Research

DESCRIPTION
My current research focuses on the dynamics of innovation, models of entry, and competition policy.  I have, however, a broad interest in Microeconomic Theory, Industrial Organization, and Applied Theory.

PUBLISHED OR FORTHCOMING PAPERS
[1] Sequential Innovation, Patent Policy, and the Dynamics of the Replacement Effect
[pdf] [Online Appendix]
RAND Journal of Economics, Vol 50 (3), Pages 568–590
    I study how patent policy—characterized by patent length and forward protection—affects Research and Development (R&D) dynamics, leadership persistence, and  market structure. Firms’ R&D investments increase as the patent’s expiration date approaches. Through forward protection, followers internalize the leader’s replacement effect. In protective systems, this internalization is substantial, reversing Arrow’s traditional result: followers invest less than leaders at every moment of the patent’s life. I study the policy that maximizes innovative activity. Overly protective policies decrease innovation pace through two mechanisms: delaying firms’ investments toward the end of the patent’s life and decreasing the number of firms performing R&D.

[2] Innovation and Competition: The role of the Product Market [with Guillermo Marshall] [pdf] (draft: July 2018)
International Journal of Industrial Organization, Vol 65, July 2019, 221-247
   We study how competition impacts innovation (and welfare) when firms compete both in the product market and in innovation development. This relationship is complex and may lead to scenarios in which a lessening of competition increases
R&D and consumer welfare in the long run. We provide conditions for when competition increases or decreases industry innovation and welfare. These conditions are based on properties of the product market payoffs. Implications for applied work and policy are discussed.

PAPERS UNDER SUBMISSION
[1] Announcing High Prices to Deter Innovation [with Guillermo Marshall] [pdf] (draft: Nov. 2019) (Revised and Resubmitted to Management Science )
     Price announcements—similar to the ones made in media events by tech firms—are effective in deterring innovation. By announcing (and setting) a high price, a rm increases its rivals’ short-run pro ts, which generates a complacency effect that reduces the rival firms’ incentives to innovate. We show that the equilibrium prices are greater and the R&D investments are lower relative to when price announcements cannot be used strategically. We call this the R&D deterrence effect of price, and show that it induces equilibrium prices that may exceed the multiproduct monopoly prices and even dissipate the consumer benefits of innovation.

[2] Entry Games Under Private Information [with José Espín-Sanchez] [pdf] [Online Appendix] 
    We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm’s strength and show that an equilibrium where players’ strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm’s private information, the herculean equilibrium is the unique equilibrium of the game.

[3] Second-Price Auctions with Participation Costs [with José Espín-Sanchez and Yuzhou Wang] [pdf]
     We study equilibria and efficiency in a second-price auction with public participation costs. We generalize previous results by allowing arbitrary heterogeneity in the bidders’ distribution of valuations and in their participation costs. We apply the notion of bidder strength, and show that an equilibrium where stronger bidders have a lower participation threshold than weaker bidders, called herculean equilibrium, always exists. We provide a sufficient condition for equilibrium uniqueness. Even though all equilibria are ex-post
inefficient, an ex-ante efficient equilibrium always exists. Therefore, when conditions for uniqueness hold, the herculean equilibrium is unique and ex-ante efficient.

[4] Entrepreneurship Innovation, Patent Protection, and Industry Dynamics, with Gerard Llobet and Javier Suárez.  (Revision Requested by the RAND Journal of Economics—Joined paper for the revision).

OTHER WORKING PAPERS

[2] Mergers in Innovative Industries: A Dynamic Framework [with Guillermo Marshall] [pdf]
     Briefing: We investigate how a merger with R&D efficiencies affects market outcomes over time. To this end, we propose a dynamic framework based on a patent race model of sequential innovations with endogenous market structure. We show that timely (but costly) entry into the patent race is sufficient to guarantee that mergers are welfare improving. These results hold for all efficiency levels and despite the fact that mergers may reduce the number of firms performing R&D by more than one.

WORK IN PROGRESS
[1] Product Differentiation and R&D Spillovers
     Briefing: We study the product location decision when location affects both the degree of product differentiation and the spillovers that exists among the firms.

[2] When to License Sequential Inventions