sector and that account for product differentiation. We show that: i) elasticity of demand varies during the year ii) the retail sector exercise only a "moderate" market power iii) the exercise of market power decreases over time iv) If markets were competitive, in the case of tomato "grappe" retail price would decrease by about 2% to 12% depending on the year; v) In absence of market power, shipping price might be 10% to 54% higher than observed. In summary, given that distortions are smaller in the case of tomato "ronde", we conclude that there is a moderate exercise of market power by the retail sector in the French tomato market.

This article studies how product introduction decisions relate to profitability and uncertainty in the context of multi-product firms and product differentiation. These two features, common to many modern industries, have not received much attention in the literature as compared to the classical problem of firm entry, even if the determinants of firm and product entry are quite different. The theoretical predictions about the sign of the impact of uncertainty on product entry are not conclusive. Therefore, an econometric model relating firms' product introduction decisions with profitability and profit uncertainty is proposed. Firm's estimated profits are obtained from a structural model of product demand and supply, and uncertainty is proxied by profits' variance. The empirical analysis is carried out using data on the Spanish car industry for the period 1990-2000. The results show a positive relationship between product introduction and profitability, and a negative one with respect to profit variability. Interestingly, the degree of uncertainty appears to be a driving force of entry stronger than profitability, suggesting that the product proliferation process in the Spanish car market may have been mainly a consequence of lower uncertainty rather than the result of having a more profitable market.

This paper computes the scope economies associated to the commercialization of several product varieties by multiproduct firms, in a dynamic oligopoly setting. Goods are differentiated and firms decide on firm entry and exit, product entry and exit, quality and pricing. The model is applied to the Spanish automobile market. Results show moderate entry costs and substantial cost reductions when introducing a second product as compared to the first, indicating that multiproduct firms benefit from strong economies of scope when expanding their range of products. However, those economies disappear after five products have been introduced, suggesting a U-shaped curve for entry costs.

This paper provides an overview of the automobile market in Spain during the 1990's, from the point of view of quality improvement and new product commercialization trends.

Previous work and projects   up

This paper presents a review of the literature on the characteristics of financial data and the alternatives that have emerged to account for those special features. The focus is then on Generalized Autoregressive Conditional Heteroscedasticity models, their properties and their usefulness to explain and predict conditional volatility. The last section offers an empirical application of the previous models to the Spanish stock returns index IGBM, providing and In-Sample and Out-of-Sample assessment of the different alternatives.
Regarding the mean equation, a simple MA(1) or an AR(1) were the best choices, compared to more complex lag specifications, and also better than the simple white noise, AR(0), because first order autocorrelation, although small is significant. GARCH specifications improve forecasts of variance to the cost of small losses in predicting the mean of the series. Whitin GARCH, the asymmetric model TGARCH(1,1) was the best In-Sample choice. Surprisingly, the other asymmetric model considered (EGARCH) widely underperformed with respect to TGARCH or GARCH. Controlling for periods of economic crises improves In-Sample performance and it is almost as good predictor as GARCH(1,1). Otherwise, the above mentioned TGARCH is still better.

My work consisted on database handling and programming specific routines in STATA for the simulator. Data came from the European Community Household Panel (ECHP). You can download STATA dictionaries in Spanish for the ECHP: households file (dichesfile.dct); individuals file (dicpesfile.dct); household members file (dicresfile.dct); relationship file (dicrelates.dct); links file (diceslink.dct).

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