Competition Policy in Light of Innovation, with David Rahman
Horizontal mergers impact welfare along several dimensions: they change markups; cost synergies increase productivity; by increasing profits, mergers encourage entry; by altering the competitive landscape, mergers affect firms' investment in productivity growth; and mergers reduce wasteful duplication of research. This paper presents a new dynamic general equilibrium model that incorporates these dimensions and quantitatively evaluates merger policies. We find that the social value of an antitrust authority is very large, and price-based policies perform best. Competition policy improves welfare mainly by encouraging innovation-driven growth, rather than lowering markups. Still, higher markups are symptomatic of decreased competition, hence slower growth.
Symbiotic Competition and Intellectual Property, with David Rahman
According to Nordhaus, the optimal life of a patent T* marries motivating innovation with the “embarrassment” of monopoly, given that imitators reduce inventors’ incentives to innovate when they copy their unpatented inventions. We extend this argument in dynamic general equilibrium with semi-endogenous growth, endogenous innovation, and deadweight losses from market power. Calibration to the US yields a T* of approximately 5 years, much lower than the current status quo of 20. Decomposing T* suggests that innovation may matter more than market power for patent policy. Methodologically, our model of competition and innovation departs from previous literature in quantitatively important ways.
Price Dispersion in Dynamic Competition (Economic Theory, 2024)
In product markets, substantial price dispersion exists for transactions of physically identical goods. Moreover, in these markets, incumbent firms sell at higher prices than entrants. This paper presents a theory of price formation under dynamic competition that explains these facts by assuming both that consumers have imperfect access to firms and that their degree of access depends on each firm's sales history. The model has a unique equilibrium that features randomized pricing strategies, with incumbents always posting higher prices than entrants. For a fixed underlying environment, the equilibrium converges to a stationary equilibrium over time. As firms' entry and exit rates approach zero, this stationary equilibrium converges to perfect competition.
Market Microstructure and Informational Complexity, with Brian Albrecht (R&R at The Journal of Public Economic Theory)
Competitive markets feature minimal informational complexity; agents only need to know prices to implement an efficient allocation. However, the standard formulation of competitive equilibrium neglects the mechanism of price formation, treating prices as exogenous. Here, we study explicit price formation mechanisms: trade intermediated by market-makers and trade via search and bargaining. We find that as the number of types in the economy grows, the informational complexity of random search diverges to infinity relative to the competitive market. This divergence can be avoided if market makers intermediate trade. Thus, this analysis provides a novel rationale for organized markets if agents’ capacity to manage informational complexity is bounded.
The Economics of Greco-Roman Slavery, with Walter Scheidel (Explorations in Economic History, 2025)
This paper investigates the economic aspects of slavery in the ancient Greco-Roman world. Existing evidence reveals significant variation in the relative cost of slaves compared to unskilled wages: it appears that at different times and places, a typical slave could be purchased for prices equivalent to wages paid from 150 to 1000 days of unskilled labor. To explain this great disparity, we develop a principal-agent model that predicts the return on slaves relative to wages, which varies as a function of the prevalence of slavery in the labor force. This model implies that slavery may have increased aggregate labor productivity by reallocating workers from less productive to more productive regions within the Greco-Roman world.
Urbanization and Economic Performance in Classical Antiquity (R&R at The Journal of Economic History)
This paper provides estimates for the rates of urbanization of the Greco-Roman world for the Late Classical and the Early Roman periods. These estimates are constructed based on surveys of archaeological evidence and follow a consistent methodology across both periods and geographical regions. They suggest that urbanization rates varied greatly across regions of the Roman Empire, and that its more urbanized regions were as urbanized as the Late Classical Greek world. As urbanization rates are strongly correlated with economic development in pre-modern societies, these results provide a proxy for relative levels of development and suggest that it was substantially heterogeneous across the Greco-Roman world. I relate these findings to the reconstruction of the economic performance of Greco-Roman societies.
Imperfect Competition as a Result of Unawareness (Review of Industrial Organization, 2025)
This paper develops a dynamic model of price competition where buyers have constrained consideration sets due to unawareness. There are two sellers: an incumbent, who is initially more well-known among buyers, and an entrant. Awareness is influenced by word-of-mouth: if more buyers choose to shop at a seller, unaware buyers are more likely to discover that seller. In the unique equilibrium, both sellers randomize their pricing strategies, but one seller posts higher expected prices than the other. I show that if the incumbent’s present actions can change the future state of the market to a high enough degree, he has a strong incentive to undercut the entrant. Thus, this model provides microfoundations to the concept of “advantage denying” motive and relates it to the empirical finding that it takes time for a seller’s demand to grow.
The Minimum Wage as an Instrument for Social Insurance, with Keyvan Eslami
We consider the welfare effects of a minimum wage policy from a public finance perspective. In a competitive economy without labor frictions, we show that the minimum wage is an effective redistribution tool that cannot be replicated by a tax and transfer system, reiterating previous results. However, by incorporating an explicit model of wage formation into this environment via a random matching and bargaining model, we show that this result no longer holds. In such a setting, a tax on entrepreneurs and lump-sum rebates to employed workers can achieve the exact same redistribution effects as increasing the minimum wage above the stationary equilibrium wage. In this case, the minimum wage must exist in an optimal redistribution policy only if it can be implemented at strictly lower costs than a tax and transfer system.