Working Papers

Input-Price Responses to Horizontal Mergers and the Bargaining-Leverage DefensePDFSSRN
September 2022
with Rebekah Dix

Abstract We study the implications of endogenous input prices for horizontal merger policy when input prices are set before goods prices. Generalizing the first-order approach of Farrell and Shapiro (2010) and Jaffe and Weyl (2013), we derive a measure of unilateral incentives to adjust input prices after a downstream merger, Input Pricing Pressure. We use this measure to show that mergers often incentivize higher input prices, and that these incentives hinge on changes in downstream pass-through rates and marginal cost efficiencies generated by the merger. By implication, consumer surplus-maximizing antitrust policy may be too lax when input prices are assumed fixed, and it should be biased against claims that input prices will fall after a downstream merger. In an empirical application to local retail beer markets, endogenizing input prices substantially raises the consumer harm from mergers of retailers.

Publications

Regulating Transformative TechnologiesPDFNBER
January 2024, forthcoming at American Economic Review: Insights
with Daron Acemoglu

Abstract Transformative technologies like generative AI promise to accelerate productivity growth across many sectors, but they also present new risks from potential misuse. We develop a multi-sector technology adoption model to study the optimal regulation of transformative technologies when society can learn about these risks over time. Socially optimal adoption is gradual and typically convex. If social damages are large and proportional to the new technology's productivity, a higher growth rate paradoxically leads to slower optimal adoption. Equilibrium adoption is inefficient when firms do not internalize all social damages, and sector-independent regulation is helpful but generally not sufficient to restore optimality.

Media: Chicago Booth ReviewQuartz

Implications of Uncertainty for Optimal PoliciesPDFSlides
January 2022, Journal of Economic Theory
with Maxim Troshkin

Abstract We study the implications of ambiguity for optimal fiscal policy in macro public finance environments with heterogeneous agents and private idiosyncratic shocks. We describe conditions under which ambiguity implies that it is optimal to periodically reform policies. Periodic reforms lead to simplified optimal policies that are not fully contingent on future shocks; at times they also lose dependence on the full history of past shocks. These simplified policies can be characterized without complete backward induction when the time horizon is finite. However, linear policies can be far from optimal. We also show that equilibria in decentralized versions of these economies are not generally efficient, implying a meaningful role for government provision of insurance, unlike in conventional environments with a narrower view of uncertainty.

In Progress

Combining Complements: Theory and Evidence from Cancer Treatment Innovation
with Rebekah Dix

Technology Paradigms, Lock-in, and Economic Growth
with Daron Acemoglu