Research

Publications:

Abstract: We examine a signaling game where the merging entity privately observes the cost-reduction effect from the merger, but the competition authority does not. The latter, however, observes the firm's submission costs in the merger request, using them to infer its type. We identify pooling equilibria where all firm types, even those with small efficiencies, submit a merger request, which is approved by the regulator. This merger profile cannot be supported under complete information, thus leading to inefficiencies. We investigate under which parameter conditions inefficient mergers are less likely to arise in equilibrium, and which policies hinder them, ultimately improving information transmission from firms to the competition authority.

Abstract: We study mergers between two or more private firms operating in mixed oligopolies, where we allow for the merger to produce cost-reduction effects. We identify that the presence of public firms can facilitate the approval of welfare-improving mergers, even when their cost-reducing effect is relatively low.

Abstract: Pricing decisions of an internet service provider (ISP) are studied in a model based on complementarity between broadband connection and content, congestion externalities on consumer side and oligopolistic externalities on content provider side. When consumers face two-part tariffs from the ISP, the equilibrium is sensitive to usage price level but is invariant to its structure on two sides. With nonlinear pricing, the markup of content providers affects consumer prices while congestion externalities and elasticity of content demand shape the price for providers. For the zero-price rule, a neutrality-of-policy result holds with two-part tariffs but not with nonlinear pricing. 

Abstract: We consider a common pool resource (CPR) where, in the first stage, every firm chooses an equity share on its rivals' profits (cross-ownership), in the second stage, firms compete for the resource, and in the third stage, firms compete again for the resource after it regenerated at a given rate. We identify equilibrium equity shares in this setting, and compare them against the socially optimal shares that maximize welfare. Our results show that equity shares are welfare improving under certain conditions, but can lead to a socially insufficient exploitation of the CPR if shares are large enough; as in a merger where firms equally share equity. We discuss how equity taxes can help firms approach socially optimal appropriation levels.

Abstract: Market mechanisms for land assembly problems suffer from a holdout problem and coercive legal solutions like eminent domain introduce new inefficiencies.  A new mechanism that is not fully market-based but attempts price discovery is proposed,  experimentally studied and is shown to improve efficiency.  The mechanism is fully specified by two parameters - a percentile value of the empirical distribution of ask-prices that serves as a trading threshold for the buyer and a quantum of penalty to be applied to landowners who bid relatively very high. In a 2 X 2 treatment,  it is found that reducing the trading threshold and increasing the penalty improves the efficiency performance.

Abstract: We consider a duopoly in which firms can strategically choose equity shares on their rival’s profits before competing in quantities. We identify equilibrium equity shares, and subsequently compare them against the optimal equity shares that maximize social welfare. Most previous studies assume that equity shares are exogenous, and those allowing for endogenous shares do not evaluate if equilibrium shares are socially excessive or insufficient. Our results also help us identify taxes on equity acquisition that induce firms to produce a socially optimal output without the need to directly tax output levels.


Working Papers:

Abstract: We consider a merger-to-monopoly that induces changes in demand. We study the firms' incentives to submit a merger request and the competition authority's decision to approve the request. We show that merger-induced demand changes help expand settings where the interests of firms and competition authority align, while not affecting the prevalence of contexts where their interests are misaligned.

Abstract: We study mergers in polluting industries where a public firm is present. We evaluate how merger approvals are affected when the competition authority's guidelines start considering environmental criteria. As expected, we show that more mergers are approved, yielding less pollution, and higher welfare. However, we find that firms only have incentives to submit a merger request if the public firm is mostly privatized; otherwise, no merger requests are filed in equilibrium, rendering guidelines changes inconsequential. We, then, examine how merger approvals are affected by the presence of the public firm and pollution. We also conduct robustness checks allowing that the manager of the public firm ignores emissions, the merger yields cost-reducing effects, and convex production costs.



Work in Progress: