monica hartmann | University of St. Thomas, Minnesota (original) (raw)
Papers by monica hartmann
National Center for Case Study Teaching in Science, 2011
Since Akerlofs (1971) seminal work on lemons, economists have been ex-amining how the presence of... more Since Akerlofs (1971) seminal work on lemons, economists have been ex-amining how the presence of private information shapes market competition, particularly in the used car market. A vehicle is considered to be a lemon if its quality, as observed by the owner, is lower than the quality expected by a
Since Akerlofs (1970) foundational work on lemons markets, economists have been investigating how... more Since Akerlofs (1970) foundational work on lemons markets, economists have been investigating how di¤erences in information about product quality nega-tively a¤ect the amount of trade in durable goods. Cardon and Hendel (2001), Hendel, Lizzeri, and Siniscalchi (2005), and Engers, Hartmann, and Stern (2009a)
Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how the ... more Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how the lack of information on product quality affects the decision to sell durable goods. Engers, Hartmann, and Stern (2004b) (EHSb) Þnds, in a dynamic setting with sufficient heterogeneity in tastes, the trade-inhibiting
The literature provides alternative explanations for the decline in used car prices: adverse sele... more The literature provides alternative explanations for the decline in used car prices: adverse selection and higher maintenance costs. This paper examines whether mileage, a proxy of the vehicle’s net benefits, can explain the pattern of declining prices over a vehicle’s working life. We first model the household-vehicle mileage decision and then establish the relationship between mileage and used car prices. The structural model formalizes the link between mileage choices and household and vehicle-stock characteristics. The model specification allows for car portfolios and household demographic characteristics to influence how vehicle age affects mileage. We find that the observed decline in prices as a vehicle ages is best explained by decomposing the age effect into three components: the direct aging effect, the household-car portfolio effect, and the household demographics effect. This implies that the effect age has on mileage (and consequently the vehicle’s value) cannot be esti...
2Abstract. This paper explores aspects of the determination of airline fares in selected medium-s... more 2Abstract. This paper explores aspects of the determination of airline fares in selected medium-sized U.S. markets subject to competition from alternative airport hubs within driving distance. Passengers in these markets often face substantial discounts at distant airports, in exchange for the time costs of driving there. Spatial linkages in airport competition are not well studied. A panel of 16 quarters is constructed in order to investigate models of spatial error correlation and spatial autoregression in overall fare levels in adjacent airports. We find that fare differentials between local and nearby alternative airports can lead to lower load factors and other indicators of poor performance in smaller local airports. Fare differentials at nearby hub airports often provide substantial incentives to travelers and are an important determinant of poor performance at medium-sized air-ports. 1.
Let the period t utility for person i of owning car k of brand/age combination (type) j be utijk = v
This classroom experiment introduces students to the concept of double marginalization, i.e. the ... more This classroom experiment introduces students to the concept of double marginalization, i.e. the exercise of market power at successive vertical layers in a supply chain. By taking on roles of firms, students determine how the mark-ups are set at each successive production stage. They learn that final retail prices tend to be higher than if the firms were vertically integrated. Students compare the welfare implications of two potential solutions to the double marginalization problem: acquisition and franchise fees. The experiment also can stimulate a discussion of two-part tariffs, transfer pricing, contracting, and the Coase theorem.
This research studies the impact of changes to federal judicial discretion on criminal sentencing... more This research studies the impact of changes to federal judicial discretion on criminal sentencing outcomes. The Feeney Amendment to the 2003 PROTECT Act restricted federal judges ’ ability to impose sentences outside of the U.S. Sentencing Guidelines and required appellate courts to review downward departures. Using data on all federal sentences between 1999 and 2004, we examine the effect of the Feeney Amendment on the downward departures rate and prison sentence. We control for type of offense, district of sentencing, criminal history, and demographic characteristics of the offender, in order to isolate the changes in judicial sentencing due to the implementation of the Feeney Amendment. Our results suggest that the Feeney Amendment reduced the probability of a downward departure by 5 % and increased prison sentences by two months. There is no evidence that judges adjust sentences in an effort to circumvent the intentions of the Feeney Amendment.
Economics Educator: Courses, 2003
This article presents an active-learning research exercise for an introductory economics course. ... more This article presents an active-learning research exercise for an introductory economics course. Students find data on specific economic, cultural, and political details of an assigned country, update the data with information on current events, and make a basic assessment of the combined effects of markets, cultures, and political systems on the country's economy. Several presentation formats facilitate the sharing of student findings in the classroom. The exercise is intended to enhance students' skills in economic analysis, data and information collection, and communication. It also allows students to broaden their exposure to economies and cultures other than their own. The article documents the positive results from student evaluation of the exercise.
This classroom experiment introduces students to the concept of double marginalization, i.e. the ... more This classroom experiment introduces students to the concept of double marginalization, i.e. the exercise of market power at successive vertical layers in a supply chain. By taking on roles of firms, students determine how the mark-ups are set at each successive production stage. They learn that final retail prices tend to be higher than if the firms were vertically integrated. Students compare the welfare implications of two potential solutions to the double marginalization problem: acquisition and franchise fees. The experiment also can stimulate a discussion of two-part tariffs, transfer pricing, contracting, and the Coase theorem.
Airlines have argued that federal limits on landing slots and long-term gate leasing arrangements... more Airlines have argued that federal limits on landing slots and long-term gate leasing arrangements have made it difficult for them to gain access to essential airport facilities. This raises interesting questions about how the manner in which airlines gain access to an airport influences the number of airlines operating at that airport and consequently price competition. This paper empirically examines how changes in airport capacity, gate leasing arrangements, and contractual arrangements between airports and airlines over airport usage affect a carrier’s decision to operate a flight between two airports. Results indicate that carriers are less likely to operate flights out of airports that give airlines exclusive use of airport gates and use residual contractual agreements to specify terms for airport usage.
This paper explores aspects of the determination of airline faresin selected medium-sized U.S. ma... more This paper explores aspects of the determination of airline faresin selected medium-sized U.S. markets subject to competition fromalternative airport hubs within driving distance. Passengers inthese markets often face substantial discounts at distantairports, in exchange for the time costs of driving there. Spatiallinkages in airport competition are not well studied. A panel of16 quarters is constructed in order to investigate models ofspatial error correlation and spatial autoregression in overallfare levels in adjacent airports. We find that fare differentialsbetween local and nearby alternative airports can lead to lowerload factors and other indicators of poor performance in smallerlocal airports. Fare differentials at nearby hub airports oftenprovide substantial incentives to travelers and are an importantdeterminant of poor performance at medium-sized airports.
This research studies the impact of changes to federal judicial discretion on criminal sentencing... more This research studies the impact of changes to federal judicial discretion on criminal sentencing outcomes. The Feeney Amendment to the 2003 PROTECT Act restricted federal judges’ ability to impose sentences outside of the U.S. Sentencing Guidelines and required appellate courts to review downward departures. Using data on all federal sentences between 1999 and 2004, we examine the effect of the Feeney Amendment on the downward departures rate and prison sentence. We control for type of offense, district of sentencing, criminal history, and demographic characteristics of the offender, in order to isolate the changes in judicial sentencing due to the implementation of the Feeney Amendment. Our results suggest that the Feeney Amendment reduced the probability of a downward departure by 5% and increased prison sentences by two months. There is no evidence that judges adjust sentences in an effort to circumvent the intentions of the Feeney Amendment.
We present a finite-horizon, multiperiod model of a market for durable goods1 (like cars) whose o... more We present a finite-horizon, multiperiod model of a market for durable goods1 (like cars) whose owners have private information about the good’s quality. A good’s quality changes stochastically over time in a way that need not be stationary. Equilibrium is characterized not only by prices and quantities, but also by the quality distributions of the different classes of the goods for sale. We use a fixed-point method to prove the existence of equilibrium.
Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how t... more Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how the lack of information on product quality affects the decision to sell durable goods. Engers, Hartmann, and Stern (2004b) (EHSb) Þnds, in a dynamic setting with sufficient heterogeneity in tastes, the trade-inhibiting effects of private information are less severe than previously thought. Newcar owners whose utility falls rapidly with declines in quality maintain them well and yet sell them soon after buying them. On the other hand, new-car owners whose utility does not fall rapidly with declines in quality hold them for long periods and maintain them poorly. The unobservable heterogeneity in car quality that drives selling decisions is not constant, speciÞc to a car, but rather varies across owners of the same car. This suggests that the lemons problem is due to individual owners decisions rather than manufacturers. EHSb shows theoretically how the owners maintenance decision determi...
Since Akerlof’s (1970) foundational work on lemons markets, economists have been investigating ho... more Since Akerlof’s (1970) foundational work on lemons markets, economists have been investigating how differences in information about product quality negatively affect the amount of trade in durable goods. Cardon and Hendel (2001), Hendel, Lizzeri, and Siniscalchi (2005), and Engers, Hartmann, and Stern (2009a) (EHSa) among others, find that, in a dynamic setting with suffi cient heterogeneity in tastes, the trade-inhibiting effects of private information are less severe than previously thought. There is also an extensive literature on the role of maintenance expenditures in decisions to buy or sell durable goods. (See, for example, Rust (1987), Rust and Rothwell (1995), Cho and Rust (2008), and Bensoussan et al. (2011).) These models, however, do not allow for asymmetric information about maintenance to affect other decisions. In this paper, we examine the role that unobserved maintenance expenditures play in household selling decisions for durable goods. We identify private informat...
National Center for Case Study Teaching in Science, 2011
Since Akerlofs (1971) seminal work on lemons, economists have been ex-amining how the presence of... more Since Akerlofs (1971) seminal work on lemons, economists have been ex-amining how the presence of private information shapes market competition, particularly in the used car market. A vehicle is considered to be a lemon if its quality, as observed by the owner, is lower than the quality expected by a
Since Akerlofs (1970) foundational work on lemons markets, economists have been investigating how... more Since Akerlofs (1970) foundational work on lemons markets, economists have been investigating how di¤erences in information about product quality nega-tively a¤ect the amount of trade in durable goods. Cardon and Hendel (2001), Hendel, Lizzeri, and Siniscalchi (2005), and Engers, Hartmann, and Stern (2009a)
Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how the ... more Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how the lack of information on product quality affects the decision to sell durable goods. Engers, Hartmann, and Stern (2004b) (EHSb) Þnds, in a dynamic setting with sufficient heterogeneity in tastes, the trade-inhibiting
The literature provides alternative explanations for the decline in used car prices: adverse sele... more The literature provides alternative explanations for the decline in used car prices: adverse selection and higher maintenance costs. This paper examines whether mileage, a proxy of the vehicle’s net benefits, can explain the pattern of declining prices over a vehicle’s working life. We first model the household-vehicle mileage decision and then establish the relationship between mileage and used car prices. The structural model formalizes the link between mileage choices and household and vehicle-stock characteristics. The model specification allows for car portfolios and household demographic characteristics to influence how vehicle age affects mileage. We find that the observed decline in prices as a vehicle ages is best explained by decomposing the age effect into three components: the direct aging effect, the household-car portfolio effect, and the household demographics effect. This implies that the effect age has on mileage (and consequently the vehicle’s value) cannot be esti...
2Abstract. This paper explores aspects of the determination of airline fares in selected medium-s... more 2Abstract. This paper explores aspects of the determination of airline fares in selected medium-sized U.S. markets subject to competition from alternative airport hubs within driving distance. Passengers in these markets often face substantial discounts at distant airports, in exchange for the time costs of driving there. Spatial linkages in airport competition are not well studied. A panel of 16 quarters is constructed in order to investigate models of spatial error correlation and spatial autoregression in overall fare levels in adjacent airports. We find that fare differentials between local and nearby alternative airports can lead to lower load factors and other indicators of poor performance in smaller local airports. Fare differentials at nearby hub airports often provide substantial incentives to travelers and are an important determinant of poor performance at medium-sized air-ports. 1.
Let the period t utility for person i of owning car k of brand/age combination (type) j be utijk = v
This classroom experiment introduces students to the concept of double marginalization, i.e. the ... more This classroom experiment introduces students to the concept of double marginalization, i.e. the exercise of market power at successive vertical layers in a supply chain. By taking on roles of firms, students determine how the mark-ups are set at each successive production stage. They learn that final retail prices tend to be higher than if the firms were vertically integrated. Students compare the welfare implications of two potential solutions to the double marginalization problem: acquisition and franchise fees. The experiment also can stimulate a discussion of two-part tariffs, transfer pricing, contracting, and the Coase theorem.
This research studies the impact of changes to federal judicial discretion on criminal sentencing... more This research studies the impact of changes to federal judicial discretion on criminal sentencing outcomes. The Feeney Amendment to the 2003 PROTECT Act restricted federal judges ’ ability to impose sentences outside of the U.S. Sentencing Guidelines and required appellate courts to review downward departures. Using data on all federal sentences between 1999 and 2004, we examine the effect of the Feeney Amendment on the downward departures rate and prison sentence. We control for type of offense, district of sentencing, criminal history, and demographic characteristics of the offender, in order to isolate the changes in judicial sentencing due to the implementation of the Feeney Amendment. Our results suggest that the Feeney Amendment reduced the probability of a downward departure by 5 % and increased prison sentences by two months. There is no evidence that judges adjust sentences in an effort to circumvent the intentions of the Feeney Amendment.
Economics Educator: Courses, 2003
This article presents an active-learning research exercise for an introductory economics course. ... more This article presents an active-learning research exercise for an introductory economics course. Students find data on specific economic, cultural, and political details of an assigned country, update the data with information on current events, and make a basic assessment of the combined effects of markets, cultures, and political systems on the country's economy. Several presentation formats facilitate the sharing of student findings in the classroom. The exercise is intended to enhance students' skills in economic analysis, data and information collection, and communication. It also allows students to broaden their exposure to economies and cultures other than their own. The article documents the positive results from student evaluation of the exercise.
This classroom experiment introduces students to the concept of double marginalization, i.e. the ... more This classroom experiment introduces students to the concept of double marginalization, i.e. the exercise of market power at successive vertical layers in a supply chain. By taking on roles of firms, students determine how the mark-ups are set at each successive production stage. They learn that final retail prices tend to be higher than if the firms were vertically integrated. Students compare the welfare implications of two potential solutions to the double marginalization problem: acquisition and franchise fees. The experiment also can stimulate a discussion of two-part tariffs, transfer pricing, contracting, and the Coase theorem.
Airlines have argued that federal limits on landing slots and long-term gate leasing arrangements... more Airlines have argued that federal limits on landing slots and long-term gate leasing arrangements have made it difficult for them to gain access to essential airport facilities. This raises interesting questions about how the manner in which airlines gain access to an airport influences the number of airlines operating at that airport and consequently price competition. This paper empirically examines how changes in airport capacity, gate leasing arrangements, and contractual arrangements between airports and airlines over airport usage affect a carrier’s decision to operate a flight between two airports. Results indicate that carriers are less likely to operate flights out of airports that give airlines exclusive use of airport gates and use residual contractual agreements to specify terms for airport usage.
This paper explores aspects of the determination of airline faresin selected medium-sized U.S. ma... more This paper explores aspects of the determination of airline faresin selected medium-sized U.S. markets subject to competition fromalternative airport hubs within driving distance. Passengers inthese markets often face substantial discounts at distantairports, in exchange for the time costs of driving there. Spatiallinkages in airport competition are not well studied. A panel of16 quarters is constructed in order to investigate models ofspatial error correlation and spatial autoregression in overallfare levels in adjacent airports. We find that fare differentialsbetween local and nearby alternative airports can lead to lowerload factors and other indicators of poor performance in smallerlocal airports. Fare differentials at nearby hub airports oftenprovide substantial incentives to travelers and are an importantdeterminant of poor performance at medium-sized airports.
This research studies the impact of changes to federal judicial discretion on criminal sentencing... more This research studies the impact of changes to federal judicial discretion on criminal sentencing outcomes. The Feeney Amendment to the 2003 PROTECT Act restricted federal judges’ ability to impose sentences outside of the U.S. Sentencing Guidelines and required appellate courts to review downward departures. Using data on all federal sentences between 1999 and 2004, we examine the effect of the Feeney Amendment on the downward departures rate and prison sentence. We control for type of offense, district of sentencing, criminal history, and demographic characteristics of the offender, in order to isolate the changes in judicial sentencing due to the implementation of the Feeney Amendment. Our results suggest that the Feeney Amendment reduced the probability of a downward departure by 5% and increased prison sentences by two months. There is no evidence that judges adjust sentences in an effort to circumvent the intentions of the Feeney Amendment.
We present a finite-horizon, multiperiod model of a market for durable goods1 (like cars) whose o... more We present a finite-horizon, multiperiod model of a market for durable goods1 (like cars) whose owners have private information about the good’s quality. A good’s quality changes stochastically over time in a way that need not be stationary. Equilibrium is characterized not only by prices and quantities, but also by the quality distributions of the different classes of the goods for sale. We use a fixed-point method to prove the existence of equilibrium.
Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how t... more Since Akerlofs (1970) seminal work on lemons markets, economists have been investigating how the lack of information on product quality affects the decision to sell durable goods. Engers, Hartmann, and Stern (2004b) (EHSb) Þnds, in a dynamic setting with sufficient heterogeneity in tastes, the trade-inhibiting effects of private information are less severe than previously thought. Newcar owners whose utility falls rapidly with declines in quality maintain them well and yet sell them soon after buying them. On the other hand, new-car owners whose utility does not fall rapidly with declines in quality hold them for long periods and maintain them poorly. The unobservable heterogeneity in car quality that drives selling decisions is not constant, speciÞc to a car, but rather varies across owners of the same car. This suggests that the lemons problem is due to individual owners decisions rather than manufacturers. EHSb shows theoretically how the owners maintenance decision determi...
Since Akerlof’s (1970) foundational work on lemons markets, economists have been investigating ho... more Since Akerlof’s (1970) foundational work on lemons markets, economists have been investigating how differences in information about product quality negatively affect the amount of trade in durable goods. Cardon and Hendel (2001), Hendel, Lizzeri, and Siniscalchi (2005), and Engers, Hartmann, and Stern (2009a) (EHSa) among others, find that, in a dynamic setting with suffi cient heterogeneity in tastes, the trade-inhibiting effects of private information are less severe than previously thought. There is also an extensive literature on the role of maintenance expenditures in decisions to buy or sell durable goods. (See, for example, Rust (1987), Rust and Rothwell (1995), Cho and Rust (2008), and Bensoussan et al. (2011).) These models, however, do not allow for asymmetric information about maintenance to affect other decisions. In this paper, we examine the role that unobserved maintenance expenditures play in household selling decisions for durable goods. We identify private informat...