with Xavier Lambin, December 2019 (JOB MARKET PAPER)
This paper shows that reputation systems can mitigate ethnic discrimination by enabling ethnic minority sellers to accrue high reputation quickly, leading buyers to update their beliefs. Using data from a ridesharing platform, we find that minority drivers with no reviews make 12% less revenue relative to similar nonminority drivers. This disparity gradually shrinks and almost disappears for experienced drivers. To understand the mechanism behind this process, we construct a model of career concerns’ of discriminated sellers in the presence of a reputation system. The model’s estimates show that minority drivers, who just entered the platform, face overly pessimistic beliefs about the quality of their service. To alter these beliefs, they exert high effort and offer low introductory prices, swiftly boosting their reputation. Counterfactual simulations reveal that the cost of incorrect prior beliefs is high and that the reputation system strictly benefits minority drivers.
- Best paper award, Workshop on Digitization, Telecom ParisTech, May 2018
with Matias Pietola, May 2019, R&R – The RAND Journal of Economics
Motivated by recent antitrust cases in the pharmaceutical industry, this article studies the interplay between pay-for-delay settlements, licensing deals and litigation. Our analysis highlights the externalities that they generate: pay-for-delay settlements reduce competition which encourages entry; licensing and litigation make entering less profitable. Faced with multiple entrants, the incumbent exploits these externalities by offering licensing deals to some entrants or by pursuing litigation in order to decrease the cost of delaying contracts offered to others. The number of delayed entrants increases with patent strength. Entrants without pay-for-delay settlements pursue litigation for patents of intermediate strength; otherwise, they receive licensing deals.
- This paper won the AdC Award 2018, for the best unpublished paper on competition economics
- Policy report for the Yearbook of the Finnish Competition Law Association , April 2019
The Price is Right: information and dynamics on online marketplaces
with Rossi Abi Rafeh, june 2020
This article studies the entry and pricing decisions of sellers in a market with a reputation system. We provide a model of dynamic oligopoly with heterogeneity in marginal and opportunity costs and individual reputation as a state variable. We show that new sellers are generally less likely to reenter the platform than incumbents and sellers who have a lower chance of entering in subsequent periods set on average higher prices. The mechanism behind these findings is selection on marginal costs. We apply our model to a dataset on sellers on a large ridesharing marketplace. We showcase a negative correlation of tenure on the platform, measured by the number of reviews, and prices set by drivers. However, after accounting for drivers’ unobserved characteristics, which we interpret as marginal costs, we find a positive relationship. We provide, further, evidence of selection on unobservables by studying reentry decisions. Finally, we calibrate our dynamic model to uncover the distribution of opportunity costs.
Competition-Innovation Nexus: Product vs. Process, does it matter?
This paper extends the model of Aghion et al. 2005 by considering both product and process innovations. Product innovations increase the differentiation between firms, while process innovations reduce marginal costs. First, I show that the level of competition that maximizes investment in process innovations is higher than in the case of product innovations. Second, I use a rich dataset on innovation expenditures of European firms to empirically test this proposition. I find an inverted U-shape relationship between competition and innovation expenditures for both types of innovations. Finally, I find that the level of competition that maximizes innovation expenditures is higher in sectors dominated by process innovations.
Work in progress
- What’s in a rating? The dynamics of homophily on a platform, with Xavier Lambin, June 2019
- Pay-for-Delay, Licensing and Litigation, with Matias Pietola, Yearbook of the Finnish Competition Law Association, April 2019
- Ridesharing and the Long Tail of Mobility, with Rossi Abi-Rafeh, Competition Policy International – Antitrust Chronicle, Winter 2020, Volume 2, Number 1, February 2020