About

Thomas N. Hubbard is the Elinor and H. Wendell Hobbs Professor of Management and a Professor of Strategy at the Kellogg School of Management, Northwestern University. He has been a faculty member at Kellogg since 2005 and served as Senior Associate Dean for Strategic Initiatives from 2012 to 2015. Prior to his tenure at Kellogg, he was a professor at the University of Chicago GSB and UCLA, and he also served as a visiting professor at Columbia GSB during 2004-2005. Hubbard's research interests primarily concern how information problems influence the organization of firms and markets, and consequently, the structure of industries. His work has been published in top-ranked journals such as the American Economic Review, the Quarterly Journal of Economics, and the Rand Journal of Economics. He is also a research associate at the National Bureau of Economic Research. His academic background includes a PhD in Economics from Stanford University and a BA with High Honors in Economics from Princeton University.

Research topics

• Microeconomics
• Economics
• Engineering
• Market economy
• Aerospace engineering
• Marketing
• Commerce
• Physics
• Geography
• Natural resource economics
• Industrial organization
• Business

Selected publications

• Industry Structure, Segmentation, and Quality Competition in the U.S. Hotel Industry*

  Journal of Industrial Economics · 2023 · 4 citations

  Senior authorCorresponding
  • Business
  • Marketing
  • Industrial organization

  We examine how quality competition affects the relationship between market size and industry structure at the product level using evidence from the U.S. hotel industry. Starting in the early 1980s, quality competition for business travelers became more based on variable and less on fixed costs, and became less scale intensive. Since then, market size increases have been met by more, but smaller, hotels in business travel destinations but continued to be met by larger hotels in personal travel destinations. Our results illustrate how the way consumers benefit from increases in market size depends on how firms compete.

  PublisherOA PDFDOI

• The Economics of Radiator Springs: Dynamics, Sunk Costs, and Spatial Demand Shifts

  The Journal of Law and Economics · 2022 · 1 citations

  Senior authorCorresponding
  • Economics
  • Natural resource economics
  • Microeconomics

  Harold Demsetz famously emphasized that the relationship between industry structure and competition runs in both directions. Competition thus can lead industries to adjust to demand increases through larger firms rather than more firms. We investigate this insight empirically by examining how local gasoline retail markets adjusted to interstate highway openings. We find that when a new highway was close to a previous route, average producer size increased beginning 1 year before it opened. If instead the interstate substantially displaced traffic, the number of producers increased beginning only after it opened. These results empirically illustrate how the role of entry in the competitive process depends on whether entry makes product space more crowded.

  PublisherDOI

• Industry structure, segmentation and competition in the U.S. hotel industry

  RePEc: Research Papers in Economics · 2020-01-01

  articleOpen accessSenior author

  This paper investigates how increases in concentration can be interrupted or reversed by changes in how firms compete on quality. We examine the U.S. hotel industry during the past half century. We document that starting in the early 1980s, quality competition came more in the form of costs that vary with hotel size, and less in the form of costs that are fixed with hotel size, particularly for business travelers. We then show that, consistent with Sutton (1991), industry structure has evolved differently since then in areas that are business travel versus personal travel destinations. Demand increases have been associated with more, but smaller, hotels in business travel destinations. In contrast, the growth in the number of hotels is much smaller, and the growth in average hotel size is much greater, in personal travel destinations. We provide evidence that this change reflects the emergence of two new classes of hotels - limited service and all-suites hotels - that did not exist before the early 1980s. These entrants - many of which had high quality rooms but which had limited out-of-room amenities - had a narrower competitive impact on other hotels than did the entrants of the 1960s and 1970s, which competed more on out-of-the-room amenities, and this led the industry structure to evolve differently.

  OA PDF

• Industry Structure, Segmentation, and Competition in the U.S. Hotel Industry

  National Bureau of Economic Research · 2019-12-01 · 3 citations

  reportSenior author

  This paper investigates how increases in concentration can be interrupted or reversed by changes in how firms compete on quality.We examine the U.S. hotel industry during the past half century.We document that starting in the early 1980s, quality competition came more in the form of costs that vary with hotel size, and less in the form of costs that are fixed with hotel size, particularly for business travelers.We then show that, consistent with Sutton (1991), industry structure has evolved differently since then in areas that are business travel versus personal travel destinations.Demand increases have been associated with more, but smaller, hotels in business travel destinations.In contrast, the growth in the number of hotels is much smaller, and the growth in average hotel size is much greater, in personal travel destinations.We provide evidence that this change reflects the emergence of two new classes of hotels -limited service and all-suites hotels -that did not exist before the early 1980s.These entrants -many of which had high quality rooms but which had limited out-of-room amenities -had a narrower competitive impact on other hotels than did the entrants of the 1960s and 1970s, which competed more on out-of-the-room amenities, and this led the industry structure to evolve differently.

  PublisherDOI

• When Demand Increases Cause Shakeouts

  American Economic Journal Microeconomics · 2019-10-28 · 7 citations

  articleOpen access1st authorCorresponding

  Standard models that guide competition policy imply that demand increases should lead to more, not fewer firms. However, Sutton’s (1991) model shows that demand increases instead can lead to shakeouts if non-price competition takes the form of fixed investments. We investigate this effect in the 1960s–1980s hotel and motel industry, where quality competition arose through investments in swimming pools. We show that demand increases associated with highway openings led to fewer firms, particularly in warm places. We do not find this effect in other industries that serve travelers, gasoline retailing, and restaurants, where quality competition does not involve fixed investments. (JEL G34, K21, L13, L15, L40, L83)

  PublisherOA PDFDOI

• An empirical examination of moral hazard in the vehicle inspection market

  2018-12-20 · 14 citations

  book-chapter1st authorCorresponding

  Buyers in auto repair, health care, and other “diagnosis-cure” markets generally are unable to determine their condition. They can neither perfectly observe nor costlessly verify sellers’ actions or recommendations. A moral hazard problem arises because sellers have an incentive to misrepresent buyers’ condition to increase demand for the treatments they supply. Controlling for differences in vehicles’ characteristics and operating condition, inspection failure rates are more than twice as high in inspections conducted by state officials as in those completed at private firms. By state law, vehicles must receive emission inspections in order to be registered in California. The state licenses individuals to complete inspections and perform emission-related repairs. Inspectors are employed by private firms, which are also licensed by the state. Inspection prices are unregulated. Firms choose their organizational characteristics, whether to supply inspections and prices in order to maximize profits.

  PublisherDOI

• Firm Boundaries (Empirical Studies)

  The New Palgrave Dictionary of Economics · 2018-01-01 · 1 citations

  book-chapter1st authorCorresponding

  The empirical literature on the determinants of firms’ boundaries examines relationships between firms’ boundaries and asset specificity, especially how relationship-specific investments create ‘hold-up’ problems that increase the costs of competitive contracting; relationships between firms’ boundaries and the contracting environment, reflecting the role of incomplete contracting in the theoretical literature and the extent to which firms subcontract downstream stages rather than input procurement; and how firms’ boundaries vary with ‘job design’. This literature has established that asset specificity is empirically relevant for understanding integration decisions, and that relationships between subcontracting decisions, the contracting environment, and the division of labour are subtle.

  PublisherDOI

• Earnings Inequality and Coordination Costs: Evidence from US Law Firms

  The Journal of Law Economics and Organization · 2018-02-21 · 7 citations

  articleSenior author

  Using evidence from confidential Census data on US law offices, we study the extent to decreases in coordination costs are responsible increases in earnings inequality among lawyers. We show that inequality increased substantially between 1977 and 1992, and that partner-associate ratios changed in ways consistent with the hypothesis that coordination costs fell during this period. We then propose a “hierarchical production function” and estimate its parameters in each period. We find that coordination costs fell over time, so that hiring one’s first associate leveraged a partner’s skill by about 30% more in 1992 than 1977. We find also that changes in lawyers’ hierarchical organization account for about two-third of the increase in earnings inequality among lawyers in the upper tail, but much less of the increase between lawyers in the upper tail and other lawyers. New organizational efficiencies potentially explain increases in inequality among lawyers, especially among the highest earners.

  PublisherDOI

• When Demand Increases Cause Shakeouts

  National Bureau of Economic Research · 2017-07-01

  preprintOpen access1st authorCorresponding

  Standard economic models that guide competition policy imply that demand increases should lead to more, not fewer firms. However, This paper provides empirical evidence of this effect in the 1960s-1980s hotel and motel industry, an industry where quality competition increasingly took the form of whether firms supplied outdoor recreational amenities such as swimming pools. We find that openings of new Interstate Highways are associated with increases in hotel employment, but decreases in the number of firms, in local areas. We further find that while highway construction is associated with increases in hotel employment in both warm and cold places, it only leads to fewer firms in warm places (where outdoor amenities were more valued by consumers). Finally, we find no evidence of this effect in other industries that serve highway travelers, gasoline retailing or restaurants, where quality competition is either less important or quality is supplied more through variable costs. We discuss the implications of these results for competition policy, and how they highlight the importance and challenge of distinguishing between "natural" and "market-power-driven" increases in concentration.

  PublisherOA PDFDOI

• BHP Billiton: Mining Potash

  Kellogg School of Management Cases · 2017-01-20

  article1st authorCorresponding

  BHP, an Australian mining company, threatens to enter the potash mining industry through a hostile takeover of the Potash Corporation of Saskatchewan. Complicating matters is the fact that the Canadian potash industry has operated as a legal cartel in which the provincial government has a stake. This case enables students to assess BHP's strategy in terms of value creation and value capture, how it relates to its existing investments in the industry, and the risks and rewards of alternatives to BHP's strategy -How cartels help firms capture value in an industry and how the threat of entry can limit the cartel members' ability to do so -How firms outside a cartel can capture value though a competitive threat -The range of strategies available to incumbents and

  PublisherDOI

Frequent coauthors

• Luis Garicano

  New York University

  61 shared

• George P. Baker

  52 shared

• Jeffrey R. Campbell

  University of Notre Dame

  12 shared

• Michael J. Mazzeo

  Hunter College

  7 shared

• R. Andrew Butters

  Indiana University

  3 shared

• Christopher John Ody

  2 shared

• Helen Kellogg

  2 shared

• G. Raghavan

  Defence Institute of Advanced Technology

  1 shared

Awards & honors

• Chair's Core Course Teaching Award, 2023-24
• Oliver E. Williamson Award for Best Paper in Law, Economics,…
• Best Professor Award, Kellogg-HKUST EMBA Program