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.

PAPERS UNDER SUBMISSION
[1] Sequential Innovation, Patent Policy and the Dynamics of the Replacement Effect [pdf] (Revision requested at RAND Journal of Economics)
     I examine the non-stationary incentives that patent policy—characterized by patent length and forward protection—has on the leader’s and followers’ R&D investments, leadership persistence, and the number of competitors in the market. The policy that maximizes innovative activity depends on the firms’ R&D productivity. Patent length and forward protection are complementary, as one tool effectively encourages innovation in markets where the other tool is not as effective. Overly protective policies decrease the pace of innovation through two mechanisms: delaying firms’ investments toward the end of the patent’s life and decreasing the number of firms performing R&D.

[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] Innovation and Competition: The role of the Product Market [with Guillermo Marshall] [pdf] (draft: January 2018)
     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, contradicting arguments provided by antitrust agencies in recent merger cases. We provide conditions for when competition increases or decreases industry innovation and welfare. These conditions are based on properties of the product market payoffs.

[4] Announcing High Prices to Deter Innovation [with Guillermo Marshall] [pdf]  (draft: March 2018) 
    Briefing: 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.

WORKING PAPERS
[1] Second Price Auction with Entry Costs [with José Espín-Sanchez](New draft expected soon) [pdf]
     Briefing: We characterize equilibrium in a completely asymmetric second price auction with entry cost. We provide general existence result, characterize uniqueness of equilibrium and discuss welfare.

[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] Spillovers in Patent Races
     Briefing: Depending on market conditions, spillovers may not benefit firms racing for an innovation. In some markets, firms will try to avoid spillovers and in others foster them.

[2] When to License Sequential Inventions
     Briefing: Patent policy and market conditions not only affect the decision of whether to grant a license. They also affect when, throughout the patent life, a license will be granted.