PUBLICATIONS
[1] R&D incentives and product market competition, International Journal of Industrial Organization (2017), Volume 52, p. 427-449, with Konstantinos Serfes (Drexel University).
Abstract: This paper studies cost-reducing innovation in knowledge-based industries where asymmetric cross-firm R&D spillovers occur and increase the effectiveness of each firm's R&D in efficiency enhancement. We model this feedback mechanism and argue that, if firms' R&D decisions are strategic complements, both incoming and outgoing spillovers spur R&D in equilibrium. By acquiring more R&D, a firm increases its rival's R&D-output through outgoing spillovers and indirectly contributes to its own R&D performance, since it internalizes some part of the provided benefit through incoming spillovers. Thus, cross-firm spillovers can foster innovation even in a homogeneous-product industry.
[2] Team production, endogenous learning about abilities and career concerns, European Economic Review (2016), Volume 85, p. 229-244.
Abstract: This paper studies career concerns in teams where the support a worker receives depends on fellow team members' effort and ability. In this setting, by exerting effort and providing support, a worker can influence her own and her teammates' performances in order to bias the learning process in her favor. To manipulate the market's assessments, we argue that in equilibrium, a worker has implicit incentives to help or even sabotage her colleagues in order to signal that she is of higher ability. In a multiperiod stationary framework, we show that the stationary level of work effort is above and help effort is below their efficient levels. We also examine career concerns with explicit contracts.
[3] Incentive contracts under product market competition and R&D spillovers, Economic Theory (2015), Volume 58, Issue 2, p. 305-328.
Abstract: This paper studies cost-reducing R&D incentives in a principal-agent model with product market competition. It argues that moral hazard does not necessarily decrease firms' profits in this setting. In highly competitive industries, firms are driven by business stealing incentives and exert such high levels of R&D that burn up their profits. In the presence of moral hazard, underprovision of R&D incentives due to risk-sharing can generate considerable cost-savings implying higher profits for both rivals. This result indicates firms' incentives to adopt a collusive-like behavior in the R&D market. We also examine the agents' contracts and the profits-risk relationship when cross-firm R&D spillovers occur.
WORKING PAPERS
[1] Incentives to help or sabotage among co-workers (submitted), Appendix
Abstract: This paper studies compensation contracts and career concerns of co-workers when a worker's individual production depends on her colleague's effort and ability. We show that a manager who commits herself to a life-time salary path may induce a low risk-averse worker to help her colleague, while she may induce a high-risk averse worker even to sabotage. We argue that the manager may allow little sabotage in order to decrease the provided insurance and motivate the worker to focus on her own project and increase her own production. If commitment is not feasible and thus the contracts are renegotiated in each period, career concerns arise and a worker now has incentives to help or sabotage her colleague in her attempt to shape market assessments about her own ability. The manager will now use explicit contracts as a mean of diminishing the worker's (implicit) incentives to sabotage. We show that career incentives to affect their colleagues' production also arise for temporary workers who will be paired with another worker in the next period. This happens in this model because a worker can build up her own reputation by influencing her current colleagues' production.
[2] Knowledge spillovers spur cost reduction (submitted)
Abstract: This paper studies the effects of knowledge spillovers among product market competitors in different science-based industries. It argues that in industries in which outgoing spillovers decrease the effectiveness of a firm's R&D in reducing costs, the IP protection should be strengthened in order to protect the innovators from dissemination of knowledge. Low spillovers imply that rivals' R&D decisions are strategic substitutes. However, in industries in which outgoing spillovers increase the marginal productivity of a firm's R&D, the IP protection should be such that facilitates knowledge diffusion. We show that if spillovers are large enough so that firms' R&D decisions are strategic complements, both incoming and outgoing spillovers spur R&D in equilibrium. Cross-firm spillovers can foster innovation even in a homogeneous-product industry, under Bertrand and Cournot competition.
WORK IN PROGRESS
[1] "A theory of sex selection and human capital investment", with Dan Bernhardt (University of Illinois at Urbana-Champaign)
[2] "International Trade and Patent Protection", with Kyriakos Drivas, Sarantis Kalyvitis and Margarita Katsimi (Athens University of Economics & Business)
[3] "Leadership and aggressiveness in a delegation R&D game with spillovers"
[1] R&D incentives and product market competition, International Journal of Industrial Organization (2017), Volume 52, p. 427-449, with Konstantinos Serfes (Drexel University).
Abstract: This paper studies cost-reducing innovation in knowledge-based industries where asymmetric cross-firm R&D spillovers occur and increase the effectiveness of each firm's R&D in efficiency enhancement. We model this feedback mechanism and argue that, if firms' R&D decisions are strategic complements, both incoming and outgoing spillovers spur R&D in equilibrium. By acquiring more R&D, a firm increases its rival's R&D-output through outgoing spillovers and indirectly contributes to its own R&D performance, since it internalizes some part of the provided benefit through incoming spillovers. Thus, cross-firm spillovers can foster innovation even in a homogeneous-product industry.
[2] Team production, endogenous learning about abilities and career concerns, European Economic Review (2016), Volume 85, p. 229-244.
Abstract: This paper studies career concerns in teams where the support a worker receives depends on fellow team members' effort and ability. In this setting, by exerting effort and providing support, a worker can influence her own and her teammates' performances in order to bias the learning process in her favor. To manipulate the market's assessments, we argue that in equilibrium, a worker has implicit incentives to help or even sabotage her colleagues in order to signal that she is of higher ability. In a multiperiod stationary framework, we show that the stationary level of work effort is above and help effort is below their efficient levels. We also examine career concerns with explicit contracts.
[3] Incentive contracts under product market competition and R&D spillovers, Economic Theory (2015), Volume 58, Issue 2, p. 305-328.
Abstract: This paper studies cost-reducing R&D incentives in a principal-agent model with product market competition. It argues that moral hazard does not necessarily decrease firms' profits in this setting. In highly competitive industries, firms are driven by business stealing incentives and exert such high levels of R&D that burn up their profits. In the presence of moral hazard, underprovision of R&D incentives due to risk-sharing can generate considerable cost-savings implying higher profits for both rivals. This result indicates firms' incentives to adopt a collusive-like behavior in the R&D market. We also examine the agents' contracts and the profits-risk relationship when cross-firm R&D spillovers occur.
WORKING PAPERS
[1] Incentives to help or sabotage among co-workers (submitted), Appendix
Abstract: This paper studies compensation contracts and career concerns of co-workers when a worker's individual production depends on her colleague's effort and ability. We show that a manager who commits herself to a life-time salary path may induce a low risk-averse worker to help her colleague, while she may induce a high-risk averse worker even to sabotage. We argue that the manager may allow little sabotage in order to decrease the provided insurance and motivate the worker to focus on her own project and increase her own production. If commitment is not feasible and thus the contracts are renegotiated in each period, career concerns arise and a worker now has incentives to help or sabotage her colleague in her attempt to shape market assessments about her own ability. The manager will now use explicit contracts as a mean of diminishing the worker's (implicit) incentives to sabotage. We show that career incentives to affect their colleagues' production also arise for temporary workers who will be paired with another worker in the next period. This happens in this model because a worker can build up her own reputation by influencing her current colleagues' production.
[2] Knowledge spillovers spur cost reduction (submitted)
Abstract: This paper studies the effects of knowledge spillovers among product market competitors in different science-based industries. It argues that in industries in which outgoing spillovers decrease the effectiveness of a firm's R&D in reducing costs, the IP protection should be strengthened in order to protect the innovators from dissemination of knowledge. Low spillovers imply that rivals' R&D decisions are strategic substitutes. However, in industries in which outgoing spillovers increase the marginal productivity of a firm's R&D, the IP protection should be such that facilitates knowledge diffusion. We show that if spillovers are large enough so that firms' R&D decisions are strategic complements, both incoming and outgoing spillovers spur R&D in equilibrium. Cross-firm spillovers can foster innovation even in a homogeneous-product industry, under Bertrand and Cournot competition.
WORK IN PROGRESS
[1] "A theory of sex selection and human capital investment", with Dan Bernhardt (University of Illinois at Urbana-Champaign)
[2] "International Trade and Patent Protection", with Kyriakos Drivas, Sarantis Kalyvitis and Margarita Katsimi (Athens University of Economics & Business)
[3] "Leadership and aggressiveness in a delegation R&D game with spillovers"