Sergei Koulayev

Economist, Consumer Financial Protection Bureau
Education: PhD in Economics, Columbia University, 2010; MA in Economics, New Economic School, 2003; 

Fields: industrial organization; applied microeconomics. Research interests: household finance; empirical modeling of search; antitrust economics;  

Contact: Google Scholar profile

Completed research

with Alexei Alexandrov; CFPB Working Paper No. 2017-01
We document and analyze price dispersion in the U.S. mortgage market. We find significant price dispersion in posted prices in the retail channel: for example, a consumer with a prime credit score and with a 20% down payment might see a spread in interest rates of 50 basis points, controlling for all relevant consumer/property characteristics, including discount points. We also show, from survey evidence, that close to half of consumers did not shop before taking out a mortgage, and worse, many consumers do not seem to realize that there is price dispersion. Using a proprietary dataset of lenders' ratesheets, we estimate an equilibrium model of costly search where a share of consumers holds incorrect beliefs regarding price dispersion. Whereas high search costs is one reason behind the lack of search, we show that non-price preferences also play an important role in preventing consumers from searching more; and so an effective policy would target both. In one of our counterfactuals, we show that eliminating non-price preferences results in savings of about $9 billion dollars a year.

with Jun Li and Serguei Netessine, forthcoming in Management Science
We study price competition in markets with a large number (in magnitude of hundreds or thousands) of potential competitors. We address two methodological challenges: simultaneity bias and high dimensionality. Simultaneity bias arises from joint determination of prices in competitive markets. We propose a new instrumental variable approach to address simultaneity bias in high dimensions. The novelty of the idea is to exploit online search and clickstream data to uncover customer preferences at a granular level, with sufficient variations both over time and across competitors in order to obtain valid instruments at a large scale. We then develop a methodology to identify relevant competitors in high dimensions combining the instrumental variable approach with high dimensional l-1 norm regularization. We apply this data-driven approach to study the patterns of hotel price competition in the New York City market. We also show that the competitive responses identified through our method can help hoteliers proactively manage their prices and promotions.

with Babur de los Santos, forthcoming in Marketing Science
Consumers engage in costly search to evaluate the increasing number of product options available from online retailers. Presenting the best alternatives at the beginning reduces search costs associated with a consumer finding the right product. We use rich data on consumer click-stream behavior from a major web-based hotel comparison platform to estimate a model of search and click. We propose a method of determining the ranking of search results that maximizes consumers' click-through rates (CTRs) based on partial information available to the platform at the time of the consumer request, its assessment of consumers' preferences, and the expected consumer type based on request parameters from the current visit. Accounting for these search refinement actions is important since the ranking and consumer search actions together shape the consideration set from which clicks are made. We find that predicted CTRs under our proposed ranking are almost double those of the platform's default ranking.

Marc Rysman, Scott Schuh and Joanna Stavins. RAND Journal of Economics, Volume 47, Issue 2, 2016
Motivated by recent policy intervention into payments markets, we develop and estimate a structural model of adoption and use of payment instruments by U.S. consumers. Our structural model differentiates between the adoption and use of payment instruments. We evaluate substitution among payment instruments and welfare implications. Cash is the most significant substitute to debit cards in retail settings, whereas checks are the most significant in bill-pay settings. Furthermore, low income consumers lose proportionally more than high income consumers when debit cards become more expensive, whereas the reverse is true when credit cards do.

with Emilia Simeonova and Niels Skipper, Health Economics, 2016. 
Earlier and more detailed version of the paper is NBER Working Paper 19496
Non-compliance with medication therapy remains an unsolved and expensive problem for healthcare systems around the world, yet we know little about the factors that affect a patient's decision to follow treatment recommendations. In particular, there is little evidence on the extent to which doctors can influence patient adherence behavior. This study uses a unique panel dataset comprising all prescription drug users, physicians, and all prescription drug sales in Denmark over 7 years to analyze the contributions of doctor-specific, patient-specific, and drug-specific factors to the adherence decision. We find that physicians exert substantial influence on patient compliance. Further, the quality of the match between a doctor and a patient accounts for a substantial portion of the variation in adherence outcomes. This suggests that the sorting of patients across doctors is an important mechanism that affects patient adherence beyond the effects of individual patient-specific and physician-specific factors.

We analyze and summarize the microeconomic theory of pass-through rates. We start by analyzing a monopolist firm in a standard Micro 101 frictionless market, then add more nuances to the model, including, but not limited to oligopolistic competition, menu costs, price points, endogenous quality and package size choices, and consumer search costs, and show how each of these factors affects pass-through rates.

with Emilia Simeonova, Health Systems 4, 55-63 (March 2015)
There are large and persistent racial differences in health-care utilization and outcomes for chronic conditions in the United States. The recent uptake in electronic health records in outpatient care settings could affect these disparities. This research shows that the adoption of electronic health records reduces the racial gap in outpatient care outcomes. We provide a basic conceptual framework that demonstrates some of the mechanisms that may drive these results.
RAND Journal of Economics, Volume 45, Issue 3, 2014. See also Online Appendix.
When consumers search for differentiated products, a given search decision can be explained either by low search cost or by low tastes for the set of products already found. We propose an identification strategy that allows to estimate the search cost distribution in the presence of unobserved tastes. The required data takes the form of conditional search decisions: observations of search actions combined with previously observed product displays. We develop an application using clickstream data from a hotel search platform. Estimates of price elasticity of demand in the search model differ from those in the static model, reflecting the bias due to endogeneity of search-generated choice sets.

Journal of Business and Economic Statistics, Volume 31, Issue 2, 2013.
In this paper, we revisit the problem of search with learning about the price distribution, as introduced by Rothschild (1974). For searchers with Dirichlet priors, we develop a novel characterization of the optimal search behavior. The advantage of our solution relative to the characterization based on reservation values is that it delivers closed form, easily computable formulas for the ex-ante purchase probabilities. Our result opens a possibility of introducing search with learning into the estimation discrete choice models of demand, when market shares data is available.

Work in progress

Estimating Marginal Effects of Government Sponsored Entities, with Alexei Alexandrov and Thomas Conkling

What are the determinants of patient behavior? Measuring the benefits of doctor choice: consequences for patient compliance, health care utilization and health outcomes. (with Emilia Simeonova and Niels Skipper; supported by a grant from the Danish Council for Independent Research). 

Information, Game Theory and Market Design, for Applied Economics Master's program, Univ of Maryland (2014,2015)

Market Organization and Public Policy, a graduate level class in Boston University. (2012)

Industrial Organization-Competition and Antitrust, an undergraduate course in Boston College (2012-2013) 

Introduction to Econometrics, an undergraduate course in Boston College (2012-2013)

Married to Emilia Simeonova
Nationality: Russian. Languages: Russian, English, conversational Bulgarian and some French  
Religion: Russian Orthodox
Interests: Photography, Sailing, Russian History, Nature

Some useful links:

Chronocontrol - a little program that forces to take breaks in a regular intervals. I do a lot of coding, and this program saves from aching eyes, headache, and useless work. 

Changedetection - a free web service that allows you to track changes on static webpages. I use this to track some 50 economists in whose work I'm interested in. This tool sends me email every time a new paper shows up on the web.