Research

Working papers

We establish new efficiency results for decentralized markets with quality uncertainty. Buyers encounter a succession of passing trade opportunities and related asset information, allowing them to screen the quality of assets by conditioning pricing on informative signals. We link key equilibrium properties with the intensity of screening. This innovative approach delivers conditions under which efficient equilibria exist, characterizes efficient and inefficient equilibria in terms of asset screening and trade dynamics, and presents a new measure for the information required for efficient trade and asset screening. Trade dynamics may manifest as either standard or reversed.

We provide a unified theory of dynamic oligopoly pricing with heterogeneous price technologies on each market side. Trackers (on the firm-side) and shoppers (on the consumer-side) can costlessly follow market prices while non-trackers and non-shoppers cannot. Our paper contributes to reconciling various observed price dynamics, such as persistent price differences, novel patterns of collusion, and adherence to and avoidance of certain prices. 

In markets with many trackers, non-trackers offer low limit prices to counter tracker collusion, which gives rise to an almost binary equilibrium price distribution. In general, we find that the presence of trackers both increases and equalizes the prices in the market, reducing consumer surplus, whereas the presence of non-trackers diminishes and disperses market prices. Price dispersion offers a simple test on how strongly the market is affected by trackers. 

Lobbyists are nowadays increasingly involved in promoting businesses through societal investment, producing what has been paraphrased as "corporate beauty contests" due to the uncertain winning criteria. To understand what motivates firm participation in these contests and their effects on welfare, our paper analyzes lobbying contests in which firms can boost their competitiveness in a market for political favors through either monetary contributions or societal investments. We establish that the responsiveness of political favors to social lobbying (i) alleviates lobbying competition, (ii) decreases total lobby spending, and (iii) shifts spending from monetary to social lobbying. This is generally welfare improving. Our results thus suggest that the ongoing transition to societal lobbying is a move toward a more efficient lobbying standard.

Corporate tax filings typically encompass a declaration of profit along with auxiliary data submitted by firms. Modern tax theory acknowledges that tax enforcement in information-rich economies should rely on both. This convention presumes data accuracy. However, as firms begin to appreciate the significance of their data input to audits, stronger reliance on firm-submitted data is likely to encourage its distortion. To comprehend how this bias should be taken into account, we extend tax theory to strategic data reporting.

Our main finding is that, although the primary goal of an audit is to ensure truthful profit reporting, this objective cannot be achieved without also monitoring the submitted data. Otherwise, audit probabilities based on firm-reported  data are mispecified, which allows firms to evade taxes by manipulating their data input. We describe examples where this can lead to a higher tax gap than disregarding data. The characterized optimal tax enforcement  policy for strategic data involves a distortion at the top and non-constant penalties.


Publications

We follow the future trajectory of more targeted wage formation in labor matching platforms, such as freelancing, crowd-sourcing, home-delivery, and ride-hailing, where local job search is coordinated by improving prediction algorithms. A labor matching platform is modelled as a directed search and matching market. We observe that targeted wage setting promotes efficient matching and longer employment spells. However, because a higher employment rate accentuates any disparities between available workers and vacancies, the effects of targeted wage setting on firm competition depend on prevailing market tightness. The impact of targeted wage formation on workers is positive when the vacancy-to-worker ratio is intermediate but turns negative at both extremes. Our results suggest that targeted wage setting may benefit occasional workers while potentially posing drawbacks for full-time platform workers. 

We introduce a new price competition model of search for a single product among multiproduct firms. Search order is optimal within and across firms. Consumers have limited time and require a random time to sample a product. Different search outcomes lead to price dispersion. We describe a symmetric mixed equilibrium where multiproduct firms provide discounted prices on some products and expensive prices on the other. Compared to single-product oligopolies, this strategy alleviates competition by (i) engaging consumers in searching more within (less across) firms and (ii) enabling more refined price discrimination.

“Obfuscation” is a literature term referring to various sales practices which increase the costs that consumers pay for searching. How does competition shape it? How does it shape competition? To address these questions, we develop a model where each firm can freely commit to any observable degree of search obfuscation, which pins down the time cost of searching its product. Consumers have limited time for browsing around websites. 

This endogenizes consumer information and competition intensity and gives clear predictions about market welfare and surplus division. We find that competition for prominence and the fear of frustrating consumers keeps the negative welfare effects of obfuscation low. However, because obfuscation reduces price awareness and differentiation relaxes price competition, the obfuscation choices in the unique equilibrium are positive and different. 


Dissertation

Essays on Market Dynamics and Frictions. Academic dissertation, University of Helsinki, 2015.

Sisäsyntyiset kitkatekijät dynaamisilla markkinoilla. Kansantaloudellinen Aikakauskirja 3/2015. 


Presentations

Information requirement for efficient decentralized screening. Hanken School of Economics Feb 21, 2024. [slides]

Heterogeneous price commitments. EARIE 2023 Rome Aug 24, 2023. HGSE Applied Micro Seminar June 7, 2023. [slides] 

Obfuscation in markets and procurement. Finnish Competition and Consumer Authority Apr 26, 2023. [slides, in Finnish] 


My take on academic bean counting [pdf]