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We provide a canonical and tractable model of a trade platform enabling buyers and sellers to transact. The platform charges a percentage fee on third-party product sales and decides whether to be "hybrid", like Amazon, by selling its own product. It thereby controls the number of differentiated products (variety) it hosts and their prices. Using the mixed market demand system, we capture interactions between monopolistically competitive sellers and a sizeable platform product. Using long-run aggregative games with free entry, we endogenize seller participation through an aggregate variable manipulated by the platform's fee. We show that a higher quality (or lower cost) of the platform's product increases its market share and the seller fee, and lowers consumer surplus. Banning hybrid mode benefits consumers. The hybrid platform might favor its product and debase third-party products if the own product advantage is sufficiently high. We also provide some tax policy implications.

With permission of CEPR. Accepted: RAND Journal of Economics

We examine how groups fall prey to the sequence effect when they make choices based on informed assessments of complex situations; for example, when evaluating research and development (R&D) projects. The core argument is that the temporal sequence of selection matters because projects that appear in a sequence following a funded project are themselves less likely to receive funding. Building on the idea that selecting R&D projects is a demanding process that drains participants’ mental and emotional resources, we further theorize the moderating effect of the influence of the timing of the panel meeting on the sequence effect. We test these conjectures using a randomization in sequence order from several rounds of R&D project selection at a leading professional service firm. We find robust support for the existence of a sequence effect in R&D as well as for the moderating effect. We further explore different explanations for the sequence effect and how it passes from the individual to the panel. These findings have broader implications for the literatures on innovation and search in general and on group decision-making for R&D, specifically, as they suggest that a previously overlooked dimension affects selection outcomes.

We study a canonical model of simultaneous price competition between firms that sell a homogeneous good to consumers who are characterized by the number of prices they are exogenously aware of. Our setting subsumes many employed in the literature over the last several decades. We show there is a unique equilibrium if and only if there exist some consumers who are aware of exactly two prices. The equilibrium we derive is in symmetric mixed strategies. Furthermore, when there are no consumers aware of exactly two prices, we show there is an uncountable-infinity of asymmetric equilibria in addition to the symmetric equilibrium. Our results show the paradigm generically produces a unique equilibrium. We also show that the commonly-sought symmetric equilibrium (which also nests the textbookBertrand pure strategy equilibrium as a special case) is robust to perturbations in consumer behaviour, while the asymmetric equilibria are not.

We build a framework where firm size is a source of market power in a frictional labor market. The key mechanism is that a granular employer can eliminate its own vacancies from a worker’s outside option in the wage bargain. Hence, a granular employer does not compete with itself for workers. We derive a structural mapping from a microfounded concentration index to average wages. Using the framework in Austrian micro-data, we find that granular market power depresses wages by 9-13 percent and can explain 40 percent of the observed decline in the labor share from 1997 to 2015. Merging the two largest firms in every labor market depresses market-wide wages by six percent.

This working paper was also published in the IZA Institute of Labour Economics discussion paper series: https://www.iza.org/publications/dp/12574