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Welcome to my homepage!
Welcome to my homepage!
I am Professor of Microeconomics at the Department of Economics of the Vrije Universiteit Amsterdam.
I am also fellow of Tinbergen Institute, CEPR, CESifo, and the Private-Public Sector Research Center (PPSRC) of the IESE Business School.
Please follow these pages to find more about my research, visit my google scholar page, or my Orcid page.
What's new?
What's new?
NEW working papers!
“The Agency and Wholesale Models When a Platform Can Charge Entry Fees” with Marie-Laure Allain and Marc Bourreau, CEPR Discussion Paper No. 21154, CEPR Press, Paris & London.
“Mergers and R&D Investment: A Unified Approach” with Evgenia Motchenkova, CEPR Discussion Paper No. 20986. CEPR Press, Paris & London.
Recently published!
"Consumer Search Costs and the Provision of Service Quality," with Yajie Sun, International Journal of Industrial Organization, 103-B, 103208, 2025.
“Start-up Acquisitions, Strategic R&D, and the Entrant's and Incumbent's Direction of Innovation,” with Esmée Dijk and Evgenia Motchenkova, Journal of Economics & Management Strategy 34-2, pp. 275-611, 2025.
Recent presentations: University of St. Gallen (November, 2025), JEI 2025 (Santander), EARIE 2025 (Valencia), MACCI 2025 (Mannheim), University of Nagoya (January 23, 2025), Kobe University (January 27, 2025), 17th Digital Economics Conference (Toulouse, 2025), Lingnan International Conference on Competition Policy and Industrial Organization. May 22-23, 2025, Hong Kong; Workshop on Search and Platforms (The Canon Institute for Global Studies, January 21, 2025).
NEW 14th Workshop on "Consumer Search and Switching Costs", co-hosted by the Chinese University of Hong Kong (CUHK) and the University of Hong Kong (HKU), 19-20 June, 2025. Website.
NEW working paper! “Mergers and R&D Investment: A Unified Approach” with Evgenia Motchenkova, CEPR Discussion Paper No. 20986. CEPR Press, Paris & London.
We investigate the impact of mergers on R&D incentives within a framework of R&D competition where effort can influence both the probability of innovation and the payoff conditional on success. Our framework nests the results of two classes of existing models and reveals assumptions that are restrictive. In models where R&D effort increases the probability of innovation but does not directly affect the payoff upon success, we show that the assumption of zero payoff upon innovation failure is restrictive. In models where R&D effort influences the payoff conditional on success, but not the probability of success itself, the assumption of deterministic innovation success (i.e., a success probability of one) is similarly restrictive. Across both modeling approaches, we offer a novel insight: the shape of investment costs, and by implication the pre-merger level of innovation, can be pivotal in determining whether a merger strengthens or weakens firms’ incentives to invest in R&D. In an extensions section, we further examine the role of R&D input and output synergies, firm asymmetries, as well as the implications for consumer surplus.
NEW working paper! “The Agency and Wholesale Models When a Platform Can Charge Entry Fees” with Marie-Laure Allain and Marc Bourreau, CEPR Discussion Paper No. 21154, CEPR Press, Paris & London.
We study the agency and wholesale models of intermediation in a bilateral monopoly where a platform can charge sellers an entry fee. With full-profit-extracting entry fees, the agency model eliminates double marginalization and yields lower prices and higher platform profits than the wholesale model, while the seller earns zero profit under both models. With partial rent extraction, the agency model yields lower prices than the wholesale model when demand satisfies Marshall’s Second Law, or when the platform can extract a sufficiently large share of the seller’s profit regardless of demand. To disentangle the mechanisms at play in this comparison, we also study the agency model with per-unit commissions. We show that shifting price-setting power from the platform to the seller lowers prices, while changing the commission instrument from per-unit to ad valorem usually further reduces prices. Finally, when the platform is uncertain about the seller’s dead-weight loss from paying the entry fee, entry may fail. We characterize when the platform optimally sets a zero entry fee, extend the price comparison, and provide conditions under which the agency model delivers both lower prices and higher entry than the wholesale model. We also show that per-unit commissions never dominate ad valorem commissions simultaneously in terms of price and entry, while the reverse can occur.
NEW “Pricing and Investment by a Two-Sided Monopoly Platform” with Evgenia Motchenkova and Long Hoang.
This paper analyzes a monopoly platform’s joint pricing and investment decisions in the canonical two-sided market model of Armstrong (2006). Participants are heterogeneous in outside options and derive both stand-alone benefits from joining and network benefits from interacting with the opposite side. The platform sets participation prices on both sides and chooses investments that enhance user experience. We characterize monopoly distortions in participation, pricing, and investment relative to a social planner. Taking investment as given, the monopoly outcome features under-participation on both sides, yet participation prices need not transparently reflect these participation distortions. We show that at least one participation price is excessively high relative to the social optimum. Equivalently, while one side’s participation price may be inefficiently low, participation prices that are too low on both sides are impossible. When investment enhances network benefits, marginal returns are proportional to interaction volume; since the planner induces greater participation and therefore more interactions, the monopoly underinvests on both sides. By contrast, when investment enhances stand-alone benefits, marginal returns scale with own-side participation, so investment distortions may be asymmetric across sides, although overinvestment on both sides is ruled out. An application to app platforms, with user-side device pricing and developer-side commissions on in-app purchases, yields sharp predictions for commission and investment distortions, as well as for the effects of commission caps on buyer and seller surplus.
"An Empirical Model of Consideration through Search," with Zsolt Sándor and Matthijs Wildenbeest. (Revised, July 2025).
We propose a tractable method for the estimation of a consideration set model in which consideration sets are endogenously determined through search. We show that the widely- used alternative-specific consideration model is a special case in which consumers put zero weight on expected utility when making their search decisions. To deal with the dimensionality problem that may arise from a large number of consideration sets, we propose a novel, accurate, and computationally fast Monte Carlo estimator for the choice probabilities. We use several existing datasets to identify the extent to which search played a role when buyers formed their consideration sets.
"Price Competition with Selling Constraints," with Makoto Watanabe. (Revised, September 2025).
This paper studies how selling constraints, which refer to the inability of firms to attend to all the buyers who want to inspect their products, affect the equilibrium price and social welfare. We show that the price that maximizes social welfare is greater than the marginal cost. This is because with selling constraints, a higher price, despite reducing the probability of trade (fewer buyers are willing to pay a higher price) increases the value of trade (only trades generating positive surplus are consummated). We show that the equilibrium price is inefficiently high except in the limit when firms’ selling constraints vanish and consumers observe prices before they visit firms. Thus, selling constraints constitute a source of market power.
Just published! "Consumer Search Costs and the Provision of Service Quality," with Yajie Sun. International Journal of Industrial Organization 103-B, 103208, 2025.
In many markets for services, such as financial advice, interior decoration or garden design, service providers incur costly efforts to make attractive offers to their clients, while consumers diligently search until they find a service plan that meets their needs. This paper studies the provision of service quality in such markets. With higher search costs, the gains to the service providers from exerting themselves increase and the market equilibrium has more sellers offering high-quality services. Despite this beneficial aspect of higher search costs, consumer surplus is lower due to higher prices and higher frictions. From the collective viewpoint of the firms, there is too much service effort in the market; from the standpoint of consumers, firms invest too little in service quality. On welfare grounds, the market over- provides service quality when the investment cost is low, while it under-provides service quality when the investment cost is high.
“Start-up Acquisitions, Strategic R&D, and the Entrant's and Incumbent's Direction of Innovation,” with Esmée Dijk and Evgenia Motchenkova. Journal of Economics & Management Strategy 34-2, pp. 275-611, 2025.
An entrant and an incumbent allocate their research funds across a rival market, where they compete with one another, and a non-rival market. The prospect of an acquisition distorts both players’ incentives to allocate funding. Allowing for acquisitions may improve both players’ innovation direction and consumer surplus. Under conditions, the incumbent, anticipating monopolization rents in the rival market, moves R&D towards that market. This “incumbency for buyout” effect lowers the rents the entrant obtains from the contestable market, which gives it incentives to move R&D resources away from the rival market. Such strategic interaction in the R&D market has implications for the assessment of start-up acquisitions.
“How Do Start-up Acquisitions Affect the Direction of Innovation?” (with Esmée Dijk and Evgenia Motchenkova). Journal of Industrial Economics, 72-1, pp. 118-156, 2024.
A start-up engages in an investment portfolio problem by choosing how much to invest in a “non-rival” project and in a “rival” project that threatens an incumbent. Anticipating its acquisition, the start-up distorts its investment portfolio in order to raise acquisition rents. This may improve or worsen the direction of innovation and consumer surplus. The bigger the difference in social surplus appropriability across the two projects, the more likely it is that the direction of innovation improves and consumers benefit from an acquisition. These results also hold if the acquirer takes over the research facilities of the start-up. (Slides)
(For the long version of the paper with additional extensions see our SSRN Working Paper November 2022.)
Consumer Search and Prices in the Automobile Market (with Zsolt Sándor and Matthijs Wildenbeest), Review of Economic Studies, 90-3, pp. 1394–1440, 2023.
This paper develops a discrete choice model of demand with optimal sequential consumer search. Consumers first choose a product to search; then, once they learn the utility they get from the searched product, they choose whether to buy it or to keep searching. We characterize the search problem as a standard discrete choice problem and propose a parametric search cost distribution that generates closed- form expressions for the probability of purchasing a product. We propose a method to estimate the model that supplements aggregate product data with individual-specific data which allows for the separate identification of search costs and preferences. We estimate the model using data from the automobile industry and find that search costs have non-trivial implications for elasticities and markups. We study the effects of exclusive dealing regulation and find that firms benefit at the expense of consumers, who face higher search costs and higher prices than would be the case if multi-brand dealerships were used.
"Product Quality and Consumer Search" (with Yajie Sun). American Economic Journal: Microeconomics 15-1, pp. 117-141, 2023.
This paper carries out a positive and normative analysis of the provision of quality in a consumer search market for differentiated products. More quality makes consumers pickier. But do they check more products before settling for one of them? If they do, firms over-invest in quality from the point of view of social welfare maximization; if they don't, firms under-invest in quality.
"Mergers and Innovation Portfolios" (with Evgenia Motchenkova and Saish Nevrekar). RAND Journal of Economics 53-4, pp. 641-677, 2022. (lead article)
This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The investment of a firm in one project imposes both a negative business-stealing and a positive business-giving externality on the rival firms. We show that when the project that is relatively more profitable for the firms appropriates a larger (smaller) fraction of the social surplus, a merger increases (decreases) consumer welfare by reducing investment in the most profitable project and increasing investment in the alternative project. The innovation portfolio effects of mergers may dominate the usual market power effects.
For the long version of the paper containing additional details and extended proofs, click here.
“Simultaneous Search for Differentiated Products: the Impact of Search Costs and Firm Prominence” (with Zsolt Sandor and Matthijs Wildenbeest). The Economic Journal, 131, pp. 1308-1330, 2021.
We extend the literature on simultaneous search by allowing for differentiated products and search cost heterogeneity. We show conditions under which a symmetric price equilibrium exists and provide a necessary and sufficient condition under which an increase in search costs may result in a lower, equal, or higher equilibrium price. The effects of prominence on equilibrium prices are also studied. The prominent firm charges a higher price than the non-prominent firm and both their prices are below the symmetric equilibrium price. Hence, market prominence increases consumer surplus.
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