Publications

This paper endogenizes a monopolist’s choice between selling and renting in a non-anonymous durable goods setting with short-term commitment, by allowing for contracts that determine the good’s allocation not only at the beginning but also at the end of a given period. We show that the revenue-maximizing menu of contracts features screening by mode of trade when future trade is subject to frictions and the monopolist is more patient than consumers. Selling to high types while renting to low types, allows the monopolist to defer part of his compensation in form of a reduction of consumers’ future information rents while lowering the allocational costs of ordinary, intertemporal screening. 

This paper uncovers a novel mechanism through which pay dispersion can have a negative effect on firm performance, even in the absence of equity or fairness considerations. We use a stylized model of a self-managed work team to show that, when team-work involves heterogeneous tasks, the provision of incentives to exert effort conflicts with the provision of incentives to share information relevant for decision-making. Pay dispersion deteriorates information sharing as it induces workers to conceal “bad news” in order to maintain their co-workers motivation.The practical implications of our theory are that team empowerment should go hand in hand with pay compression and that empowerment should be avoided when team production involves strongly heterogeneous tasks

This paper examines the influence of information on market performance  in an advance purchase setting. Information reduces the risk that an advance purchase results in a mismatch between consumer preferences and product characteristics. However, information may also raise the number of advance purchases by increasing a firm’s incentive to offer advance purchase discounts. Accounting for consumers’ aversion towards losses/risks turns out to be crucial as it changes our assessment of policies  aiming to improve consumers’ information: Under monopoly information can be detrimental both for efficiency and consumer surplus whereas under competition information is doubly beneficial because it mitigates inter-temporal business stealing

Do the contests with the largest prizes attract the most-able contestants? To what extent do contestants avoid competition? In this paper, we show, theoretically and empirically, that the distribution of abilities plays a crucial role in determining contest choice. Complete sorting exists only when the proportion of high-ability contestants is sufficiently small. As this proportion increases, high-ability contestants shy away from competition and sorting decreases, such that, reverse sorting becomes a possibility. We test our theoretical predictions with a large panel data set containing contest choice over twenty years. We use exogenous variation in the participation of highly-able competitors to provide empirical evidence for the relationship among prizes, competition, and sorting

This paper considers dynamic bilateral trade with short-term commitment. We show that, when the seller is more patient than the buyer, there exist systematic differences between the optimal selling and renting mechanisms. While the former consists of simple price-posting, the latter induces the buyer to choose between a secure- and a random-delivery contract. Allowing for mechanisms more general than price-posting reduces the seller’s cost of learning the buyer’s valuation in the renting case.  Renting leads to more learning than selling but only when general mechanisms are available. Our results contrast with the common view that the restriction to price-posting is innocuous and that informational asymmetries are more persistent under renting than under selling.

This article offers a tractable model of (oligopolistic) competition in differentiated product markets characterized by individual demand uncertainty. The main result shows that, in equilibrium, firms offer advance purchase discounts and that these discounts are larger than in the monopolistic benchmark. Competition reduces welfare by increasing the fraction of consumers who purchase in advance, i.e. without (full) knowledge of their preferences.

We use a mechanism-design approach to study a team whose members select a joint project and exert individual efforts to execute it. Members have private information about the qualities of alternative projects. Information sharing is obstructed by a trade-off between adaptation and motivation. We determine the conditions under which first-best project and effort choices are implementable and show that these conditions can become relaxed as the team grows in size. We also characterize the second-best mechanism and find that it may include a ‘motivational bias’, that is,  a bias in favor of the team’s initially preferred project, and higher-than-optimal effort by uninformed team members.

When players compete repeatedly in a series of contests, prizes won in earlier periods may improve the players’ abilities in later periods. This paper determines the allocation of prizes within and across contests that maximizes the (weighted) sum of aggregate efforts. It provides a new rationale for the use of multiple prizes, based on a trade-off between incentives and competitive balance. The optimal winner’s share is shown to be increasing in the players’ discount factor and the weight the organizer attaches to early periods, but decreasing in the strength of competition and the effectiveness with which prizes improve abilities.

This paper considers advance selling problems. It explains why some goods (e.g. airline tickets) are sold cheap to early buyers, while others (e.g. theater tickets) offer discounts to those who buy late. We derive the profit maximizing selling strategy for a monopolist when aggregate demand is certain but buyers face uncertainty about their individual demands. When aggregate demand exceeds capacity, both Advance Purchase Discounts as well as Clearance Sales might be optimal. We determine how the comparison of these price discrimination strategies depends on the rationing rule, capacity costs, and the availability of temporal capacity limits, price commitment, and resale.

When several contests compete for the participation of a common set of players, a contest’s allocation of prizes not only induces incentive effects but also participation effects. Our model predicts that an increase in the sensitivity with which contest outcomes depend on players’ efforts makes flatter prize structures more attractive to participants. In equilibrium, contests that aim to maximize the number of participants will award multiple prizes if and only if this sensitivity is sufficiently high. Moreover, the prize awarded to the winner is decreasing in the contests’ sensitivity. We provide empirical evidence from professional road running using race-distance as a measure of sensitivity. We show that steeper prize structures are more attractive to top ranked runners in longer, i.e. less sensitive, races. In line with our theory, longer races do in fact offer steeper prize structures

This paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities. Contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades. If instead externalities become stronger, sequential negotiations might benefit the principal as they lower the agents’ outside options. Under some linearity conditions, the principal’s preferences with respect to different timings of contracting are opposed to their efficiency ranking.  

We show that when leaders share some of their information with subordinates, decision-making is subject to a motivational bias; leaders make the decisions their subordinates want to see. As this bias increases with the quality of the shared information, an improvement of an organisation’s information might even decrease its efficiency. As a consequence, information-sharing is not always optimal. We show however that self-confidence can help the leader to overcome his motivational bias, thus making information-sharing more attractive. Conversely we find that information-sharing can help to curb the autocratic tendencies of a self-confident leadership. We conclude that a policy of information-sharing and the appointment of a self-confident leadership are most effective when they go hand in hand.