Brown, J., J. Hastings, E.T. Mansur, and S.B. Villas-Boas. Forthcoming. “Reformulating Competition? Gasoline Content Regulation and Wholesale Gasoline Prices.” Journal of Environmental Economics and Management. [JEEM link] or [working paper link]

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.

Brown, J., and J. Morgan. 2006. “Reputation in Online Auctions: The Market for Trust.” California Management Review, 49(1): 61-81. [CMR link] or [working paper link]

Online markets have dramatically altered the retail landscape. By eliminating barriers associated with geography as well as the physical costs of maintaining a storefront, online markets have created a “democracy” of buyers and sellers. However, the fluidity of this marketplace poses unique challenges— owing to the relative anonymity of transactions, the need for trust is paramount. Solving the “trust problem” represents a key competitive advantage for many of the successful players in the online space. For instance, much of the remarkable success of eBay has stemmed from its ability to create valuable and informative reputations for its users through its feedback system. The lock-in associated with a user’s reputation on eBay helped it to stave off challenges by Amazon and Yahoo. We highlight how eBay’s solution to the “trust problem,” has led to the existence of a “market for feedback” whose sole purpose is the “manufacture” of reputation for eBay users. We present a case study and statistical analysis of this market and show it as a crucial challenge to eBay’s future competitive advantage and, more generally, to solving the “trust problem” in other online markets.

Brown, J., J.A.L. Cranfield and S. Henson. 2005. “Relating Consumer Willingness-to-pay for Food Safety to Risk Tolerance: An Experimental Approach.” Canadian Journal of Agricultural Economics, 53(2-3): 249-263. [CJAE link]

This study investigates the role of risk tolerance in shaping Canadian consumers’ willingness-to-pay for food safety risk reductions. Non-hypothetical experimental auctions were used to elicit consumer valuations of food safety improvement. To identify the relationship between food safety concern and risk-reduction valuations, individual risk-perception scores are constructed based on questionnaire responses. Results show willingness-to-pay for improved food safety tends to decrease as individuals become more risk tolerant. Differences in bids across naive and informed rounds of bidding tend to become smaller with risk tolerance for individuals who initially overestimated the food safety risk.

Brown, J. 2001. “Price discrimination and pricing to market behavior of Canadian canola exporters.” American Journal of Agricultural Economics. 83(5): 1343-49 [AJAE link]

The role of exchange rate fluctuation on the pricing behavior of Canadian canola exporters to Japan, Mexico, and the U.S. is examined using a model identifying noncompetitive and exchange rate related pricing behavior. Price discrimination was identified for Canadian canola exports to the three destinations over the period of 1993–99. Results also suggest that Pricing to Market strategies were employed for Japanese imports. Canadian canola exporters used local currency price stabilization to dampen the effects of relative price changes in the Japanese currency, perhaps linked to the large size of Japanese imports relative to Mexico and the U.S.