Applications of structural demand estimation to the smartphone and the electric automobile industries

Abstract

ESSAY ONE: Quality, Variety, and Welfare: The U.S. Smartphone Market It is commonplace for firms operating in multi-product markets, like the smartphone market, to offer a product portfolio that spans a range of quality levels. In markets of this nature, product proliferation is directly correlated with the level of oligopolistic competition in the marketplace. This study aimed to understand (1) how the product quality of smartphones changes over time, (2) whether the increase in the number of products is contributing to product variety (a measurement that increases with the meaningful product), and (3) whether oligopolistic competition stimulates an excess or lack of products in the market from a welfare perspective within the context of the US smartphone market. This study found within the smartphone market, the quality and variety of products available increases over time. Also, the current study's findings indicate that the smartphone market commences with a lack of products; however, by the end of 2015, the number and variety of products increases and eventually becomes a market with excess products. The change occurs because in moderately concentrated market conditions, firms are incentivized to avoid cannibalization of their own product(s), resulting in a lack of products and as the market a highly concentrated, the losses that are incurred from cannibalization of sales are less than the gains that can be secured from deterring competitors from adding products, it leads to the market being flooded with excess products. ESSAY TWO: Fuel Prices, Federal Tax Credits, and the Welfare: A Case of the Electric Car Market This paper represents an analysis of the drivers for the demand for electric vehicles, with a focus on the price of gasoline and incentivization via income tax. It is demonstrated that if gasoline prices had remained at the same level as 2010, 2017 electric vehicle sales would have been 22%-39% lower; the influence of the federal income tax credit program on the sales of electric vehicles in 2017 is estimated at 8%. With the federal credit incentive program, the cost of effecting a reduction in the consumption of gasoline was $73 in government revenue per barrel; reducing CO2 emissions costs by $137 per ton. The changes to government revenue, company surpluses, consumer surpluses, and external costs have been quantified based on the introduced federal income tax incentives. The findings demonstrate that $49 million (net) of social welfare losses would result from the incentive program although other positive influences resulting from the incentives would more than makeup for these.--Author's abstract