Research

Abstract: This paper studies how spillovers across complementary markets shape product variety and firm entry. We examine the Indian cell phone and wireless service markets during the 4G rollout and estimate a structural model of demand, pricing, carrier network expansion, and phone product choice. The estimation results support the economic forces through which complementarity gives rise to spillovers. Counterfactual simulations show that banning budget Chinese phones slows 4G deployment by roughly five quarters and lowers consumer welfare without raising domestic firms' profits. Similarly, an unrestricted subsidy outperforms a domestic-only subsidy in expanding network coverage, increasing consumer welfare, and raising domestic firms' profits. 

Abstract: This article investigates the effects of drug price-control policy on access to drugs and consumer welfare. We focus on regional markets for malarial drugs in India. Governments in developing and underdeveloped countries implement price controls to make drugs affordable and improve consumer welfare. However, gains from lower prices due to price control have little meaning if, firms stop selling those drugs in response to price control, and drugs are not available for purchase in local markets. In order to characterize the trade-off between availability and affordability on consumer welfare, we estimate a structural model of Indian malarial market where firms make endogenous product offering decisions across regions. We use a unique dataset that features detailed region level information. Our estimates reveal that even in a poor region, lower prices lead to lower consumer welfare, as costs of making a drug available in a regional market are high enough to induce exit of products in response to lower prices. We characterize the optimal price control level that balances the trade-off and maximizes consumer welfare.

Abstract: With over a billion people lacking access to clean drinking water and freshwater reserves of groundwater dwindling rapidly, informal water markets have become an important source of resource allocation in the developing world. We study these informal markets in Rajasthan India using in-depth buyers, sellers, and transactions data we collected. Utilizing this data, we structurally estimate the demand for drinking water allowing consumer heterogeneity to obtain price elasticities. This enables us to quantify the consumer welfare gains generated by such markets. We find that these markets disproportionately benefit the poor households and the households where women spend longer time collecting water indicating that a ban on extraction affecting the supply would largely affect the welfare of these households. Using our estimates, we are able to recover the ‘valuation of time’ of women in the household. We then use our structural estimates to study how firms compete in these informal markets. We implement a test of collusion and find evidence of caste-based collusion in these markets. Our simulations indicate that government entry in water distribution may lead to heterogeneous effects on consumer welfare as market prices may go up in response to government entry for wealthier consumers. 

Abstract: Our article studies the design of reimbursement rates in the context of a large-scale publicly funded health insurance program in India by exploring its effects on the quality of care, diagnostic facilities provided by the hospitals and welfare of the patients. Under this insurance program implemented in the state of Andhra Pradesh, close to 40 million eligible households get free treatment from hospitals, and the hospitals are reimbursed by the government. The level of reimbursement is the key decision variable for the government. Setting the level too low implies that not enough private hospitals will participate, and the program will have capacity shortfalls and potentially lower quality. Setting the level too high implies that the fiscal burden will be high, which might be unsustainable in the future. To study this problem, we gather a unique and novel dataset that records the universe of claims made by the patients in the state of Andhra-Pradesh. Our data covers patient characteristics as well as details of diagnosis for each patient. Additionally, we collect detailed data on hospital characteristics, including provision of hospital facilities, quality of care as well as entry and exit of hospitals over time. We build a structural model and estimate the underlying incentives for patient's choice of hospital, hospitals' decision to participate in the insurance program as well as the provision of quality of care conditional on participation. Given the parameter estimates, in our counterfactual exercise, we vary the reimbursement rates, simulate hospitals' decisions to participate and provision of quality, and compute corresponding patient welfare. Our preliminary estimates suggest that adopting an alternative reimbursement policy that varies in urban and rural markets may save the Government up to 15% of its cost without compromising the access and quality of health care.