Theoretical Microeconomics - Industrial Organization / Behavioral Economics

- Speed of Copycat Entry: We explore a model of vertically differentiated markets, where products differ in their quality levels and consumers differ in their willingness to pay. In the market, there are an incumbent and two potential entrants. Observing that higher quality is always more profitable, we find that in a simultaneous entry game, there is a unique pure strategy equilibrium where entrants choose the highest quality and price at marginal cost. Thus, firms make zero profits and two entrants are enough to guarantee competition. When assuming endogenous sequential entry, we find that entrants have no incentives to enter a market first, and entering becomes a game with “war-of-attrition”- features. Given the idleness to enter the market immediately, we observe delayed market entry despite costless entry. Thus, even if competition increases, consumer surplus decreases due to an extended monopoly period.

- The Price of Banning Commissions: This paper analyses the welfare impact of switching from a commission-based to a fee-based remuneration model in markets where consumers rely on expert advice when choosing among products. Starting from the baseline scenario with commissions, I ban commissions paid by producers and instead introduce a fixed transaction fee that needs to be paid by consumers when buying a product. (Work in progress)

- Risk Taking and Effort Provision in Tournaments with Overconfident Players: This paper investigates the role of overconfidence in tournaments where players choose effort as well as risk exposure. We find that overconfident players can adopt less risky strategies but exert more effort than rational ones. They, thus, can make the tournament organizer better off. In a tournament where an overconfident player competes against a rational player, the overconfident player may choose a less risky strategy, but the reverse cannot happen. However, the presence of an overconfident player can lead a rational player to take less risk. Our findings provide a new mechanism whereby overconfidence can raise effort provision of workers and go against the idea that overconfident individuals choose riskier strategies than rational ones.