Work in Progress
Work in Progress
"Environmental Policy and Strategic Abatement under Scale Economies" (with Yu Pang), invited R&R, minor revisions at Energy Economics
Regulating pollution in a context of monopolistic competition involves a trade-off between exploiting scale economies and reducing environmental damage. This paper extends the Dixit-Stiglitz-Krugman model by introducing pollution as a by-product of production and firms’ potential engagement in pollution abatement. Rather than relying on the conventional assumption that firms act non-strategically, we consider that firms conjecture that their strategies influence other firms’ strategies and payoffs. Our method enhances the consistency of the laissez-faire equilibrium results with existing empirical evidence. We then characterize the condition under which it is socially optimal to abate pollution and suggest that a social planner may choose to restrict entry only if firms behave strategically. Furthermore, environmental regulations do not impede market entry, as the number of firms remains unaffected under an intensity standard and may even increase under an emissions tax. Our simulations illustrates that compared with the optimal tax, the optimal standard leads to a better environmental performance for firms, but it is only socially preferred in concentrated markets with substantial scale economies.
In this paper, we experimentally analyze the incentives to avoid a collective catastrophe when subjects face uncertainty about the exact time at which the loss may occur. We study three versions of a Collective Risk Dilemma: (i) a benchmark scenario where subjects know the ending period by which they have to complete collective efforts to avoid a sure loss of a big portion of their remaining assets; (ii) a risky scenario where subjects do not know the exact ending period, but they are at least aware of its probability distribution; and (iii) an ambiguous scenario where subjects do not know the exact ending period nor the probability distribution. Both uncertainty treatments result in significantly larger efforts than those found under certainty. However, these additional contributions may not be enough to avoid the collective disaster.
"Consumer Choices in the Circular Transition: Exploring Preferences in a Digital Secondhand Era" (with Claudia Ranocchia, Sandra Rousseau and Francisco J. André), submitted
This paper investigates consumption decision-making processes on secondhand digital platforms. Through a Discrete Choice Experiment (DCE), we analyze the factors that influence purchase choices, focusing on the interactions between different provider types, product attributes, and consumers’ preferences. This approach allows us to delve into two current trends aimed at extending the lifespan and utilization of underutilized goods: re-commerce (reuse) and digitalization. Thus, our research sheds some light on the current rapid expansion of online secondhand platforms and the ensuing range of trade options offered to individuals willing to access secondary exchanges. Once a niche, these platforms turn out to be a strategic asset for service providers facilitating peer-to-peer transactions, as well as for traditional businesses. Many firms are indeed implementing systems to supply secondhand goods by launching their resale platforms. Based on this evidence, we investigate the role of consumers’ preferences in prompting firms’ strategic decisions to enter the secondary market. We detect a brand effect in the user evaluation when opting for secondhand buying either from a peer or an incumbent. In addition, we find that consumers value uncertainty-reducing features such as an extended warranty and previous knowledge of the seller’s reputation.
"Peer-to-Peer Sharing, Price Competition, and Consumers' Awareness" (with Francisco J. André, Claudia Ranocchia and Sandra Rousseau), in progress
In this paper, we present a model of product differentiation where two firms can offer either a standard or a circular version of a product. The latter refers to a version of the good that can be shared in a peer-to-peer sharing platform. Consumers are heterogeneous concerning the amount of time they use the goods for themselves and can end up being either consumers of the standard product, or prosumers or users of the circular product. We characterize the equilibrium for given degree of maturity of the sharing market, maximum consumers’ use intensity and marginal cost differences between the two varieties. Key to our results is whether consumers care for circularity. In the absence of environmental awareness, there is very little space for the circular product when coexisting with a standard variety: the circular good is more expensive, it has a lower market share, and results in lower, albeit positive, profits. Things change dramatically if consumers experience bad conscience when purchasing the standard version: the circular product continues to be more expensive, but it may beat the standard one in market share and profits. This can even result in the two firms offering the circular variety in equilibrium. Our findings suggest that consumers’ environmental awareness can be a key driver for the transition towards the circular economy.
"Economic Decisions with Uncertain Consequences, Self-Deception, and Strategic Pricing" (with Adrián Caballero-Castillejo), in progress
In this paper, we present a model of consumption in which individuals are uncertain about some characteristics of the products that may affect their future utility. In contrast with traditional models of decision theory, we consider the possibility that individuals form and keep distorted beliefs in order to alleviate their concern and anxiety about their future. We explore how this behavior may alter the pricing decisions of a monopolistic firm, which could take advantage from belief distortion.