Research
Here, I present an overview of research projects I am currently pursuing.
Job Market Paper:
Regulation of Commissions in the Presence of Price Competition. [MPRA][SSRN]
ABSTRACT: This paper analyzes the welfare impact of a cap on commissions paid by product providers to intermediaries who advise consumers. In contrast to the extant literature, with a downward sloping demand capped commissions have a direct impact on product providers' margins and consumers' prices. I show that a general ban is not welfare optimal as, in contrast to immediate intuition, higher commissions do not necessarily lead to higher consumer prices. Starting from a general ban, allowing (marginally) higher commissions indeed leads to lower prices as positive commissions make intermediaries wary to recommend more expensive products to consumers, risking no sale at all.
Work in Progress:
Advice with Loss-averse Consumers.
ABSTRACT: This paper analyzes the optimal pricing of an experience good and corresponding advice when consumers have dynamic reference-dependent preferences as in Köszegi and Rabin (2009). Although, in practice, advice is ubiquitous in the market for retail financial products, consumers usually only pay for the product and not advice itself. I show that whether it is optimal for the firm to offer advice at no cost, or to charge a fee for advice while offering the product at no cost depends on the degree of horizontal differentiation. The key trade-off the firm faces is the reduction of uncertainty for consumers who planned to buy the product compared to the attraction of consumers who did not initially plan to do so.
Advice with Contingent Compensation.
ABSTRACT: This paper analyzes the optimal compensation structure in a market where firms compete for advisor recommendations when firms can make compensation contingent not only on the sale of their product but additionally on the suitability, as is the case when firms have in-house evaluations. Then firms can lower compensation costs for a given level of recommendations by paying a higher fee when the advisor recommends the product to a consumer who is a mismatch and a lower fee when it is a match for the consumer. I show that in the monopoly, it is optimal for the firm to compensate the advisor only for mismatched consumers. Since the monopolist expands demand more aggressively with this compensation structure, a regulation which bans paying the advisor for a mismatched consumer, is welfare improving.
Early-access Releases as a Commitment Device for Higher Quality.