David D. Reh School of Business
I am an assistant professor of economics and financial studies at Clarkson University. My research falls under the umbrellas of social dynamics, public economics, political economy, the economics of culture and religion, game theory, and industrial organization. I am particularly interested in the effects of diversity and heterogeneity on markets with consumption externalities, specifically the provision of public goods, club goods, networks, platforms, and social interactions.
I hold an M.A. in mathematical behavioral sciences from the Institute for Mathematical Behavioral Sciences at the University of California, Irvine and a Ph.D. in economics from the University of California, Irvine.
(Forthcoming) Failed Secular Revolutions: Religious Belief, Competition, and Extremism, with Jean-Paul Carvalho and Jared Rubin, Public Choice.
All advanced economies have undergone secular revolutions in which religious belief and institutions have been subordinated to secular forms of authority. There are, however, numerous examples of failed secular transitions. To understand these failures, we present a religious club model with endogenous entry and cultural transmission of religious beliefs. A spike in the demand for religious belief, due for example to a negative economic shock, induces a new and more extreme organization to enter the religious market and exploit the dissatisfaction of highly religious types with the religious incumbent. The effect is larger where institutional secularization is more advanced, for example where the religious establishment has moderated itself or has been moderated by the political authority. The greater the moderation of the religious incumbent, the more extreme is the position chosen by the religious entrant, and the larger is the rise in religious participation. Hence, unanticipated shifts in religious demand can lead to the emergence of new and more extreme religious organizations, and reverse previous trends toward secularization. Our model sheds light on the causes and consequences of failed secular revolutions and religious revivals in Latin America and Egypt.
A wide range of public goods, such as open source software, possess two often-ignored features: (i) excludable and potentially rivalrous contribution benefits (e.g. status seeking) and (ii) nonexcludable and nonrival consumption costs (e.g. adoption costs). I develop a model of the voluntary provision of public goods that incorporates these features. I find that these additional features mitigate the well-known incentive problems, but introduce new ones. Costly consumption lessens the free-rider problem, leading to more efficient provision. Private benefits similarly reduce the free-rider problem, but can lead to over-provision via a negative congestion externality on the supply side. Status-seeking induces an increase in contributions to the benefit of each contributor but imposes a cost on all other consumers and contributors. Efforts to maximize welfare by a community leader or social planner often involve transferring surpluses from consumers to producers.
The religious club model is central to the economics of religion. To expand its scope for application, we develop the first model to combine (i) increasing returns to membership, (ii) discrimination, and (iii) religious competition. Any degree of non-rivalry in religious club goods introduces scale effects which require new analytical techniques. Due to increasing returns, a religious leader faces a trade-off between forming a large inclusive club and screening out less committed types to form a small strict club. Endogenous screening makes religious strictness a non-monotonic function of economic development, which is consistent with the emergence of strict sects following periods of liberalization and economic growth. Blanket discrimination against all community members makes the religious community stricter and more cohesive, explaining the survival of religious sects and minorities under persecution. Stigmatizing actively religious members promotes social integration on the whole, but can create an extreme isolationist sect. Contrary to prior work on religious markets, we uncover a mechanism by which religious competition reduces religious participation and boosts social integration. Thus, attempts to moderate religion by stigmatizing participation and restricting competition could backfire. Finally, our model provides guidance for empirical work on religious discrimination and further extensions of the religious club model.
(2018) "Going Along or Going Independent? A Dynamic Analysis of Nonprofit Alliances," with Jiawei Chen, B.E. Journal of Economic Analysis and Policy, 18(2). [working paper version]
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.
(2017) "Education, Identity, and Community: Lessons from Jewish Emancipation," with Jean-Paul Carvalho and Mark Koyama, Public Choice, 171(1) pp. 119-143. [working paper version]
Why do some minority communities take up opportunities for education while others reject them? To shed light on this, we study the impact of Jewish Emancipation in nineteenth century Europe on patterns of education. In Germany, non-religious and Reform Jews dramatically increased their rates of education. In the less developed parts of Eastern Europe, Orthodox and ultra-Orthodox communities imposed unprecedented restrictions on secular education and isolated themselves from society. Explaining this bifurcation requires a model of education that is different from the standard human capital approach. In our model, education not only confers economic benefits but also transmits values that undermine the cultural identity of minority groups. We show that it is individually rational for agents who benefit least from rising returns to education to respond by reducing their investment in education. Group-level sanctions for high levels of education piggyback upon this effect and amplify it.
(2015) "Competition Between Open Source and Proprietary Software: Strategies for Survival," Journal of Management Information Systems, 32(3) pp. 268-295. [working paper version]
There are two puzzles in the software competition literature: whether both proprietary and open source software will survive and how producers of proprietary software differentiate themselves from open source competition. I address both puzzles by analyzing competition between a firm producing proprietary software and a community producing open source software. If the firm faces no competition, then the software caters to less technologically savvy individuals. When facing competition, the open source software caters to the most technologically savvy individuals, leading the firm to target even less savvy individuals than it would when acting as a monopolist in order to differentiate its software from the open source option. The open source movement, then, may not be an unalloyed success as the growth in open source can be tied to deterioration in the proprietary software. Given that both types of software survive by catering to different segments of the market, an important avenue for research will be to analyze the stability of the underlying segments and the corresponding welfare implications.
This paper analyzes the rise of radical movements and the design of counter-radicalization policies. We build a model centered on a population (or subpopulation) known as the identity group that derives meaning from participation in identity-based activities. A forward-looking organization provides a platform (i.e., club) for these activities. By dynamically tuning its membership requirements, the organization determines both current participation and the future share of radicals. The warning sign for radicalization is cultural purification, i.e., the screening out of moderates and exclusive recruitment of radicals. While this shrinks the club, it puts it on a growth path along which it becomes larger and more extreme over time. Conventional counter-radicalization policies can backfire and fuel this process of radicalization. The organization can itself boost radicalization through outreach and by inducing discrimination against group members. The radicalization mechanisms we identify can be disabled by mild anti-radical messaging and informational interventions that eliminate stereotypes.
Reimbursing Consumers' Switching Costs in Network and Non-network Industries (NET Institute Working Paper #16-13, with Jiawei Chen, under review).
To analyze how firms' policies to reimburse consumer switching costs affect prices, market structure, and welfare, we develop a dynamic duopoly model with network effects, switching costs, and switching cost reimbursement. We find that each firm's reimbursement strategy is nonmonotonic in its installed base. While nonmonotonic, the firm with the greater installed base always reimburses more of the switching cost than its smaller competitor, allowing the firm that obtains an early advantage to dominate the market. Consumers benefit from the reimbursement, while producers only benefit in network industries when network effects are large; otherwise, the reimbursement induces a prisoner's dilemma.
Dynamic Price Competition and Evolutionary Behavior with Search (with Blake Allison, under review). [Online Appendix]
This paper studies a model of undirected consumer search with boundedly-rational agents. Consumers observe one price, can engage in costly search to learn the other prices, and then purchase from the firm with the lowest observed price. Each consumer searches only if the observed price exceeds their reservation price, which they dynamically update through one of two revision protocols: myopic best responses or imitation. Firms myopically optimize given the current distribution of consumer thresholds. The short run pricing is characterized by Edgeworth cycles. Each cycle ends when the firm with the larger installed base relents and monopolizes its residual demand. These price cycles persist in the long run except under restrictive conditions. Convergence to the Diamond paradox occurs only if consumers adapt to search sufficiently infrequently. The Bertrand paradox can emerge temporarily when the search cost becomes arbitrarily small, but cannot persist.
Works in Progress
Incubation and the Emergence of Identity-Based Organizations.
Searching for Extremists (with Jean-Paul Carvalho).
Collective Action with Intersectional Identities.