Abstract: We study a manufacturer's demand-investment decisions in distribution channels subject to double marginalization. Casting this as a mechanism design problem, we show that demand-enhancing investments strengthen retailers' incentives to exploit market power, forcing manufacturers to concede greater rents. Manufacturers therefore optimally restrict product quality or market coverage. We fully characterize which demand parameters create these perverse incentives: increases benefit manufacturers in segments where they control pricing but harm them in segments with binding incentive constraints. This reveals fundamental limits to demand-side investment in vertical relationships.
working paper (November 2025)
Abstract: We develop a model of oligopolistic price competition in information markets where buyers purchase and combine signals from multiple sellers. This nonexclusivity transforms competition into "portfolio competition", with sellers competing against all possible coalitions rather than individual competitors. We fully characterize its pure-strategy competition equilibria and study endogenous entry. In every equilibrium, buyers purchase efficiently from all active sellers. Whether competition protects buyers from rent extraction depends on information complementarities: in duopoly, full extraction occurs if and only if signals are complements; in oligopoly this if-and-only-if condition generalizes to a coalitional "balancedness" condition. With symmetric sellers, balancedness reduces to a geometric test. Entry can paradoxically reduce competitive pressure when entrants provide strong complementarities. Entry is never excessive, contrasting standard oligopoly models where excess results from business-stealing externalities. Instead, efficient entry is always an equilibrium, though insufficient entry equilibria may exist, prompting regulatory intervention.
working paper (November 2025)
video presentation (March, 2025)
slides (updated to March, 2025)
working paper (January, 2025)
This paper supercedes our earlier paper "Selling Certification of Private and Market Information"
slides (April, 2024)
working paper (February, 2025)
slides (Paris, 2025)
video presentation (June, 2024)
working paper version (March, 2025)
slides (Toronto, 2022.03.22)
video presentation (90min; newer version)
video presentation (20min; older version)
presentations: Cambridge (UK), University of Toronto, Yale University, Paris School of Economics, Michigan University, Penn State
This work is based on and supersedes my working paper "Mechanism design with partially verifiable information" from 2016.