Three Essays in Applied Microeconomics

In this thesis, I investigate economic and policy implications of individual choice decisions, including consumers’ choices among differentiated products and households’ decisions on intra-household resource allocations. In the first chapter, I develop a consumer demand model for US retail banking services in which consumers have preference over the geographical convenience of their banks’ networks. The purpose of the study is to identify consumers’ taste for branch network convenience in the US banking industry and to assess the effect of this demand motive on bank revenues, consumer surplus, and market structure. I show that consumers value the geographical convenience of their bank branch network to a large extent. Specifically, a branch that is one mile closer is equivalent to a branch with a 0.4 percent higher annual interest rate. Furthermore, consumers value proximity of the branch network to both their residence and workplace. The counterfactual experiment shows that banks with a larger number of branches enjoy greater network benefits in terms of revenue. Meanwhile, consumers benefit from the reduction in their expected travel distance by choosing depository institutions with large-scale networks. The second chapter examines how parents adjust bride-prices and land divisions to compensate their sons for differences in their schooling expenditures in rural China. The model is tested using data from a unique household interview survey carried out in Hebei Province. The main estimate implies that when a son receives one yuan less in schooling investment than his brother, he will obtain 0.7 yuan more in observable marital and post-marital transfers as partial compensation. This marginal compensation estimate is quantitatively larger than any comparable estimate using North American data, suggesting that the unitary model is a useful model of resource allocation for sons in traditional agricultural families. As a supplement to Chapter 2, Chapter 3 investigates matchmakers’ negotiation role in rural Chinese marriages and its impact on marital transfer from the parents to the children at the time of marriage. Using a unique household-level dataset collected in Hebei province, I find that a negotiator’s involvement can raise the total marital transfer by 20 percent, which supports my public goods story.Ph