Many retail platforms have recently expanded their advertising businesses, featuring sponsored products in search results. While sponsored product advertising can enable sellers to reveal information, it can also worsen search results and raise prices. Using data on Amazon searches, purchases, and advertising auction bids, I estimate a model incorporating consumers, sellers, and the platform to evaluate the welfare effects. Counterfactual analysis suggests that eliminating advertising could benefit consumers and sellers under a fixed commission rate, but would harm them if Amazon adjusts the rate optimally. Advertising tends to be more beneficial in markets with newer products and greater product differentiation.

Concerned about the low academic ability of public school teachers, in the 1990s and 2000s, some states increased licensing stringency to weed out candidates with low academic ability, while others decreased restrictions in hopes of attracting more competitive candidates. We offer a theoretical model justifying both reactions. Using data from 1991–2007 on licensing requirements and teacher characteristics, we find that stricter licensing requirements, specially those emphasizing academic coursework, increased the left tail of the distribution of college selectivity among secondary school teachers. We find no evidence of disparate effects for high-minority or high-poverty school districts.