Job Market Paper:
Vertical Integration and Technology Adoption
Abstract: How does the presence of a cost-reducing technology affect the integration incentives of vertically structured firms? In this paper, I develop a duopoly model where firms are making both integration and technology adoption decisions, and I show that even in a purely symmetric set-up, an asymmetric integration equilibrium in which only one firm chooses to integrate can arise, without synergies or foreclosure incentives. This paper makes three further contributions. First, I study the timing of technology adoption in an asymmetric set-up and show that the effect of integration on technology adoption by one firm is significantly influenced by the vertical structure of the other firm. Second, I show that integration is profitable whenever it allows the firm to adopt the technology faster and to become a profitable technology leader for a longer period of time. Third, I show that integration generally reduces consumer surplus, but when considering total surplus, \textit{laissez-faire} outcomes are often maximizing societal welfare.
Working Papers:
Technology Adoption under Asymmetric Market Structure (2019, Trinity Economic Papers, tep0819)
Abstract: This paper examines the impact of vertical integration on the timing of adoption of a cost-reducing technology. Combining the technology adoption and vertical relations literatures in a simple duopoly model, I compare the technology adoption patterns under different vertical structures. In particular, the study of the asymmetric case, where one firm is integrated while the other one is separated, allows me to make three main contributions. First, I show that the effect of vertical integration on technology adoption by one firm is influenced significantly by the vertical structure of the other firm. Second, I consider the two main types of technology adoption games under an asymmetric set-up and broaden the understanding of the underlying mechanisms for the solving of such games. Finally, I develop an industrial policy aimed at encouraging firms to adopt the technology at the socially optimal timing.
Vertical Integration in the presence of a Cost-Reducing Technology (2019, Trinity Economic Papers, tep0919)
Abstract: This paper examines vertical integration incentives in the presence of a cost-reducing technology. Combining the technology adoption and vertical merger literatures in a simple duopoly model, I show that asymmetric integration can occur even in a purely symmetric set-up, without synergies or foreclosure incentives. This paper makes three further contributions. First, in this model, integration is profitable whenever it allows the firm to adopt the technology faster and to become a profitable technology leader for a longer period of time. Second, comparing preemption and precommitment game, I show that the asymmetric equilibrium may exist under both types of game. Third, vertical integration generally reduces consumers’ surplus, but often competition authorities should not forbid such vertical mergers if they seek to maximize social welfare.
Work in Progress:
Retail Apocalypse Now: A Theory of Predatory Investment
Abstract: The recent dramatic increase of retailer closure raised serious questions about the responsibility of major Internet retailers, such as Amazon.com, in this so-called "Retail Apocalypse". This paper develops a theoretical framework in order to understand the impact of the competition of heterogeneous retailers (internet versus brick & mortars) on market structure, consumer surplus and societal welfare. The introduction of internet retailing radically changed shopping habits, and these new consumption patterns directly affect firms' strategies and incentives. In this context, I develop a theory of predatory investment, in which an online retailer invests aggressively in delivery services in order to exclude a physical competitor from the market.
Award: My research is supported by the Grattan Scholarship of the Department of Economics, Trinity College Dublin.
Seminars and Presentations: