Assistant Professor - Economics, HEC Lausanne

Joao Montez is a business economist. He uses game theory to answer questions in competition policy and strategy, on topics such as pricing, bargaining, and supply-chains.

Before joining HEC Lausanne in 2016, he was an Assistant Professor at the London Business School. He completed his postgraduate education at Toulouse, Lausanne, and Columbia Universities. He is a CEPR Research Affiliate and an Associate Editor of the Journal of Industrial Economics.

His CV can be found here.

Research Interests: Microeconomics - Industrial Organization and Game Theory

Publications (click on title for direct access)

Downstream mergers and producer's capacity choice: why bake a larger pie when getting a smaller slice 
Rand Journal of Economics, winter 2007 Vol. 38 pp. 948-966

We study the effect of downstream horizontal mergers on the upstream producer's capacity choice. Contrary to conventional wisdom, we find a non-monotonic relationship: horizontal mergers induce a higher upstream capacity if the cost of capacity is low and a lower upstream capacity if this cost is high. We explain this result by decomposing the total effect into two competing effects: a change in hold-up and a change in bargaining erosion.

Inefficient sales delays by a durable-good monopoly facing a finite number of buyers
Rand Journal of Economics, fall 2013 Vol. 44 pp. 425-437 (working paper version and web appendix)

This article offers a new explanation for unscheduled price cuts and slow adoption of durable-goods. We study a standard durable-goods monopoly model with a finite number of buyers and show that this game can have multiple subgame perfect equilibria in addition to the Pacman outcome--including the Coase conjecture. Of particular interest is a class of equilibria where the seller first charges a high price, and only lowers that price once some---but not all---high-valuation buyers purchase. This price structure creates a war of attrition between those buyers, which delays market clearing and rationalizes unscheduled purchase and price cut dates.


Journal of Economic Theory, July 2014 vol. 152 pp. 249-265 (working paper version)

We study a model where a central player (the principal) bargains bilaterally with each of several players (the agents) to create and share the surplus of a coalitional game. It is known that, if the payments that were previously agreed (with each of the remaining agents) are renegotiated in case any bilateral negotiation permanently breaks down, then the Shapley value is the unique efficient and individual rational outcome consistent with bilateral Nash bargaining. Here we show that when instead the agreed payments cannot be renegotiated the outcome is also unique but it now coincides with the Nucleolus of an associated bankruptcy problem. We provide a strategic foundation for this outcome. Then we study how such renegotiation affects the principal's payoff according to the properties of the surplus function. We find, for example, that renegotiation benefits the principal when agents are complements and it hurts him when they are substitutes (situations with, respectively, increasing and decreasing marginal contributions

Previous version with additional applications, circulated as "The worth of binding agreements in one-to-many bargaining."

Rand Journal of Economics, fall 2015, vol. 46 pp. 650–670

In a make-to-stock vertical contracting setting with private contracts, when retailers do not observe each other's stocks before choosing their prices, an opportunism problem always exist in contract equilibria but public market-wide Resale Price Maintenance (RPM) can restore monopoly power. However other widely used tools which do not fall under antitrust scrutiny and require only private bilateral contracts, such as buyback contracts, also allow the producer to fully exercise his monopoly power. We conclude that a more lenient policy toward RPM is unlikely to affect the producer's ability to control opportunism.

Competitive intensity and its two-sided effect on the boundaries of firm performance  (with Mike Ryall and Francisco Ruiz-Aliseda) download here:

Management Science, June 2018 vol. 64, pp. 2716–2733
We contribute to the "value capture'' stream in strategy, which uses cooperative games to study firm performance under competition. We are motivated by the idea that there are two sides to competition -- a good side (competition for the firm) and a bad side (competition for the firm's transaction partners). We develop three increasingly general measures of competitive intensity and demonstrate that intensity on the good side places a minimum bound on the value captured by the firm, while that on the bad side imposes a maximum. The core, a standard solution concept appropriate for productive deals in free markets, associates each agent with an interval of payoffs. Because our bounds contain the core and require less information to compute, they may be interpreted as alternative solutions consistent with boundedly-rational agents. They also provide empirically testable implications and normative guidance in settings where the computation of core intervals is not practical.

Rand Journal of Economics, forthcoming Online Appendix
We study bilateral bargaining between several buyers and sellers in a framework that allows both sides, in case of a bilateral disagreement, flexibility to adjust trade with each of their other trading partners and receive the gross benefit generated by each adjustment. A larger buyer pays a higher per unit price when buyers' bargaining power in bilateral negotiations is sufficiently low, and a lower price otherwise. An analogous result holds for sellers. These predictions, and the implications of different technologies, are explained by the fact that size is a source of mutual dependency and not an unequivocal source of power.

Working papers


All-pay oligopolies: price competition with unobservable inventory choices (with Nicolas Schutz)

Submitted. CEPR working paper version here and Online Appendix

We study a class of games where stores source unobservable inventories in advance, and then simultaneously set prices. Our framework allows for firm asymmetries, heterogeneous consumer tastes, endogenous consumer information through advertising, and salvage values for unsold units. The payoff structure relates to a complete-information all-pay contest with outside options, non-monotonic winning and losing functions, and conditional investments. In the generically unique equilibrium, stores randomize their price choice and, conditional on that choice, serve all their targeted demand---thus, some inventories may remain unsold. As inventory costs become fully recoverable, the equilibrium price distribution converges to an equilibrium of the associated Bertrand game (where firms first choose prices and then produce to order). This suggests that with production in advance, the choice between a Cournot analysis and a Bertrand-type analysis, as properly generalized in this paper, should depend on whether or not stores observe rivals' inventories before setting prices.

Work in progress


Generic entry in the pharmaceutical market: why can less be better (with Annabelle Marxen) draft on request

This paper models an economy with one incumbent firm producing a patent protected drug and two potential entrants of lower quality generics. After patent expiry, the generic producers play a fixed cost entry game in which entry by both is unprofitable due to intense price competition -- therefore each enters with a low (high) probability if entry costs are high (low). Early entry agreements allow one generic producer to enter just before patent expiry, thus foreclosing the market for the other generic producer. Surprisingly we find that such agreements are always welfare enhancing, even when entry costs are so low that entry by both generics is virtually costless and thus almost certain in the absence of early entry agreements. Consumers are made worse off by early entry agreements if entry costs are sufficiently low, but for intermediate entry costs, the consumer and industry incentives are aligned in favor of early entry.

A case for manufacturer returns draft on request

We study whether a manufacturer should endogenously reduce the extent to which retailers' inventory cost is sunk by offering the possibility of returning unsold stocks for a fraction of the wholesale price. The answer solves a trade-off: returns intensify retail competition by giving retailers the incentive to order excess stocks, but such inefficient over-production must be paid up-front by the manufacturer. Therefore the optimal return decreases as the manufacturing marginal cost increases.

Garbage in oligopoly: when sharing capacity information helps (with Nicolas Schutz)

Unions and investment with intra-firm bargaining

Exclusive dealing, relationship length and specific investments (with Bjørn Johansen)


"Taxe sur les huiles de chauffage: Faut-il réformer le droit du bail?" Le Temps, 28th April 2007 (Opinion article with Nicole Mathys in Swiss newspaper of wide circulation

"Why some MBA's are reading Plato"  Wall Street Journal, 30 April 2014 (link) (feature on his LBS course Nobel Thinking)