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You are now leaving the Kelley School of Business' official website; the views and opinions expressed in the linked website are those of the author and do not reflect the views, opinions, or official policy or position of Indiana University or the Kelley School of Business.
Outstanding Graduate Student Teacher Award, Northwestern University
Selected Publications
Baye, M. R., and Prince, J. (2020). The Economics of Digital Platforms: A Guide for Regulators. In The GAI Report on the Digital Economy, Global Antitrust Institute.
Freedman, S., Lin, H., and Prince, J. (2018). Information Technology and Patient Health: Analyzing Outcomes, Populations, and Mechanisms. American Journal of Health Economics, 4(1), 51-79.
Freedman, S., Lin, H., and Prince, J. (2018). Does Competition Lead to Agglomeration or Dispersion in EMR Vendor Decisions? Review of Industrial Organization, 53(1), 57-79.
Prince, J., and Greenstein, S. (2017). Measuring Consumer Preferences for Video Content Provision via Cord-Cutting Behavior. Journal of Economics and Management Strategy, 26(2), 293-317.
Prince, J., and Simon, D. (2017). The Impact of Mergers on Quality Provision: Evidence from the Airline Industry. Journal of Industrial Economics, 65(2), 336-362.
Lin, H., and Prince, J. (2016). Determinants of Private Long-Term Care Insurance Purchase in Response to the Partnership Program. Health Services Research, 51(2), 687-703.
Simon, D., and Prince, J. (2016). The Effect of Competition on Toxic Pollution Releases. Journal of Environmental Economics and Management, 79, 40-54.
Prince, J., and Simon, D. (2015). Do Incumbents Improve Service Quality in Response to Entry: Evidence from Airlines’ On-Time Performance. Management Science, 61(2), 372-390.
Abstract
We examine if and how incumbent firms respond to entry and entry threats using non-price modes of competition. Our analysis focuses on airline service quality. We find that incumbent on-time performance (OTP) actually worsens in response to entry, and even entry threats, by Southwest Airlines. Since Southwest is both a top-performing airline in OTP and a low-cost carrier (LCC), we conjecture that this response by incumbents may be due to a cost-cutting strategy that allows for intense post-entry price competition along with pre-entry deterrence, or it may be due to a post-entry differentiation strategy along with pre-entry accommodation. Further analysis of entry and entry threats by other airlines is inconclusive, providing evidence that is partially consistent with both hypotheses. Nonetheless, the phenomenon of worsening OTP can only be observed when the (potential) entrant is a LCC (Southwest, Jet Blue, and AirTran).
Prince, J., Kadiyali, V., and Simon, D. (2014). Is Dual Agency in Real Estate a Cause for Concern? Journal of Real Estate Finance and Economics, 48(1), 164-195.
Abstract
We examine the effects of the regulation of dual agency in residential real estate transactions, for 10,888 transactions in Long Island, New York in 2004-2007. We find that dual agency has an overall null effect on sale price, but includes two opposing forces where buyer and seller interests might be compromised. The link between dual agency and timing of sales is less clear. These findings are robust to endogeneity bias. Although it appears dual agency does cause some market distortions, our analysis yields little evidence that prohibiting dual agency in real estate will increase welfare.
Prince, J., and Greenstein, S. (2014). Does Service Bundling Reduce Churn? Journal of Economics and Management Strategy,23(4), 839-875.
Abstract
We examine whether bundling in telecommunications services reduces churn using a series of large, independent cross sections of household decisions. To identify the effect of bundling, we construct a pseudo-panel dataset and utilize a linear, dynamic panel-data model, supplemented by nearest-neighbor matching. We find bundling does reduce churn for all three “triple-play” services. The effect is only “visible” during times of turbulent demand. We also find evidence that broadband was substituting for pay television in 2009. This analysis highlights that bundling helps with customer retention in service industries, and may play an important role in preserving contracting markets.
Kim, J.-H., Prince, J., and Qui, C. (2014). Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry. International Journal of Industrial Organization, 37(6), 99-108.
Abstract
Two-sided markets (e.g., video game consoles and operating systems) consist of platforms that need to bring both retail consumers and complementary goods producers on board to be successful. Consumer adoption of these platforms can often hinge on the presence and magnitude of indirect network effects – the positive feedback loop where a larger base of adopters of a primary product (“hardware”) creates a larger market for complementary goods (“software”), and this in turn increases the value of the primary good. Prior work attempting to measure indirect network effects often uses aggregate counts of software variety to do so. In this paper, we illustrate the importance of accounting for variation in software quality – a feature present in many markets – when conducting this measurement, and provide the conditions under which not doing so results in an over- or underestimate of the actual indirect network effect. We apply our framework to the 7th-generation video game console market with quality-differentiated titles and show that in this market the use of aggregate software measures underestimates the indirect network effects by approximately 30 percent.
Lin, H., and Prince, J. (2013). The Impact of the Partnership Long-Term Care Insurance Program on Private Coverage and Medicaid Expenditures. Journal of Health Economics, 32(6), 1205-1213.
Abstract
We examine the impact of U.S. states’ adoption of the partnership long-term care (LTC) insurance program on households’ purchases of private coverage. This program increases benefits of privately insuring via a higher asset threshold for Medicaid eligibility for LTC coverage, and targets middle-class households. We find the program generates few new purchases of LTC insurance, and those it generates are almost entirely by wealthy individuals, as predicted by Medicaid crowd-out. Further analysis suggests that awareness levels of the program, and possibly bequest intentions, also effectively predict response rates, but Medicaid crowd-out persists. We provide an estimate of expected Medicaid savings/costs.
Lucrarelli, C., Prince, J., and Simon, K. (2012). The Welfare Impact of Reducing Choice in Medicare Part D: A Comparison of Two Regulation Strategies. International Economic Review, 53(4), 1155–1177.
Abstract
Motivated by widely publicized concerns that there are “too many” plans, we structurally estimate (and validate) an equilibrium model of the Medicare Part D market to study the welfare impacts of two feasible, similar-sized approaches for reducing choice. One reduces the maximum number of firm offerings regionally; the other removes plans providing donut hole coverage – consumers’ most valued dimension. We find welfare losses are far smaller when coupled with elimination of a dimension of differentiation, as in the latter approach. We illustrate our findings’ relevance under current health care reforms, and consider the merits of instead imposing ex ante competition for entry.
Fowdur, L., Kadiyali, V., and Prince, J. (2012). Racial Bias in Expert Quality Assessment: A Study of Newspaper Movie Reviews. Journal of Economic Behavior and Organization, 84(1), 292-307.
Abstract
Newspaper critics' movie reviews are often used by potential movie viewers as signals of expert quality assessment. We investigate the existence and revenue impact of racial bias in these reviews. Using an expansive, novel dataset spanning 2003-2007, we find ratings for movies with a black lead actor and all white supporting cast are approximately 6% lower than for other racial compositions. These findings appear consistent with implicit discrimination, and result in an average revenue loss of up to 4%, or $2.57 million, per movie. Robustness checks show it is unlikely these results are driven by unobserved heterogeneity or random correlations.
Prince, J., (2011). Relating Inertia and Experience in Technology Markets: An Analysis of Households’ Personal Computer Choices. Applied Economics, 43(29): 4501-4514.
Abstract
This paper empirically analyzes how households’ PC purchasing behaviors change with market experience. We find that: households generally exhibit inertia in their PC purchases, the level of inertia is increasing as a function of experience on the PC market, and, for households switching brands, the likelihood of buying a lesser-known brand increases with experience, regardless of the brand of the previous purchase. These findings are consistent with the predictions of a simple learning model, and extend our understanding of how market experience affects purchasing behavior to an important technology product, with implications that may apply to other similar products.
Prince, J., and Shawhan, D. (2011). Is Time Inconsistency Primarily a Male Problem? Applied Economics Letters, 18(6), 501-504.
Abstract
We conduct a simple experiment, using real money, that tests whether men and woman differ in time consistency. The experiment provides strong evidence of time inconsistency among males, but no evidence of such behavior among females. Furthermore, the difference between males and females is statistically significant. This result could have important implications in marketing and in efforts to improve intertemporal decision-marking.
Barseghyan, L., Prince, J., and Teitelbaum, J. (2011). Are Risk Preferences Stable across Contexts? Evidence from Insurance Data. American Economic Review, 101(2), 591–631.
Abstract
Using a unique data set, we test whether households' deductible choices in auto and home insurance reflect stable risk preferences. Our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household-coverage specific Poisson processes. We find that the hypothesis of stable risk preferences is rejected by the data. Our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices. We find that our results are robust to several alternative modeling assumptions.
Prince, J., and Simon, D. (2009). Has the Internet Accelerated the Diffusion of New Products? Research Policy, 38(8), 1269-1277.
Abstract
In this paper we measure the effect of Internet adoption on consumers' propensity to adopt a wide range of diffusing products. To do this, we utilize a rich panel of household surveys on purchases of relatively new technology products. Our results indicate that the Internet accelerates product diffusion, but with varying magnitude. In an attempt to determine the mechanisms underlying this effect, we find direct evidence that the Internet does not increase product awareness. However, we find suggestive evidence that the Internet increases adoption rates both through access to increased information about new products (via online research) and through online shopping. We also find that the magnitude of the Internet's effect is strongly tied to diffusion rates, and especially familiarity rates. This finding is consistent with Internet access having the greatest impact on the adoption of products with more developed marketing strategies (i.e., more developed information sources and online markets). Our findings indicate that the Internet helps bolster demand for products early in their diffusion process, and they suggest that improved access to information and the convenience of online shopping are likely the primary drivers of this effect. Consequently, to the extent that accelerated diffusion of new products is (on net) desirable, our findings may provide a further argument toward social promotion of Internet adoption.
Prince, J. (2009). How Do Households Choose Quality and Time to Replacement for a Rapidly Improving Durable Good? International Journal of Industrial Organization, 27(2), 302-311.
Abstract
Many durable goods, particularly in the high technology sector of the economy, experience rapid quality improvement. As a result, replacement is typically due to obsolescence rather than breakdown, and replacement cycles are relatively short. When these goods are vertically differentiated, consumers must make two important, inter-related choices upon making a purchase: what quality level to buy, and how long to wait between purchases. In this paper, we analyze how these two decisions relate to underlying preferences and to each other both theoretically and empirically. We demonstrate how a single, tenuous assumption in a commonly used theoretical model can drive the relationships we would predict when we take this model to the data. This highlights the necessity of a more direct empirical analysis. In our empirics, we show that quality choice and replacement cycle length (RCL) are generally positively correlated. We also find evidence of non-monotonic relationships between quality choice and marginal utility of quality and RCL choice and marginal utility of money. That is, households who value quality more don't always buy higher-quality PCs, and households who value money less don't always buy more frequently, ceteris paribus. Our results provide new insights into the nature of durable goods demand, the proper characterization of markets and market segments, and welfare measures.
Prince, J., and Simon, D. (2009). Multi-market Contact and Service Quality: Evidence from On-Time Performance in the US Airline Industry. Academy of Management Journal, 52(2), 336-354.
Abstract
We examine the impact of multimarket contact on on-time performance in the airline industry. Using flight-level data for more than 3.5 million flights, we find that increases in multimarket contact lead to increases in delays, and this result is robust to several delay measures and the inclusion of carrier-route, as well as month, fixed effects. We further determine that the effect is primarily in the form of departure delays, and not due to changes in scheduled flight times or time spent in the air. These findings provide support for the mutual forbearance hypothesis, and suggest that multimarket contact facilitates tacit collusion not only on price - but also on quality.
Prince, J. (2008). Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of the Demand for Personal Computers. Journal of Economics and Management Strategy, 17(1), 1-33.
Abstract
This paper estimates a structural model of demand for the personal computer (PC) by repeat purchasers. Taking advantage of a large dataset on household-level PC purchases, the econometric model uses variation in PC holdings among PC owners to identify households' marginal values of quality improvements. The analysis uses only cross-sectional data, and accounts for: stock effects, forward-looking behavior, and large amounts of household heterogeneity. The estimates allow us to measure sensitivity to long-term and short-term price and technology changes, as well as consumer welfare changes from technological improvements. The results show a large variation in marginal values for PC quality across households, and that failing to account for forward-looking behavior results in biased estimates and a poorer fit to the data. Incorporating stock effects proves especially important since, for the data used here, the model's parameters are not only biased, but virtually unidentified without them. The results also show that price elasticity is approximately 25% higher in the short-term compared to the long-term, and technology elasticity is approximately 35% higher in the short-term compared to the long-term. Further, welfare measurements are significantly underestimated when using a model that doesn't account for forward-looking behavior. Finally, the model is extended to include first-time purchasers. The results show similar patterns, but should be interpreted with much caution due to the likely presence of significant unobserved heterogeneity between new purchasers and repeat purchasers.
Goldfarb, A.. and Prince, J. (2008). Internet Adoption Patterns and Usage are Different: Implications for the Digital Divide. Information Economics and Policy, 20(1), 2-15.
Abstract
There is a well-documented a "digital divide" in internet connection. We ask whether a similar divide exists for internet usage. Using a survey of 18,439 Americans, we find that high-income, educated people were more likely to have adopted the internet by December 2001. However, conditional on adoption, low-income, less-educated people spend more time online. We examine four possible reasons for this pattern: 1) differences in the opportunity cost of leisure time, 2) differences in the usefulness of online activities, 3) differences in the amount of leisure time, and 4) selection. Our evidence suggests this pattern is best explained by differences in the opportunity cost of leisure time. Our results also help to determine the potential effects of internet-access subsidies.
Prince, J. (2007). The Beginning of Online/Retail Competition and Its Origins: An Application to Personal Computers. International Journal of Industrial Organization, 25(1), 139-156.
Abstract
This paper measures cross-price elasticity for online and retail personal computers (PCs) across several years. The results indicate that cross-price elasticity for 1996 and 1997 was a statistical 0, while in 1998 it was large and statistically significant (approximately 3.0). I consider both demand-side and supply-side explanations for this change. My demand-side explanations argue that a change in the composition of households shopping in online and retail markets is responsible for the switch. The empirical results suggest that these explanations are not correct. My supply-side explanations argue that changes in business models late in 1997 were responsible instead. The first supply-side explanation says that expansion by firms from single to multiple distribution channels (e.g., expansion from online only to online and retail) drove the new competition. Both Apple and Gateway made such expansions late in 1997, and the data provide some evidence that this contributed to online/retail competition. The second explanation says that the increase in the number of brands offering both physical inspection (through a physical location) and customizability drove the new competition. These changes marked directed efforts to target high-end buyers by both types of suppliers. The data also support this explanation. While I am unable to quantify which has the greater impact, it is clear that online/retail competition began largely because of these two supply-side changes.
