My research evolves around the following areas and topics:
- International Trade
Global value chains
Firm trade dynamics
Institutional reform and trade policy
- Industrial Organization
Firm pricing strategies
Optimal Payment Contracts in Trade Relationships
R&R (re-submitted), International Economic Review
Abstract. In buyer-seller trade relationships, long-term collaboration and payment contract selection are mutually dependent: While the provision of trade credit to buyers increases the stability of trade relationships, its availability varies systematically as relationships evolve. To explain this reciprocity, we model the optimal provision dynamics of trade credit when the seller's information about the buyer's type is incomplete and parties can sign contracts with limited enforceability. We investigate how self-enforcing relational contracts and formal contracts complement each other and show how their interaction determines optimal payment contract choice. We find that payment contracts can be interpreted as screening technologies and imply distinct learning opportunities for the seller about the buyer's type. When buyers are stochastically liquidity-constrained and sellers can observe their liquidity status, in line with empirical evidence the model predicts that all transitions between payment terms lead to the provision of seller trade credit in the long run.
- Complex Pricing and Consumer-Side Attention
with Alexander Rasch and Tobias Wenzel
R&R, International Journal of Industrial Organization
Abstract. This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and in which some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms' ability to price discriminate: (i) diminishing the range of contracts via a reduction in the number of two-part tariffs offered (which prohibits inter-group price discrimination), and (ii) a reduction in tariff complexity via the abolishment of linear fees (which prohibits inter- and intra-group price discrimination). We characterize the effects of these interventions on firm profits and (informed and uninformed) consumer welfare, and identify conditions for the optimal policy. Our results provide insights for the evaluation of recent policy interventions (e.g., the regulation of roaming charges in the EU market).
- Trade Policy along the Global Value Chain: A Rationale for the Existence of Deep Trade Agreements
with Hartmut Egger
Abstract. This paper sets up a model of trade, in which two countries with differing levels of technology specialize in the production of sub-stages of the global value chain. In the open economy, the technologically backward country exports intermediates in exchange for imports of a homogeneous consumption good from the technologically advanced country. This vertical specialization gives the two countries access to different policy instruments for appropriating rents in the open economy. The technologically advanced country can impose an import tariff on intermediates to lower foreign wages and increase national welfare. An import tariff is ineffective for the technologically backward economy, which can instead lower institutional quality and allow its workers to consume intermediate goods at a utility discount. In a non-cooperative policy equilibrium, the incentives to appropriate rents can be strong enough to lower welfare of the two countries to their autarky levels. This gives scope for a deep trade agreement that conditions tariff reductions on institutional quality improvements and is beneficial for both countries. Empirical evidence shows support for the main mechanisms of the model.