Xing Li
Job Market Candidate

Stanford University
Department of Economics
579 Serra Mall
Stanford, CA 94305

Curriculum Vitae

Industrial Organization, Econometrics, Economics of Innovation

Expected Graduation Date:
June, 2016

Thesis Committee:

Tim Bresnahan (Primary):

Wes Hartmann:

Han Hong:

Petra Moser:


Paying Incumbents and Customers to Enter an Industry: Buying Downloads (with Tim Bresnahan and Pai-Ling Yin)
Success breeds success in many mass-market industries, as well known products gain further consumer acceptance because of their visibility. However, new products must struggle to gain consumer's scarce attention and initiate that virtuous cycle. The newest mass-market industry, mobile apps, has these features. Success among apps is highly concentrated, in part because the "top apps lists" recommend apps based on past success as measured by downloads. Consequently, in order to introduce themselves to users, new app developers attempt to gain a position on the "top app lists" by "buying downloads", i.e., paying a user to download the app onto her device. We leverage a private dataset of one platform for buying downloads and identify the return from this investment. $100 invested will improve the ranking by 2.2%. To capture the rationale of investment in buying downloads as to enter the virtuous cycle, we further build a model that accommodates (1) the impact of buying downloads on top list rank, (2) optimal investment in buying downloads, (3) an empirical distinction between organic virtuous cycle diffusion and spurious diffusion caused by buying downloads, and (4) a rich set of app-specific heterogeneities. We quantify the app-specific structural coefficients, including the value per organic download, top-list effect, word-of-mouth effect and market size, by estimating the model using time-series ranking positions of 2,755 free apps. We find the median value of one organic download is 65% of the cost of buying one download, implying a huge marginal cost of buying downloads. App developers lose money during the initial days after release and before taking off. These coefficients are correlated with ex-post quality, measured by users' rating but uncorrelated with ex-ante categories of apps, suggesting that developers face a great deal of ex-ante uncertainty about the outcome for their apps when they enter the market. A model based measure of values for top-list appearance is proposed, and we find that value is associated with app quality and app categories.

Product Offerings and Product Line Length Dynamics

This paper provides a model that uses preference heterogeneity to rationalize the cross-sectional and intertemporal variation in a firm's product proliferation strategies. Product-line dynamics arise from shocks to preference heterogeneity. For example, in the potato chip category I study, consumer concerns over fat levels in foods created two desirable alternatives (low fat and zero fat) for each flavor. On the supply side, firms learn about these changing tastes and adapt product lines accordingly. For tractability, the heterogeneity in preference is captured within the nesting parameter in an aggregate nested logit demand model. I find greater preference heterogeneity for smaller packages of chips and for markets with more demographic diversity. The dominant firm in the market bases its decisions primarily on past experience in the market, with the latest preference shocks representing only 30% of the influence in product-line decisions. Gross margins are increased by 5% if firms have perfect information about preference diversity. Costs for product line maintenance constitute about 2% of total revenue. Sunk costs incurred when expanding the product line are estimated to be four times the per-product fixed cost, thereby limiting the flexibility of product-line adjustment. The probability of line length adjustment grows from 70% to 90% under a smooth cost structure.

Dead Poets' Property - How Does Copyright Influence the Price of Content? (with Megan MacGarvie and Petra Moser, R&R: The RAND Journal of Economics)
This paper exploits a differential increase in copyright under the U.K. Copyright Act of 1814 - in favor of books by dead authors - to examine whether policies that strengthen copyrights increase the price of information goods. Contrary to existing results, difference-in-differences analyses, which compare changes in price after 1814 for books by dead and living authors, reveal a substantial increase in price. By comparison, placebo regressions for books by dead authors that did not benefit from stronger copyrights indicate no differential increase. Historical evidence suggests that intertemporal price discrimination may be the mechanism by which stronger copyrights increase price.

Managerial Ownership and Firm Performance: Evidence from the 2003 Tax Cut (with Stephen Teng Sun)
We identify the causal effect of managerial ownership on firm performance, exploiting the 2003 Dividend Tax Cut as a quasi-natural experiment, which increased the net-of-tax effective managerial ownership. Consistent with predictions from agency theory, we find a significant and hump-shaped improvement in firm performance measured by Tobin's Q with respect to the level of managerial ownership due to the tax cut. Moreover, the increase in performance is more pronounced for firms in which agency problems are relatively more severe as well as firms under weak alternative governance mechanisms, further demonstrating a rise in the managerial ownership incentive being the underlying channel for our results.

Work In Progress

Car Efficiency Standards In China and Their Industrial Implications (with Yang Shu and Yang Yu)

Target Setting in Tournaments: Theory and Evidence from China (with Chong Liu, Xi Weng and Lian Zhou)