Current Research

  1. (2017) Education, Identity, and Community: Lessons from Jewish Emancipation, with Jean-Paul Carvalho and Mark Koyama, Public Choice, 171(1) pp. 119-143.
  2. (2015) “Competition Between Open Source and Proprietary Software: Strategies for Survival,” Journal of Management Information Systems, 32(3) pp. 268-295.

Working Papers

The Cult of the Firm (JOB MARKET PAPER).

  • ABSTRACT: I develop a model of duopoly competition with network externalities and heterogeneous consumers. The model is the first to treat preferences as endogenous and subject to influence by the firms. Consumers have different valuations of the network, so firms are concerned not only about network size, but about network composition as well. To analyze the market, I import tools from the economics of religion and culture typically used for modeling cults and other close-knit communities. As a result, prices are no longer necessarily monotonic in the size of the installed base. Therefore, profitability can vary inversely with market share. A smaller firm can thus be more profitable than a larger competitor by strategically targeting and cultivating its consumer base, a strategy often employed by strict religious organizations and clubs to build a highly committed community from the population.

Given Enough Eyeballs, All Bugs Are Shallow: Incentives for the Over-Provision of Public Goods.
  • ABSTRACT: Existing public and club good models assume monotonicity in the utility of both consumption and provision.  A wide range of public and club goods, including open source software, violate these monotonicity assumptions.  Accounting for appropriate non-monotonicities dramatically alters the equilibrium structure and welfare.  When the utility from consumption is no longer monotonic (local satiation), increasing the number of contributors mitigates the free-rider problem, rather than exacerbating it.  When both the consumption value and provision cost are non-monotonic, increasing the number of contributors not only mitigates the free-rider problem, but leads to an over-provision problem in which both the number of contributors and the intensity of contributions are inefficiently high.  When the population is large, every equilibrium yields over-provision.  Lastly welfare-maximizing policies involve transferring surpluses from consumers to producers, decreasing the utility from consumption and increasing the utility of contribution.

In the Club: Strategic Admission, Membership, and Endogenous Splits.

  • ABSTRACT: Clubs are an important form of organization in many economic contexts. This is the first study to combine a dynamic analysis of capital formation within clubs with an analysis of competition among clubs, generating several new insights. In particular, individuals with preferences that are far from the objective of the club may not immediately split and form a new club. Instead they may take advantage of the increasing returns from club membership and incubate their new club within an existing one.  In equilibrium, clubs may not be able to prevent this type of behavior even if it is undesired.  Moreover, there are a range of conditions under which clubs may encourage incubation of future competitors to  take advantage of increasing returns themselves and build up their own capital base.  The results are applied to the software industry.

  • ABSTRACT: This paper investigates strategic alliances in the nonprofit sector in the form of franchising. Using a dynamic model of local public goods with endogenous affiliation and splitting, we show that local organizations may choose to affiliate with the national organization for faster capital accumulation. Temporary alliance occurs when a local organization strategically affiliates with the national organization only to break away after accumulating enough capital. Alliance is more likely to arise and persist when the local chapter is smaller, when the local chapter's mission is closer to the national organization's, when the national organization is more efficient in production, and when the local chapter is more patient. Moreover, regulation that requires the local chapter to be affiliated with the national organization would be welfare reducing when the local chapter is large, when the local and national missions differ substantially, and when production at the national organization is inefficient.

Reimbursing Consumers' Switching Costs in Network Industries (NET Institute Working Paper #16-13, with Jiawei Chen, revise and resubmit).
  • ABSTRACT: This paper investigates firms’ decisions to reimburse consumers’ switching costs in network industries. Prior literature finds that switching costs incentivize firms to harvest their locked-in consumers rather than price aggressively for market dominance, thereby resulting in a lower market concentration. Using a dynamic duopoly model, we show that this result is reversed if firms have the option to reimburse consumers’ switching costs. In that case the larger firm reimburses a greater share of the switching cost than the smaller firm does, as an additional instrument to propel itself to market dominance. Consequently, an increase in the switching cost increases market concentration. Compared to the case without switching cost reimbursement, allowing firms the option to reimburse results in greater consumer welfare despite having a higher market concentration, as consumers are helped by larger network benefits and often lower effective prices.