Access to high-quality local services constitutes an important amenity in residents’ valuation of cities. In this article, I examine consumer preferences for variety in nightlife to understand these preferences and their impact on nightlife industry dynamics. I develop a structural dynamic model for venue entry and exit in the nightlife industry and estimate the model using a panel of liquor license data from Chicago. I find strong preferences for variety. The results suggest that in equilibrium a new entrant can increase profits for incumbent venues in some cases due to increased demand. However, potential entrants face high barriers to entry.
Housing Appreciation and Supply in Monocentric Cities with Topography (with Joseph Williams and Tom Davidoff)
Housing appreciates more rapidly in cities where the quantity and quality of buildable land decreases more rapidly with the distance from downtown. In both U.S. data from the past three decades and our enhanced model of monocentric cities, marginal land near the urban fringe affects housing appreciation more than the its average availability across the metropolitan area. In the initial model the fraction of buildable land at each radial distance from the city center is a power function of that distance, unlike previous models where the buildable fraction is independent of radial distance. In the equilibrium housing appreciation is driven by the exponent of the power function, but not its coefficient. Both parameters are then estimated using data from satellite imagery. Empirically, the coefficient of the power function is correlated with natural amenities and other drivers of demand. The exponent, by contrast, is plausibly independent of these other characteristics and thereby arguably a good instrument for endogenous housing supply.
Welcome! We Have a New Menu: Measuring Product Responses to Competition (with Nathan Schiff)
This paper measures the response to new competition using a novel longitudinal dataset of restaurant menus in New York City. We use a technique from computer science to obtain a scalar measure of the pairwise distance between restaurants in product characteristic space based on differences in menu text. This particularly detailed measure of characteristic space allows for precise measurement of price and product changes in the menu of incumbent restaurants responding to entry. We address the endogeneity of location choice by matching “treated” incumbent restaurants facing competition from a new entrant with a “control” group of incumbent restaurants that have similar menus and location characteristics but no new competition. While we observe significant menu changes over our sample period, we do not find any evidence that restaurants facing competition respond by changing prices or product characteristics. We seek to provide some of the first evidence on the response to competition in markets with substantial product differentiation, many firms, and rapid turnover.
Homebuilding and the macroeconomy (with Luis Quintero)
We investigate the impact of increasing concentration in local residential construction markets on housing cycle dynamics. We show that the increase in concentration has led to greater unit price volatility, less production, and fewer vacant unsold units. Our results imply that the greater concentration has decreased the value of new housing by 19% of the value of net private fixed investment. Because housing is a determinant of the business cycle these findings provide further evidence that the secular decline in competitive intensity in the American economy is altering macroeconomic dynamics.
Price and differentiation responses to a minimum wage increase (with Nathan Schiff)
The Impact of Municipal Restrictions on Retail Chain Expansion (with Nathan Yang)