• Selected
• Entire List

Abstract:
Peer-to-peer file sharing networks are becoming an important medium for the distribution of information goods. However, there is little academic research into the optimal design of these networks under real-world conditions. Our research represents an initial effort to analyze the impact of positive and negative network externalities on the optimal size of these P2P networks. Our analysis uses a unique dataset collected from the six most popular OpenNap peer-to-peer networks between December 19, 2000 and April 22, 2001.

We find that users contribute value to the network in terms of additional content and additional replicas of content at a diminishing rate, while they impose costs on the network in terms of congestion on shared resources at an increasing rate. Together these results suggest that the optimal size of peer-to-peer networks is bounded — at some point the costs a marginal user imposes on the network will exceed the value they provide.

peer-to-peer, file sharing, empirical, network externalities, network size

Abstract:
The paper reconsiders the nature of mining districts and property rights during the California gold rush. According to a widely accepted view advanced by Umbeck (1977, 1981), in the absence of effective legal authority, district codes established secure property rights in mining claims. Drawing on a data set of mining district codes and a simple theoretical model, we argue that the main historical features of mining districts may best be understood by viewing them not as enforcers of private property rights, but as institutions for managing access to a nonrenewable resource, in what was fundamentally an open-access context.

property rights, institutions, gold rush

Abstract:
Commentators have observed that the ease of monitoring competitors on the Internet may allow Internet retailers to engage in non-competitive pricing. Using data on the daily prices of 399 books at 26 online bookstores between August 1999 and January 2000, we investigate firm pricing behavior in the online book market. Although sales in the Internet channel were growing very rapidly at the time, we find that relative prices differed across the three categories of bookstores (big three, active fringe, and inactive fringe), and these differences were remarkably stable over time. We present a simple model in which cross-channel competition and differentially informed consumers lead to the observed (static) pricing patterns. Although relative prices were stable, prices did change and were on average increasing over time. We document the dynamic strategic interaction across firm categories and across individual firms. Ten pairs of firms involving seven individual firms changed prices in the same direction on the same book within three days in an (one standard deviation) above average number of cases and respond more than 25 percent of the time to competitors' price changes. Given the behavior of these firms and the large market shares held by the top three firms, we formally test a number of oligopoly and non-oligopoly explanations for the observed price changes. We find that the observed patterns were not consistent with the predictions of oligopoly pricing in the Haltiwanger and Harrington (1991) model or with other explanations such as customer loyalty, inventory considerations or changes in elasticity of demand associated with holidays. We conjecture that the observed cases of parallel pricing were largely attributable to experimentation on the part of the initiator and learning or competitive response on the part of the responder.

Internet, pricing, dynamic pricing, static pricing, books, oligopoly

Abstract:
Consumers are often uncertain about their future demands when choosing from a menu of tariffs. We analyze tariff and usage choices of 5333 customers of an online grocer who offered a menu of three two-part tariffs. Similar to data in other studies, observed choices suggest consumers choosing fixed-rate plans had biased beliefs. We propose and estimate a Bayesian learning model of tariff and usage choice in which biases arise despite consumers having unbiased priors and receiving unbiased signals about their idiosyncratic utility (i.e., match-value) for a new product. The biases result from consumers overweighting their private signals and are therefore higher for higher signals. As such, consumers on fixed-rate tariffs have the most biased beliefs. Our model can therefore explain why consumers on fixed-rate plans often fail to use the product enough to justify the fixed fee. The biases are consistent with rational expectations since consumers may be biased with respect to a particular product, while being correct, on average, across all products. The biases are also consistent with behavioral conjectures, such as projection bias. Dynamic trade-offs arise in our model from two sources: an incentive to learn via consumption, and costs to switching tariffs. We demonstrate the effects of uncertainty and switching costs on initial and subsequent tariff choices and assess the pricing implications. We find tariff menus are ineffective screening devices for price discrimination in this market.

consumer learning, price discrimination, dynamic discrete choice

Abstract:
Using state-level data from the United States, we find that differences in colonial legal institutions have affected the current quality of state legal institutions. These differences in colonial legal institutions arose because some states were settled by Great Britain, a common law country, and other states were settled by France, Spain, and Mexico, all civil law countries. To explain these findings, we develop a transplant-civil law hypothesis that highlights the disruption associated with large-scale legal transplantation and the possible relative inefficiencies of colonial civil law. We find strong support for the transplant-civil law hypothesis. Our results are robust to the inclusion of additional variables capturing climate, geography, initial population, resource endowments, state level rules, and legal environment. Given the 150-200 year gap between the initial conditions and the measures of the current quality of legal institutions, we provide indirect evidence on the persistence of legal institutions. We then use initial legal systems as a source of exogenous variation in current institutions for providing a series of estimates of their impact on current economic performance.

Common law, civil law, transplant, initial conditions, state courts and public corruption

Abstract:
This paper uses a model and historical data from California in 1860, a time at which property rights were uncertain, to investigate the links among property rights, production, and violence. Consistent with the model, squatters had production that was 15-47 percent lower than non squatters; a 10 percent increase in the density of squatters was associated with an 8-17 percent decrease in agricultural output per acre, and, at levels above the mean, increased density of squatters was associated with higher levels of violence. The market for squatting does not appear to have been in equilibrium. This may reflect the imperfect information available to squatters, sorting based on a taste for violence, or our use of aggregate data. We then compare our results on agricultural production for California to results for other states west of the Mississippi in 1860 and in 1880. The negative effects of squatting were widespread in 1860, but by 1880 the effects had abated in many places as the number of squatters fell. The results on production and violence have implications for understanding the historical development of agriculture in the United States more broadly, since squatting on agricultural land was prevalent throughout the United States, and for understanding agriculture in the Third World, since uncertain property rights in agricultural land are still an issue today.

property rights, agricultural production, California

Abstract:
This paper uses data from California in 1860, a period in which property rights were uncertain, to investigate the relationship between the certainty of property rights and agricultural production. The negative effect of uncertain property rights on farm values, crop production, and wheat productions was large. For example, crop values for preemptors, who had more uncertain property rights than other farmers, were 22-38 percent lower than other farmers. This is consistent with contemporary discussion of the period, which linked uncertain property rights to low investment in the land and the use of short season crops. Less obviously, the mix of products was also significantly affected. Farmers with less secure property rights produced less as measured by crop value than similar farmers with more secure property rights, but owned similar amounts of livestock, presumably because it was mobile. In aggregate, uncertainty depressed the value of crop output by 13-20 percent. The results have implications for understanding the historical development of agriculture in the United States, since squatting on agricultural land was prevalent throughout the United States, and for understanding agriculture in the Third World, since uncertain property rights in agricultural land are still an issue today.

property rights, agricultural production, California

Abstract:
Several important studies of institutions assume that the quality of institutions is persistent following some formative historic event. The assumption of institutional persistence, however, begs the question of how these institutions persisted. To better understand this issue, this paper examines the evolution of state courts in the United States. We begin by reviewing the evidence that France, Spain, and Mexico operated civil-law legal systems in territory that would later make up thirteen states. One important philosophical difference between civil-law and common-law legal systems arises from differences in their beliefs regarding the appropriate degree of judicial independence. To show how these beliefs, if persistent, would manifest themselves, we present a model in which legislatures allocate budgets to their judges. In the model, common and civil-law legislatures have different preferences regarding the level of judicial independence. Our model predicts civil-law legislatures will give fewer discretionary resources to their judges when judicial elections are replaced by a system of appointments. We confirm this prediction using state-level data for the period 1961-1999. Finally, we argue that one important reason why civil-law preferences for a weak judiciary appear to have persisted in the American states is that the political culture within state legislatures is slow-moving.

Civil law, persistence, judicial independence, political culture.

Abstract:
Using data collected between August 1999 and January 2000 covering 399 books, including New York Times bestsellers, computer bestsellers, and random books, we examine pricing by thirty-two online bookstores. One common prediction is that the reduction in search costs on the Internet relative to the physical channel would cause both price and price dispersion to fall. Over the sample period, we find no change in either price or price dispersion. Another prediction of the search literature is that the prices and price dispersion of advertised items or items that are purchased repeatedly will be lower than for unadvertised or infrequently purchased items. Prices across categories of books appear to conform to this prediction, with New York Times bestsellers having the lowest prices as a fraction of the publisher's suggested price and random books having the highest prices. Interestingly, price dispersion does not conform with this prediction, apparently for reasons related to stores' decisions to carry particular books. One reason why we may not observe convergence in prices is because stores have succeeded in differentiating themselves even though they are selling a commodity product. We observe differentiation (or attempted differentiation) by a significant number of firms.

Abstract:
Two conflicting predictions have emerged regarding the effect of low-cost information on price. The first states that all Internet retailers will charge the same low price for mass produced goods. The second states that Internet retailers will differentiate to avoid intense price competition. Using data collected in April 1999 on the prices of 107 books in thirteen online and two physical bookstores, we find similar average prices online and in physical stores and substantial price dispersion online. Analysis of product differentiation yields no clear results. The substantial premium charged by Amazon provides indirect evidence of product differentiation.

Abstract:
Using data from the turn-of-the-century whiskey industry, we conduct tests of the NEIO methodology similar to those conducted by Genesove and Mullin (1998). Like Genesove and Mullin, we find that the NEIO methodology appears to perform reasonably well for low levels of market power. Conduct is somewhat overestimated, with estimates ranging from 0.17 to 0.35 as compared to direct estimates of 0.09. Cost parameters are generally underestimated. Estimates of conduct and remaining cost parameters improve significantly, however, with additional information on cost. Estimates improve further if conduct is allowed to have two regimes, which are identified based on historical evidence.

Abstract:
Special education litigation has grown rapidly during the 1980s and 1990s following the passage in 1975 of the Individuals with Disabilities Education Act (IDEA) and judges have become more involved in determining whether or not students with disabilities are receiving a free and appropriate public education. We argue that students with disabilities are a minority interest and promoting their interests can make state judges unpopular for two reasons: first, IDEA imposes substantial costs on state and local budgets; second IDEA mainstreams children with disabilities into regular classrooms. We then provide evidence at the state and school district level that those states that either did not elect judges or eliminated judicial elections have more aggressively promoted the interests of students with disabilities. The most compelling explanation for this finding is that judges who do not stand for election are more likely to promote minority interests.

Abstract:
These chapters document that civil law origins in the American States have had a persistent influence on the interactions between state courts and state legislatures during the twentieth century. One important philosophical difference between civil-law and common-law legal systems arises from differences in their beliefs regarding the appropriate degree of judicial independence. We document that legislatures in civil law states have been relatively slow in granting their judges independence during 1912-2000. Then, using data during 1960-2000, we show that civil law legislatures tend to cut judicial budgets when their judges become more independent. This legislative behavior is consistent with the predictions of a model that we build where legislatures have preferences for a weak or strong judiciary. Our results are consistent with previous chapters of this book which show that the political culture in state legislatures is slow-moving.

legal origins, judicial retention, judicial independence, panel estimation

Abstract:
This paper explores how early life exposure to poverty and want adversely affects later life health outcomes. In particular, it examines how exposure to crowded housing conditions and impure drinking water undermines long-term health prospects and increases the risk of age-related pathologies such as cancer, heart disease, kidney disease, and stroke. Exploiting city-level data from early-twentieth century America, evidence is presented that cities with unusually high rates of typhoid fever in 1900 had elevated rates of heart and kidney disease fifteen years later; also cities with unusually high rates of tuberculosis in 1900 had elevated rates of cancer and stroke fifteen years later. The estimated coefficients suggest that eradicating typhoid fever (through water purification) and tuberculosis (through improved housing and nutrition) would have reduced later death rates from heart disease, cancer, stroke, and kidney disease by 23 to 35 percent.

Abstract:
Beginning around 1880, public health issues and engineering advances spurred the installation of city water and sewer systems. As part of this growth, many cities chose to use lead service pipes to connect residences to city water systems. This choice had negative consequences for child mortality, although the consequences were often hard to observe amid the overall falling death rates. This paper uses national data from the public use sample of the 1900 Census of Population and data on city use of lead pipes in 1897 to estimate the effect of lead pipes on child mortality. In 1900, 29 percent of the married women in the United States who had given birth to at least one child and were age forty-five or younger lived in locations where lead service pipes were used to deliver water. Because the effect of lead pipes depended on the acidity and hardness of the water, much of the negative effect was concentrated on the densely populated eastern seaboard. In the full sample, women who lived on the eastern seaboard in cities with lead pipes experienced increased child mortality of 9.3 percent relative to the sample average. These estimates suggest that the number of child deaths attributable to the use of lead pipes numbered in the tens of thousands. Many surviving children may have experienced substantial IQ impairment as a result of lead exposure. The tragedy is that lead problems were avoidable, particularly once data became available on the toxicity of lead. These findings have implications for current policy and events.