Working Papers

"Investing in High-end or Low-end? Competition and Innovation with Unobserved Choices of Firms" [Job Market Paper]

I construct a structural model of a dynamic duopoly with multi-product firms to examine how competition affects firms’ strategic innovations on high-end and low-end product lines. I identify and estimate the model using data of the US-brand large SUV industry with GM-Ford duopoly, in the circumstance where firms' R\&D choices between product lines are unobserved. I find that in the case where the competitor devotes itself to upgrading only high-end products, the firm chooses to compete face-to-face with its competitor: keeping investments in high-end products to remain competitive but reducing investments in low-end ones to save effort. In the case where the competitor puts more effort into the low-end product line, the firm reacts by investing predominantly in both lines to thoroughly build up market power.

"Does the Competitor Stimulate the Firm to Innovate More and Release Sooner?"

I construct a structural model of dynamic duopoly for durable goods to examine how competition affects firms' endogenous innovation with optimal releasing time. Firms dynamically decide pricing, how much to invest in R&D, and when to release new versions. I estimate my model using data of the personal computer microprocessor industry with Intel-AMD duopoly. Comparing the baseline market structure of duopoly and the counterfactual without AMD present, I find that firms' average investment is 12.4% less and the frontier quality upgrading rate is 0.9% lower in monopoly, but the average new product releasing probability is slightly higher. Moreover, the industry profit is decreased by 10% and consumer surplus is reduced by 4.7% without competition.

Work in Progress

"Market Structure and Innovation for Multi-Product Firms: A Case Study of the Large SUVs Industry"

"Competition for Better Students and College Budget Decisions”, with Quanfeng Zhou

Click here to view my Research Statement.