Assistant Professor - Economics
London Business School
Regent's Park | London NW1 4SA | United Kingdom
Direct line +44 (0)20 7000 8471
Mobile +44 (0)79 6690 8471
I am a business economist. I use game theory
to answer questions in competition policy and strategy, on topics such as
pricing, bargaining, and supply-chains.
Before joining LBS in 2008, I received a PhD from the U. Lausanne. I was awarded a MSc. in Quantitative Economics from U. Toulouse and I was a visiting doctoral researcher at Columbia U. for two years. I am also a CEPR Research Affiliate in the Industrial Organisation
Research Interests: Microeconomics - Industrial Organization and Game Theory
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)
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."
In a make-to-stock vertical contracting setting with private contracts, we show that when retailers do not observe each other's stocks before choosing their prices then in any contract equilibrium the opportunism problem is extreme: a monopolist producer makes no profit. Market-wide price floors and RPM can under some conditions restore monopoly power. However other tools which do not fall under antitrust scrutiny and require only bilateral private contracts already allow the producer to exercise monopoly power in contract equilibria, such as bilateral contracts with buybacks---buybacks are a price paid by the producer to the retailer for each unit of unsold stock. We conclude that a more lenient policy towards RPM is therefore unlikely to have a significant effect on a producer's ability to control opportunism.
Buyer Power and dependency in a model of negotiations (with Roman Inderst)
Invited resubmission to the Review of Economic Studies
We study bilateral bargaining between buyers and sellers of substitute goods. A novel bargaining framework encompasses the outcome of auctions in truthful menus as limiting cases. Looking at the equilibrium per unit transaction prices, we find that a larger buyer pays a lower per unit price only when the bargaining power of buyers in bilateral negotiations is sufficiently high---and a higher price otherwise. The ambivalent effect is explained by how size affects own dependency of a buyer on each seller and the dependency of each seller on a buyer. The richer predictions of our model may help to explain the recent ambiguous empirical evidence on buyer size and inform empiricists, business strategists, and antitrust practitioners.
(with Mike Ryall and Francisco Ruiz-Aliseda)
Invited resubmission to Management Science (old version, new version soon)
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.
We study how the extent to which the inventory cost is sunk or remains variable affects retail competition when retailers do not observe each others' stocks before choosing their prices. We find intense price competition when inventory costs remain variable, and that markups increase as the sunk fraction increases. We then 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. We finally study how the inability to observe retail stocks affects manufacturer profitability relative to a situation where stocks are observed (where returns do not change profits).
"Unions and investment with intra-firm bargaining"
"Taxe sur les huiles de chauffage: Faut-il réformer le droit du bail?" (with Nicole Mathys), Le Temps (Swiss newspaper of wide circulation), 28th April 2007
“Why Some M.B.A.s Are Reading Plato” (link), feature on newly created and lectured elective course “Nobel Thinking” in Wall Street Journal, 30 April 2014