1. Dynamic Persuasion with Outside Information (with Adrien Vigier and Jacopo Bizzotto). AEJ: Microeconomics. 2021.
[previous working paper version] [python code for simulation]2. Who Acquires Information in Dealer Markets? (with Adrien Vigier). American Economic Review. 2020.
[working paper version] [feature on the Oxford Business Law Blog] [matlab code for simulations]3. Testing, Disclosure and Approval (with Adrien Vigier and Jacopo Bizzotto). Journal of Economic Theory. 2020.
[working paper version]4. Learning about Analysts (with Adrien Vigier). Journal of Economic Theory. 2019.
[python code for simulations]Efficient Grid Search to Solve Static Games with Private Information (with Jakub Kastl and Eric Richert). Kilts Center at Chicago Booth Marketing Data Center Paper.
We introduce a new method for computing equilibria in a large class of games, including auctions, nonlinear pricing and optimal contracting. First, we observe that the objective function, e.g. the bid function in an auction, can often be approximated arbitrarily well by a piecewise constant function. Second, we formulate a sequential program to find the global solution within this class of strategies. This presents a major advantage over other solution methods which rely on local optimization. A Monte Carlo study of asymmetric auctions and nonlinear pricing games suggests that the method is stable, fast, and easily extends to complex games that are difficult to solve with existing methods. We then examine two applications to highway procurement auctions and show that our method leads to increases in accuracy and speed, and has fewer required model restrictions. Finally, we use our method to shed light on recent concerns of shrinkflation. We study the breakfast cereal market and compute globally incentive-compatible counterfactual package size and price adjustments following a cost shock.
Design and Sale of Market Segments (with Jacopo Bizzotto and Stefan Terstiege).
A platform segments a market and runs auctions in which firms bid for the access to market segments. Segmenting the market more finely allows firms to extract more profits from consumers but can decrease competition in the auctions. We first characterize extremal markets: markets that cannot be segmented further without reducing auction revenue. Second, we employ this result to characterize optimal segmentations in a Hotelling environment. Our results give an insight into the welfare losses and consumer surpluses resulting from for-profit market segmentation.
The Value of Primary Dealer Status in Treasury Auctions (with Jakub Kastl and Martin Gonzalez-Eiras).
We propose a dynamic model of bidding in treasury auctions, in which primary dealers must satisfy minimum winning requirements to retain their dealer status. Data from Argentina between 1996 and 2001, a period in which primary dealer requirements were particularly important, shows dealers bid more aggressively the greater their shortfalls in meeting the requirements, thus sacrificing short-term profits to retain their status. We then leverage this trade-off and develop a method for estimating the value of being a primary dealer. We estimate that the gain from being a dealer is of the same order of magnitude as short-term profits. Dealers who bid optimally retain dealer status with high probability, but may have to sacrifice a significant amount of short-term profits to do so. Finally, we use our model to perform a counterfactual exercise which illustrates how the central bank can use minimum winning requirements in order to reduce dealers' rents.
Competition in Selling Information
We study a setting where two experts have private information about the value of an investment, and report their information coarsely to a set of investors through recommendations. The investors have different priors and therefore different information preferences, leading to horizontal competition between experts who must choose to whom they cater their recommendations. When investors cannot crosscheck by acquiring both recommendations, both experts provide the recommendation that is optimal for the median investor. However, when crosschecking is allowed, experts may differentiate and the degree of differentiation is increasing in the dispersion of investor types. Differentiation is detrimental to investor welfare, and a single monopoly expert may provide higher investor welfare than a competitive duopoly.