Charles Hodgson
Job Market Candidate

Stanford University
Department of Economics
579 Serra Mall
Stanford, CA 94305
312-860-1901
chodgson@stanford.edu



Curriculum Vitae

Fields:
Industrial Organization, Applied Microeconomics
Expected Graduation Date:
June, 2019

Thesis Committee:
Liran Einav (primary):
leinav@stanford.edu

Matthew Gentzkow:
gentzkow@stanford.edu

Timothy Bresnahan:
tbres@stanford.edu

Paulo Somaini:
soma@stanford.edu

Research

Working Papers

Information Externalities, Free Riding, and Optimal Exploration in the UK Oil Industry
Job Market Paper

Information spillovers between firms can reduce the incentive to invest in R&D if property rights do not prevent firms from free riding on competitors' innovations. Conversely, strong property rights over innovations can impede cumulative research and lead to inefficient duplication of effort. These effects are particularly acute in natural resource exploration, where discoveries are spatially correlated and property rights over neighboring regions are allocated to competing firms. I use data from offshore oil exploration in the UK to quantify the effects of information externalities on the speed and efficiency of exploration by estimating a dynamic structural model of the firm's exploration problem. Firms drill exploration wells to learn about the spatial distribution of oil and face a trade-off between drilling now and delaying exploration to learn from other firms' wells. I show that removing the incentive to free ride brings exploration forward by about 1 year and increases industry surplus by 31%. Allowing perfect information flow between firms raises industry surplus by a further 38%. Counterfactual policy simulations highlight the trade off between discouraging free riding and encouraging cumulative research - stronger property rights over exploration well data increase the rate of exploration, while weaker property rights increase the efficiency and speed of learning but reduce the rate of exploration. Spatial clustering of each firm's drilling licenses both reduces the incentive to free ride and increases the speed of learning.

You Can Lead a Horse to Water: Consumer Search with Spatial Learning
With Greg Lewis

We develop a model of search by imperfectly informed consumers with unit demand. The innovation is that consumers learn spatially: sampling the payoff to one product causes them to update their payoffs about all products that are nearby in some attribute space. Search is costly, and so consumers face a trade-off between "exploring'' far apart regions of the attribute space and "exploiting'' the areas they already know they like. Learning gives rise to path dependence, as each new search decision depends on past experiences through the updating process. We present evidence of these phenomena in data on online camera purchases, showing that the search paths and eventual purchase decisions depend substantially on whether the past items searched were surprisingly good or bad. We argue that search intermediaries can affect purchase decisions not only by highly ranking products that they would like purchased, but also by highlighting bad products in regions of the attribute space that they would like to push the consumer away from.

Trade-ins and Transaction Costs in the Market for Used Business Jets
An earlier version of this paper won the Buckley Memorial Prize for best second year paper

Manufacturers of durable goods can encourage consumers who face transaction costs to upgrade by accepting used units as trade-ins. These buyback schemes increase demand for new units from replacement buyers, but also increase the supply of used units if units bought back are resold. In this paper, I investigate the effects of buyback schemes on equilibrium in the market for business jets. I find that buyback reduces transaction costs by between 7% and 18%, and that removing buyback would decrease demand for new jets among replacement buyers by 45% at fixed prices. In equilibrium, removing buyback raises used jet prices by 7%. Although this effect on used jet prices induces substitution towards new jets, I find that manufacturer revenue is lower without buyback.

Publications

The Effect of Transport Infrastructure on the Location of Economic Activity: Railroads and Post Offices in the American West
Journal of Urban Economics, 2018, 104, 59-76.

This paper uses data on the locations of historical US Post Offices to study the effect of railroad construction between 1868 and 1889 on the geographical distribution of towns in the American West. I estimate the probability of survival and expected lifetime of a post office as flexible functions of the distance to the railroad. Existing post offices that were bypassed by the railroad at between 5 and 10 km were 20 to 50 percentage points less likely to remain in operation until 2010 than control post offices over 50 km from the railroad. Given the historically close correspondence between the location of post offices and the location of towns, these results provide evidence that the railroads generated an agglomeration shadow - towns that were almost connected to the railroad were more likely to decline than those that remained isolated. I show that the short distances over which the forces of agglomeration act in this setting mean that it is difficult to detect the agglomerative effects of railroad construction using alternative methodologies based on census population data.

Work in Progress

Causal Machine Learning for Human Lives: Survival Effects of Kidney Transplants
With Nikhil Agarwal, Yusuke Narita, and Paulo Somaini