Exclusive and Non Exclusive Contracts in Two Sided Markets (with Jorge Tamayo)
Job Market Paper <download>
We study competition between horizontally differentiated platforms offering exclusive and non-exclusive contracts in a two-sided market. We solved the technical problem of “tipping markets” in the platform literature, which allowed us to describe equilibrium market share of multi-homing content (that does not tipped towards zero or one), and endogenous prices (which were often not possible due to tipping markets).
We showed that when content providers can choose between exclusive or non-exclusive contracts, content availability does not react to increases in consumer value for content despite increases in subsidies paid to content providers. Introducing non-exclusive in addition to exclusive prices benefits platforms, but may hurt consumers and content providers. Entry of new platforms may increase prices and platform profits. We attribute the results to the reduction in ``threat of tipping.'' Finally, incumbent platforms can offer exclusive contracts or refusing to offer non-exclusive contracts to deter entry.
Exploding Offers: a Screening Device
I study the case of “exploding offers’ where the lesser firm make job-offers to potential employees which expires before the better firm makes its offers. Unlike related studies that assumed a sequential discovery procedure, I model the case when firms have information on all candidates before making any offers (e.g., Economics Job Market). I showed that there exist a subgame perfect equilibrium - exploding offer equilibrium - where the higher firm make late offers and lesser firm makes early offers with deadlines before the late offers arrive. Compared to enforcing simultaneous offer timing, allowing exploding offers is beneficial to the lesser firm, higher firm and job-seekers in general. The improvement is a result of forcing job-seekers to reveal their private information through the acceptance decision and reduction in firm’s search cost.
Altruism and Firm Profits (with Michele Fioretti)
<Working Paper><download>
Firms' donations are pervasive, but do they increase profits? Theoretical studies attribute higher profits if consumers display warm-glow preferences and exhibition value. The two models differ in the way consumers perceive direct donations to charities. Under warm-glow, indirect donations by purchasing charity-linked products act as discounts, resulting in no extra profits. Under exhibition value, indirect donations can increase profits because consumers' own purchases and direct donations are not perfect substitutes. Indirect contributions can also generate a larger public good, but this necessarily implies lower profits. Thus, markets cannot adequately incentivize firms to promote greater individual contributions.
Intertemporal Price Discrimination and Bundling Competition (with Jorge Tamayo)
<Working Paper>
We study firms incentive to offer intertemporal price discount with competition. We introduce new simplification to the two-dimensional Hotelling model to obtain closed-form solution. Rochet and Thanassoulis (2017) showed that the monopolist has incentive to make intertemporal price discounts when bundling is possible. We extend the Rochet study to show that competing firms have incentive to make intertemporal price discounts under more general conditions than the monopolist case.
Competitor or Collaborator
<Working Paper>
Increasing number of users on the same side of a platform increases the platforms attractiveness to others users, but cannibalizes market share of existing users. I show that the net substitute/complement relationship between users on same side is independent of the total number of users. Introducing new large or small users has the same impact on existing users. I derive a pricing structure for revenue base commission. I show that platforms that attracts sellers and content providers set prices differently, and the substitute/complement relationship