Publications
Publications
Several antitrust authorities have investigated platform price parity clauses around the world. I analyze the impact of these clauses when platforms design a search environment for sellers and buyers to interact. In a model where platforms choose the unitary search cost faced by consumers, I show when it is profitable for platforms to obfuscate consumers through high search costs. Then, I show that price parity clauses, when exogenously given, can increase or reduce obfuscation, prices, and consumer surplus. Finally, when price parity clauses are endogenous, they are only observed in equilibrium if they hurt consumers.
We provide a new interpretation for coalition loyalty programs in an environment where consumers search for their preferred products. A dominant firm in one market can generate a prominent position for another firm in an unrelated market, by offering a reward to consumers conditionally on buying in both firms. We show when it is optimal for consumers to sample first the firms in the coalition. We derive conditions under which this coalition is profitable in comparison with a case with no coalition and in comparison with a case where the dominant firm creates a loyalty program only in its own market. We find that the coalition can be profitable if and only if it increases consumer surplus. Then, we explore the case where a continuum of coalitions compete, and show that in this case, consumer surplus is lower, industry profits are higher, and total welfare is ambiguous, relative with a case with no coalitions.
We analyze the pricing problem of credit card issuers when setting per-transaction fees for payments and interest rates for the credit associated with these cards. By considering the issuer’s incentives coming from the credit market, we provide a new explanation to the widely observed phenomenon of credit card rewards. Issuers induce higher demand for the credit function of their cards by lowering per-transaction fees, even to negative levels. In addition, by assuming that some consumers face a form of behavioral bias,consistent with recent empirical findings in financial markets, we develop a new explanation for the interest rate exhibiting some degree of stickiness in this market. Finally, we argue that interest rates are independent of interchange fees and that interchange fee regulation should take into account the costs and benefits of different forms of credit.
We analyze the pricing problem of credit card issuers when setting per-transaction fees for payments and interest rates for the credit associated with these cards. By considering the issuer’s incentives coming from the credit market, we provide a new explanation to the widely observed phenomenon of credit card rewards. Issuers induce higher demand for the credit function of their cards by lowering per-transaction fees, even to negative levels. In addition, by assuming that some consumers face a form of behavioral bias,consistent with recent empirical findings in financial markets, we develop a new explanation for the interest rate exhibiting some degree of stickiness in this market. Finally, we argue that interest rates are independent of interchange fees and that interchange fee regulation should take into account the costs and benefits of different forms of credit.
Electoral competition with multiple attributes: the search for information and the role of media (with Sofía Correa)
We characterize the information acquisition process in elections when voters care about candidates’ multiple attributes. Borrowing from the consumer product search literature, we model information acquisition as sequential and costly learning of these attributes. We introduce media influencing which attributes are more “salient” to voters. In this context, we characterize the regions of learning and turnout decisions as a function of voters’ prior beliefs about attributes. Using this model, we can evaluate the effects of mandatory voting, fake news, and candidates’ campaign strategies on voters’ behavior and media outlets’ optimal strategies.