“Be quick to listen and slow to speak” - James 1:19
1. Consumer Search, Collusion, and Artificial Intelligence
Job Market Paper [Manuscript]
Abstract: This article investigates the impact of consumer search friction on seller collusion and market prices. The study employs an oligopoly model in which consumers sequentially search for the best product with advertised prices. By combining economic theory with computational experiments using reinforcement learning algorithms, the study shows that collusion is more sustainable, and market prices are higher when search costs are low.
2. Product Return Policies, Pricing, and Consumer Welfare
R&R at the International Journal of Industrial Organization [Manuscript]
Abstract: This article presents a monopoly model in continuous time that incorporates a dynamic process of consumer learning about the quality of purchased products, coupled with the option to return the item within a specified period. The study demonstrates that a no-questions-asked return policy leads to a lower consumer surplus compared to a conditional return policy when consumers exhibit low price sensitivity. The study also finds that lower product quality can lead to a higher market price if the seller can extract a high salvage value from the returned items.
Figure 1. Simulations of market prices with different product quality (α and λ).
Figure 2. Simulations of return periods with different product quality (α and λ).
3. Product Return Policies under Duopoly: Online and Local Stores
Abstract: This article presents a duopoly model to examine the impact of return policies on the market power of online and local stores selling the same products. Specifically, the study develops a closed-form solution for the optimal return periods offered by the two sellers, taking into account consumer learning about product quality during the trial period. The findings indicate that both sellers can leverage return policies to enhance their market power, with accepting returns after sales being a key strategy. Moreover, the model reveals that higher information costs result in greater market price dispersion and greater market share for online stores.