Essays in Industrial Organization

This dissertation studies environmental and health policy-relevant issues using cutting-edge applied microeconomic, especially industrial organization, tools and related econometric developments. The first chapter considers policies incentivizing renewable power investors to achieve the policymaker’s environmental objectives. The second chapter relaxes econometric assumptions in dynamic games—a workhorse in industrial organization—to enhance the robustness of policy suggestions implied by the structural estimates. The third chapter explores how physicians and patients interact and how these organic interactions affect the productivity and disparities of the healthcare system. In the first chapter, I propose a structural framework of policymakers providing financial incentives to support renewable investors in building new capacity. Widespread investment in renewable energy is seen as a critical tool in mitigating the impacts of climate change. However, renewable energy projects face substantial risk because they sell their electricity into volatile wholesale electricity markets, and this risk may hinder investments that otherwise appear profitable. Policymakers looking to encourage renewable investment can choose between direct subsidies for renewable investment and power purchase agreements that assume the risk of future electricity sales. The relative value of these two approaches depends critically upon investors’ risk premium. This chapter investigates this trade-off in the context of Brazilian wind energy actions that award winners purchase agreements for a share of their production. I develop and estimate a structural auction model that separately recovers the investors’ risk aversion and private costs. I find that investors are substantially risk averse: investors require an additional risk premium of $20.16/MWh to accept the risk of selling all electricity into the wholesale market, where revenues have a standard deviation of $5.44/MWh. For 3% of Brazil’s ge