I examine horizontally differentiated firms in three different contexts. First, I look at an industry where firms can develop self-customizable products---products which appeal to different consumers for different reasons. This addition results in an unexpected conclusion that sometimes more differentiated firms can end up with lower profits than less differentiated firms. The result is due to the fact that more differentiated firms engage in a prisoner dilemma type competition, making their products more and more self-customizable, and ending up with higher costs in the end. In the equilibrium consumers derive more welfare than is socially optimal. We, with Martin Lariviere, go on to examine why capacity constrained restaurants offer reservations for consumers. It does not make sense for a monopolist to offer free reservations in a homogenous market, since it leaves the monopolist with empty seats due to some of the consumers not honoring their reservations. We find that even in a heterogeneous market with competition two restaurants with the same total capacity as a monopolist, under some parameters, offer reservations when the monopolist does not. Moreover, whenever the monopolist offers reservations, so do the two firms. In the third chapter we, together with George Deltas and Daniel Spulber, examine two sided market where intermediaries are horizontally differentiated both upstream and downstream. The comparative statics in competition have similar properties to those in the monopoly case in the standard Hotelling model---as firms become more differentiated (downstream), their profits become lower. We use the model for several applications, for example to explain why malls generally have comparatively lower priced apartment buildings around them, even though living close to the mall would be of great benefit for the regular shoppers.

In the first chapter, I study the adoption of tractors by U.S. farmers in the early 20th century. First, I present reduced-form evidence that highlights the importance of cross-state differences in wages and farm sizes for tractor adoption. The data suggest that the adoption rates are positively associated with wages and average farm size but negatively related with the variation of farm size within-state, and that if size distribution is omitted, the effect of wages is overestimated. Next, I estimate two structural models in which the technology choice depends explicitly on farm wages and farm size. Both models are able to accurately predict the observed cross-state adoption rates. Finally, I use the second model, which produces the most precise estimates while incorporating within-state farm heterogeneity, to conduct counterfactual exercises. Results show that changes to either farm wages or land size distribution lead to changes in the predicted adoption rates. In particular, if regional differences in farm wages and farm size distribution are taken away, one can no longer replicate the observed adoption patterns across states. In the second chapter, I estimate the demand for housing in Bogotá, modeling electricity consumption explicitly to take into account the crossed subsidies included in Colombian utility rates. I use household level data on housing prices, observable dwelling attributes, and demographic variables to recover the willingness to pay for housing characteristics following the three-step estimation procedure suggested by Bajari and Kahn (2005). First, I regress the price of housing against different observable dwelling characteristics to recover the implicit price of each feature. Next, I infer household-specific preference parameters from the utility maximizing first-order conditions, where a household's utility depends on these observable characteristics. Finally, I analyze the relationship between demographic variables and the taste parameters estimated in the previous step. In order to study the impact of subsidies on households' housing decisions, I focus on the impact of changes in the price of electricity on the choice of dwelling size. I find that subsidized households choose bigger dwellings than they would in the absence of subsidies, while those who are taxed choose smaller ones.

Applied Industrial Organization offers a perspective on the richness of empirical industrial organization studies. Some papers derive empirical implications from theoretical models, but other papers start from empirical evidence and construct a theory. Three major topics are explored: the role of innovation, the evolution of market structure and firms, and the determinations of performance. As the central force of market economies, innovation is the essence of competition and results in changes to market structures. Other forces driving the evolution of markets and firms are also analyzed. Finally, the determinants of profitability are investigated. In particular, characteristics such as price flexibility, successful lenders and monopoly regulation are examined. Contributors include F.M. Scherer, Paul Geroski, John Hey, David Audretsch, Manfred Neumann, among others.

Empirical Studies in Industrial Organization brings together leading scholars who present state-of-the-art research in the spirit of the structure-conduct-performance paradigm embodied in the work of Leonard W. Weiss. The individual chapters are generally empirically or public policy oriented. A number of them introduce new sources of data that, combined with the application of appropriate econometric techniques, enable new breakthroughs and insights on issues hotly debated in the industrial organization literature. For example, five of the chapters are devoted towards uncovering the link between market concentration and pricing behavior. While theoretical models have produced ambiguous predictions concerning the relationship between concentration and price these chapters, which span a number of different markets and situations, provide unequivocal evidence that a high level of market concentration tends to result in a higher level of prices. Three of the chapters explore the impact of market structure on production efficiency, and three other chapters focus on the role of industrial organization on public policy. Contributors include David B. Audretsch, Richard E. Caves, Mark J. Roberts, F.M. Scherer, John J. Siegfried and Hideki Yamawaki.