## Research papers

Symbiotic Competition and Intellectual Property (online appendix), with David Rahman

According to Nordhaus, the optimal life of a patent T* trades off the "embarrassment" of monopoly with motivating innovation, given that imitators would otherwise copy inventions and, in competing with innovators, reduce their profit, hence their incentive to innovate. In this paper, we extend this argument through a general equilibrium growth model with follow-on innovations, knowledge spillovers and imperfectly elastic labor supply. We calibrate this model to the US economy and find T* between 8 and 14 years, in contrast with the current global standard of 20. A decomposition of T* suggests that knowledge spillovers are quantitatively just as important as market power, each reducing the optimal life of a patent by about 20 years. We also find that optimal patent policy depends crucially on the distribution of spillovers across industries. As such, we argue for a general equilibrium approach to patent policy.

Price Dispersion in Dynamic Competition

In product markets, substantial price dispersion exists for transactions of physically identical goods, and in these markets, incumbent firms sell at higher prices than entrants. I present a theory of dynamic competition that explains these facts as results from the same fundamental assumption: that consumers have imperfect access to firms and that the degree of access to a firm is endogenous, depending on a firm's past sales history. The models' unique equilibrium features randomized pricing strategies, but incumbents always post higher prices than entrants. The equilibrium converges to a stationary equilibrium. As firms' entry and exit rate converges to zero, the stationary equilibrium converges to the competitive equilibrium.

Market Microstructure and Informational Efficiency: The Role of Intermediation, with Brian Albrecht

The competitive market is informationally efficient; people only need to know prices to implement a competitive allocation. However, the standard formulation of competitive markets assumes that prices are not set by strategic agents but by "supply and demand" and thus neglects the underlying role of market microstructure. We show that if prices are determined by strategic agents, then intermediation is necessary for markets to achieve informational efficiency. We study two specific market microstructures: a model where trade is intermediated by market-makers and a model of random matching and bargaining. First, we show that an economy where competition among market-makers determines prices can approximate the informational efficiency of the competitive model. Second, we show that as the complexity of the economy increases, matching markets require infinitely more information than the competitive market.

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.

On the Measurement of Growth Over the Long Run (online appendix, resulting estimates)

Methodologies for the construction of nominal and real gross domestic product (GDP) time series often differ across time and countries. This paper discusses the main issues raised by this methodological heterogeneity on long-run measures of economic growth and, informed by those issues, provides a set of internationally comparable GDP estimates from 1820 to 2020. The estimates are based on real product benchmarks relative to the UK as a reference economy. The reference economy's GDP time series is a normalized composite of several indices. These estimates suggest that the Maddison and Maddison Project datasets overestimate economic growth after 1950 relative to the period from 1820 to 1950.

The Illusion of Perfect Competition: The Law of One Price under Trading Frictions

Perfectly competitive behavior can occur in individual markets that should not be competitive if only analyzed in isolation from the wider economy. To show that, I study an economy where consumers and workers have imperfect access to the firms, and these frictions imply that firms have market power in the labor and product markets. Suppose frictions are higher in the labor market than in the product market. In that case, the firms behave competitively in the product market: frictions in the labor market prevent the firms from altering supply to the degree required to exploit their market power.

Imperfect Competition as a Result of Unawareness

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.