Research

Publications

Imperfect Competition with Costly Disposal (IJIO, 2022)

Abstract: This paper studies the effect of disposal costs on consumer surplus and firms' profits. First, we analyze a monopolist producing inventories either early on at a low cost and with little information about demand, or later with more information yet at a higher cost. Unsold products are discarded. The firm forgoes an early production cost advantage if and only if the disposal cost and demand uncertainty are both simultaneously high. Expected disposal decreases in its cost, yet the firm lowers its production to mitigate costs, resulting in lower expected profit and consumer surplus. Similar results hold for firms competing in sales volumes with unobserved inventories. Ex-ante symmetric firms may choose different production timings. The disposal cost substitutes information about demand, thereby affecting a firm's information advantage. Accordingly, a firm's expected profit may increase with the disposal cost. Firms may adjust their production timing, resulting in a discontinuous change in the expected profit and consumer surplus.

Rebating Antitrust Fines to Encourage Private Damage Negotiations (ALER, 2022, Awarded by Concurrences and the George Washington University with the Antitrust Writing Award 2021 for the best academic article in the category of private enforcement)
with Winand Emons

Abstract: To encourage private negotiations for damages in antitrust cases some jurisdictions subtract a fraction of the redress from the fine. We analyze the effectiveness of this policy. Such a rebate does not encourage settlement negotiations that would otherwise not occur. If, however, the parties settle without the rebate, the introduction of the reduction increases the settlement amount, yet at the price of reduced deterrence for those wrongdoers who are actually fined. Under a leniency program the rebate does not affect the leniency applicant: she doesn’t pay a fine that can be reduced. The overall effect of a fine reduction on deterrence is, therefore, negative.

Random Pricing: Bertrand Competition with Uncontested Consumers (Rev Ind Organ, 2025)

Abstract: Two firms offer a homogeneous product and compete in prices. Consumers are homogeneous yet differ in their access to the firms. Three groups exist, consumers, who have access to both firms, i.e., compare prices, and consumers who can only access one of the two firms and are thus uncontested. The group sizes may differ; one firm’s consumer base may be zero. No pure strategy equilibrium exists. In the mixed equilibrium, firms randomize on the same continuum of prices; in expectation, the firm with the larger consumer base plays a higher price and has a higher expected demand. We study the firms’ incentive to invest in demand, effects of price discrimination, and collusion. Moreover, we extend the model to more than two firms and discuss mergers.

The Economics of Advice  (Rev Ind Organ, 2025)
with Winand Emons

Abstract: A consumer wants to buy one of three different products. An expert observes which of the three products is the best match for the consumer. Under linear prices a monopolistic expert may truthfully reveal, may partially reveal, and may not reveal at all her information. The outcome is thus inefficient; moreover, the consumer gets some of the surplus. With a two-part tariff the expert truthfully reveals her information. The outcome is efficient and the expert appropriates the entire surplus. Truthful revelation is also the outcome if experts are competitive; here all the surplus goes to consumers.

Working Papers

Interest Rate and Cartel Stability

Abstract: Low interest rates enhance cartel stability by increasing the present value of future collusive profits, making defection less attractive. However, it also lowers capital costs, reducing production costs and potentially boosting demand. This creates an incentive for firms to defect and capture a larger market share, thereby destabilizing collusion. Considering these opposing effects, our analysis reveals a U-shaped relationship between interest rates and cartel stability: collusion is most stable when interest rates are either very low or very high. Empirical evidence from 615 firms convicted by the European Commission between 1999 and 2016 supports our theoretical predictions. 

Dynamic Monopoly Pricing with Multiple Varieties: Trading Up
with Stefan Buehler and Nicolas Eschenbaum

Abstract: This paper studies dynamic monopoly pricing for a broad class of settings that allows for multiple durable, multiple rental, or a mix of varieties. We show that the driving force behind pricing dynamics is the existence of trading-up opportunities. If there are no trading-up opportunities in the static monopoly outcome, then pricing dynamics do not emerge in equilibrium. With trading-up opportunities, pricing dynamics arise until these opportunities are exhausted or the game ends. We characterize the lower bound for the emerging prices and profit and study the conditions under which pricing dynamics end in finite time.

Patterns of Competitive Interaction in a Dual Supply  Chain: A Minimalist Example
with Atharwa Deshmukh

Abstract: A manufacturer and a retailer bargain about a linear wholesale price. The manufacturer has a dual supply chain, selling directly to con sumers and thereby competing with the retailer. Some consumers only consider the retailer in their purchase decision. The retailer’s bargaining position depends on its share of captive consumers in the market. The wholesale price decreases with the share of captive con sumers; expected consumer prices may in- or decrease, depending on the level of captive consumers in the market. Moreover, the level of price dispersion is affected by the share of captive consumers and the distribution of bargaining power. 

Optional Fee-Shifting
with Winand Emons and Francesco Parisi

Abstract: We study settlement bargaining under three alternative fee-shifting rules: the American Rule, the English Rule, and an optional feeshifting regime in which the defendant chooses whether the case will proceed under the American or the English Rule. The defendant knows whether his conduct gives rise to liability while the plaintiff only has a noisy signal. This two-sided asymmetric information creates scope for strategic misrepresentation: defendants who face liability may try to pass as if they do not, while plaintiffs with weak evidence may act as if they have a strong case. When litigation costs are similar for both parties, optional fee-shifting reduces litigation rates more effectively than either the American or the English Rule alone. 

Work in Progress

Bargaining with Two-Sided Imperfect Information: Litigation and Settlement

Selling to Marxists
with Stefan Buehler and Daniel Halbheer