Contact Information
Department of Economics
Northwestern University
2211 Campus Drive
Evanston, IL 60208
Phone: 224-241-4936
mescudero@u.northwestern.edu
Education
Ph.D., Economics, Northwestern University, 2019 (expected)
MA, Economics, Northwestern University, 2015
MA, Economics, Universidad Torcuato Di Tella, 2013
BA, Economics, Universidad Nacional de Córdoba, 2010.
Fields of Specialization
Industrial Organization (primary)
Applied Microeconomics (secondary)
Curriculum Vitae
Job Market Paper
“Rule-of-thumb Pricing: Retail Cannabis in Washington State”
Download Job Market Paper (PDF)
Conventional methods in industrial organization assume that firms are strategically sophisticated and set prices as best responses to their competitive environment. In this paper, I use a detailed dataset of both retail and wholesale prices from the new cannabis industry in Washington state to show that firms are instead widely using fixed markup rules. I show that almost half of all units sold in this market have prices that can be explained by simple rules of thumb, such as setting a 50% markup over price. Moreover, these same markup rules are used for a diverse set of products and in many different competitive environments. I document a robust convergence process across all products toward this 50% markup rule. While this strategy adheres to the conventional wisdom in the retail industry, these findings cast doubt on the idea that firms learn to price to exploit the specific differences across products and markets. Using a discrete choice model of demand for differentiated cannabis products, I find that this rule-of-thumb markup is not consistent with optimal pricing behavior, and firms capture only about 75% of the variable profits they would get if they were to maximize profits. These results indicate that the widespread use of uniform pricing rules by multiproduct oligopolists can lead to non-negligible losses in terms of foregone profits.
Other Research Projects
“Discrete Choice with Advice: An Empirical Model of Fiduciary Duty” joint with Vivek Bhattacharya & Gaston Illanes (Northwestern University)
This paper develops a new structural model of discrete choice with strategic advice in which a price-setting firm offers a set of relatively complex products for sale. Given these products’ complexity, we assume markets in which naive consumers are poorly informed about their preferences and the satisfaction they might get from each alternative available in the market. By means of providing potentially-distorted advice regarding the convenience of each product to each customer, firms take on an extra role that allows them to potentially extract more surplus. Settings in which agents are poorly informed about their preferences for complex products are common: patients may need advice from doctors to understand the efficacy and necessity of procedures, car salesmen may push sophisticated features to increase potential buyers’ expenditure, or firms may engage in advertising to persuade consumers of the benefits of acquiring such products. In this particular project, we adapt our general setup to the specifics of the market for retirement investment products and estimate this model in order to understand the mechanisms through which regulatory restrictions such as fiduciary duty operate.
“Sampling and Upstream Linkages in the Legal Cannabis Industry”
This paper focuses on the early stages of Washington State’s new cannabis market to understand the way in which upstream markets develop when the quality of their participants is unknown. I analyze the importance of product samples as a means to establish profitable relationships between manufacturers and retailers. In this context, sampling activities can be understood as a signaling device from which retailers are able to learn and update their priors regarding the idiosyncratic quality of a given manufacturer. Using data from this market, I am able to document that manufacturers do indeed use product samples as a means to approach new retailers, and that these samples substantially increase the probability of subsequent transactions that are larger in monetary value and longer lasting in time. Despite the relevance suggested by these findings, sampling activities are not homogeneous across all manufacturers, with top-sellers producers also leading the rankings in terms of intensity of sampling behavior.
“Devaluations and Market Power” joint with Gabriela Cugat (Northwestern University)
This paper studies the impact of macroeconomic episodes associated with large price distortions on market outcomes such as price dispersion, industries’ concentration levels, and market power. In environments characterized by frequent and unpredictable changes in prices, consumers might find it difficult to keep up with distortions in the structure of relative prices. This is frequently the case for small open economies exposed to a large degree of exchange rate volatility, leading to asymmetric price changes in different types of goods. If learning about relative prices is costly to consumers, then some firms might find it profitable to adjust prices in a different way from what it would be expected if consumers were informed about the impact of the currency depreciation on each firms’ cost structure. We explore these ideas by looking at the effects of the Argentine currency depreciation of early 2002 on prices and concentration levels in markets for packaged consumer goods.
Teaching
Teaching fields: Industrial Organization, Microeconomics, Experimental Economics (Teaching Evaluations)
References
Prof. Robert Porter (Committee Chair)
Prof. Gastón Illanes
Prof. Vivek Bhattacharya
Prof. Scott Ogawa (Teaching Reference)