Justine S. Hastings

Vertical Relationships and Competition in Retail Gasoline Markets: An Empirical Evidence from Contract Changes in Southern California

This study examines how much, if any, of the differences in retail gasoline prices between markets is attributable to differences in the composition of vertical contract types at gasoline stations in each market. The purchase of the independent retail gasoline chain, Thrifty, by ARCO provides a unique opportunity to examine the effects of changes in different vertical contract types on local retail prices. This event caused sharp changes in the market share of i) fully vertically integrated stations, and ii) independent stations; differentially affecting local markets in the Los Angeles and San Diego Metropolitan areas. Using unique and detailed station-level data, this study examines how these sharp changes affected local retail prices. The detailed data and the research design based on the Thrifty station conversions allow for credible estimation of the effects of the market share of independent retailers and vertically integrated retailers on local market prices, controlling for any omitted factors at the station level, and the city level over time. Results for the Los Angeles and San Diego metropolitan areas indicate that a decrease in the market share of independent stations has a significant positive impact on local retail price. However, a change in the market share of refiner owned and operated branded stations does not have a significant impact on local market price. These results have important implications as policy makers consider the regulation of vertical contracts as a means to increase competition in gasoline markets. The research design and detailed data also allow for inference on the underlying nature of retail gasoline competition.

Reformulating Competition?: Gasoline Content Regulation and Wholesale Gasoline Prices

The 1990 Clean Air Act Amendments stipulated gasoline content requirements for metropolitan areas with air pollution levels above predetermined federal thresholds. The legislation led to exogenous changes in the type of gasoline required for sale across U.S. metropolitan areas. This paper uses a panel of detailed wholesale gasoline price data to estimate the effect of gasoline content regulation on wholesale prices and price volatility. We investigate the extent to which the estimated price effects are driven by changes in the number of suppliers versus geographic segmentation resulting from regulation. We find that prices in regulated metropolitan areas increase significantly, relative to a control group, by an average of 3 cents per gallon. The price effect, however, varies by 8 cents per gallon across regulated markets and the heterogeneity across markets is correlated with the degree of geographic isolation generated by the discontinuous regulatory requirements.

Gender and Performance: Evidence from School Assignment by Randomized Lottery

School choice programs are intended to improve student achievement, by allowing for better matches between students and schools. It is not clear, however, that academic achievement will improve if parents make school choice decisions over both academic and nonacademic school attributes (Justine S. Hastings et al., 2005, 2006). Indeed, many randomized studies of impacts of school choice find little or no effect of school choice on academic outcomes. For example, initial evaluations of randomized voucher experiments in Milwaukee and New York City found modest academic impacts on eligible students (John F. Witte et al., 1995; Daniel P. Mayer et al., 2002). More recently, evaluations of public school choice lotteries in Chicago and Charlotte have found no difference between the average lottery winner and loser in academic outcomes such as test scores (Julie Cullen et al., 2003; Hastings et al., 2006). When parents are choosing schools for academic and nonacademic reasons, school choice may increase utility but not necessarily improve academic outcomes. There is growing evidence that educational interventions may have heterogeneous treatment effects by gender. Analysis of the Moving To Opportunity demonstration, in which parents were randomly given the opportunity to move to nonpoverty neighborhoods, found improvements in education, mental health, and criminal behavior for females, but negative effects on males (Jeffrey R. Kling and Jeffrey B. Liebman, 2004). Similarly, Michael Anderson (2005) reanalyzed data from three randomized trials of early childhood education and found that all of the long-term benefits accrued to girls and not to boys. We use data from a public school choice program, with school assignment by lottery, to estimate the impacts on academic outcomes by race and gender of attending a first-choice school. Our data come from the CharlotteMecklenburg school district (CMS) in North Carolina, which introduced district-wide public school choice in the fall of 2002 after a racebased busing plan was terminated by the courts. The data include students’ choices, lottery numbers, school assignments, demographics, and academic achievement for the years surrounding implementation of school choice. We compare outcomes for those making similar choices, whose school assignment was determined solely by lottery number. Overall, there was no gain in academic achievement for those winning the lottery. White females did experience significant improvements in test scores when randomized into their first choice school, however. White females were also more likely to choose academically focused magnets and, among those who won the lottery, reported significant increases in time spent on homework. Our evidence suggests that school choice programs may have heterogeneous treatment effects by gender, which are related to differences in the factors driving parental choices.

Sales Force and Competition in Financial Product Markets: The Case of Mexico's Social Security Privatization

This paper examines how sales force impacts competition and equilibrium prices in the context of a privatized pension market. We use detailed administrative data on fund manager choices and worker characteristics at the inception of Mexicos privatized social security system, where fund managers had to set prices (management fees) at the national level, but could select sales force levels by local geographic areas. We develop and estimate a model of fund manager choice where sales force can increase or decrease customer price sensitivity. We find exposure to sales force lowered price sensitivity, leading to inelastic demand and high equilibrium fees. We simulate oft proposed policy solutions: a supply‐side policy with a competitive government player and a demand‐side policy that increases price elasticity. We find that demand‐side policies are necessary to foster competition in social safety net markets with large segments of inelastic consumers.

How financial literacy and impatience shape retirement wealth and investment behaviors

Two competing explanations for why consumers have trouble with financial decisions are gaining momentum. One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations such as computing compound interest, which could cause them to make suboptimal financial decisions. A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people persistently choose immediate gratification instead of taking advantage of larger long-term payoffs. We use experimental evidence from Chile to explore how these factors appear related to poor financial decisions. Our results show that our measure of impatience is a strong predictor of wealth and investment in health. Financial literacy is also correlated with wealth though it appears to be a weaker predictor of sensitivity to framing in investment decisions. Policymakers interested in enhancing retirement well-being would do well to consider the importance of both factors.

The Political Economy of School Choice: Randomized School Admissions and Voter Participation

We provide empirical evidence on the determinants of voter turnout using the randomized outcomes of a school choice lottery. We show that those losing the lottery to attend their first-choice school are significantly more likely to vote in the ensuing school board election than lottery winners. The effect of losing the school choice lottery on voting is highest among high-income families and among those who participated in prior elections. Aggregating the predicted turnout results up to the precinct level, we find evidence consistent with the hypothesis that losing the school choice lottery caused parents to vote against the incumbent school board chair, causing her to lose the election. These results have potentially important implications for political behavior: in order to maximize their chances of re-election, public officials may seek to minimize losses to high income residents and those with a history of voting rather than choosing welfare maximizing policies. The results also have important implications for the political viability of public school choice programs.