Welcome! I am an Assistant Professor in the Department of Economics at Bocconi University. Prior to joining Bocconi, I obtained my PhD at the University of Mannheim. During the academic year 2021-22, I am visiting Northwestern University.

My research interests lie primarily in the field of Microeconomic Theory. In particular, I am interested in dynamic problems with evolving information. The main applications of my theoretical research lie in the economics of science, the economics of innovation, and industrial organization more broadly.

I am also interested in empirical work; so far, I have been working on the estimation of auction models, the analysis of merger policy, and the interaction of pricing strategies with online ratings.

Economics of Science and Innovation


A Quest for Knowledge

(with Johannes Schneider)

Abstract: Is more novel research always desirable? We develop a model in which knowledge shapes society's policies and guides the search for discoveries. Researchers select a question and how intensely to study it. The novelty of a question determines both the value and the difficulty of discovering its answer. We show that the benefits of discoveries are non-monotone in novelty. Through a dynamic externality, moonshots---research on questions more novel than myopically optimal---can improve the evolution of knowledge. Incentivizing moonshots requires promising ex-post rewards. However, even a myopic funder combines rewards with ex-ante cost reductions to increase research effort.


[pdf], [slides], [video], [Twitter]


On Risk an Time Pressure: When to Think and When to Do

(with Johannes Schneider, Journal of the European Economic Association, accepted for publication.)

Abstract: We study the tradeoff between fundamental risk and time. A time-constrained agent has to solve a problem. She dynamically allocates effort between implementing a risky initial idea and exploring alternatives. Discovering an alternative implies progress that has to be converted to a solution. As time runs out, the chances of converting it in time shrink. We show that the agent may return to the initial idea after having left it in the past to explore alternatives. Our model helps explain so-called false starts. To finish fast, the agent delays exploring alternatives reducing the overall success probability.


[pdf], [slides]


Informative Milestones in Experimentation

Abstract: I study a continuous-time moral hazard problem with learning about a two-stage project of unknown quality. The first-stage arrival time is informative but not conclusive about the project’s quality. Due to the informativeness, the optimal contract features a combination of continuation value and intermediate bonus payments as a reward. There is a negative correlation between the first success time and the share of bonus payments in the reward. Second-stage deadlines adjust to the first-stage success time: early successes are rewarded with longer deadlines in the second stage. When agent replacement between stages is possible, the principal will replace the agent if the first success arrives late.


[pdf]


Agency Cycles

(with David Lindequist)

[in progress]

Ratings and Pricing


Pricing for the Stars: Dynamic Pricing in the Presence of Rating Systems

(with André Stenzel and Peter Schmidt, R&R at Management Science, new version!)

Abstract: Maintaining good ratings increases the profits of sellers on online platforms. We analyze the role of strategic pricing for ratings management in a setting where a monopolist sells a good of unknown quality. Higher prices reduce the value for money, which on average worsens reviews. However, higher prices also induce only those consumers with a strong taste for the product to purchase, which on average improves reviews. Our model flexibly parametrizes the two effects. This parametrization can rationalize the empirical heterogeneity in the relationship between reviews and prices and highlights the dependence of outcomes on the dominant effect. We analytically characterize a seller's optimal dynamic pricing strategy, long-run profits and consumer surplus, and consumers' speed of learning. We show that dynamic pricing benefits the seller, but may harm consumers when higher prices lead to better reviews. Recent changes to rating systems, which have increased the sensitivity of rating systems, may have harmed consumers by increasing prices and by reducing the speed of learning.


[pdf], [EC 20], [Mathematica]


Value for Money and Selection: How Pricing Affects Airbnb Ratings

(with Kevin Tran, Maximilian Schaefer and André Stenzel)

Abstract: We investigate the impact of prices on seller ratings. In a stylized model, we illustrate two opposing channels through which pricing affects overall ratings and rating subcategories. First, higher prices reduce the perceived value for money which worsens ratings. Second, higher prices increase the taste-based valuation of the average traveler which improves ratings. Using data from Airbnb, we document a negative relationship between prices and ratings for most rating subcategories indicating that the value-for-money effect dominates the selection effect. In line with our model, we find that hosts of low-rating listings exert more effort than those of high-rating listings. Finally, an empirical assessment of the dynamics in the market suggests that taking the effect of prices on future ratings into account pays off: entrants who set low entry prices obtain better ratings and higher revenues in the medium run. A median entry discount of 8.5 percentage points increases medium-run monthly revenues by approximately 50 euros.


[pdf]


Strategic Pricing and Ratings

(with Anton Sobolev, Konrad Stahl and André Stenzel)

Abstract: A seller serving two generations of short lived heterogeneous consumers sells a product under uncertain demand. We characterize the seller's optimal pricing, taking into account that the current period's price affects the information transmission to the next period consumers via consumer ratings. While the seller always prefers to generate more information, it is not necessarily in the consumers' interest. We characterize situations in which consumer surplus and welfare are decreasing in additional information. We provide conditions under which aggregate consumer surplus and welfare are lower with than without a rating system.


[pdf]


Economic Epidemiology


Epidemics with Behavior

(with Satoshi Fukuda and Nenad Kos)

Abstract: We study social distancing in an epidemiological model. Distancing reduces the individual's probability of getting infected but comes at a cost. Equilibrium distancing flattens the curve and decreases the final size of the epidemic. We examine the effects of distancing on the outset, the peak, and the final size of the epidemic. First, the prevalence increases beyond the initial value only if the transmission rate is in the intermediate region. Second, the peak of the epidemic is non-monotonic in the transmission rate. A reduction in the transmission rate can increase the peak. However, a decrease in the cost of distancing always flattens the curve. Third, both a reduction in the transmission rate as well as a reduction in the cost of distancing decrease the final size of the epidemic. Our results suggest that public policies that decrease the transmission rate can lead to unintended negative consequences in the short run but not in the long run. Therefore, it is important to distinguish between interventions that affect the transmission rate and interventions that affect contact rates.


[pdf]


Time-Varying Cost of Distancing: Distancing Fatigue, Holidays and Lockdowns

(with Satoshi Fukuda and Nenad Kos)

Abstract: We study an SIR model with endogenous behavior and a time-varying cost of distancing. We show that a steep increase in distancing cost is necessary for a second wave of an epidemic to arise. As a special case of the model with changing cost, we study distancing fatigue---the distancing cost increases in past distancing---and show that it cannot generate a second wave. Moreover, we characterize the change in the distancing cost necessary for the slope of prevalence to change its sign. This characterization informs policymakers: (i) of the required strictness of mitigation policies to cease the increase of prevalence, (ii) when and how policies can be lifted to avoid a second wave, and (iii) whether public holidays are likely to generate another wave of the epidemic. Finally, we illustrate the implementation of desirable time-varying transmission rates through time-varying distancing cost with endogenous equilibrium distancing.


[pdf]

Procurement Auctions


Asymmetries in Procurement Auctions: Efficiency vs. Information

(with Stefan Weiergraeber, R&R at IJIO)

Abstract: We develop a structural empirical model of procurement auctions with private and common value components and bidder asymmetries in both dimensions. While each asymmetry can explain the dominance of a firm, they have opposite welfare implications. We propose a novel empirical strategy to quantify the two asymmetries using detailed contract-level data on the German market for railway passenger services. Our results indicate that the incumbent is slightly more cost-efficient and has substantially more information about future ticket revenues than its competitors. If bidders’ common value asymmetry was eliminated, the median probability of selecting the efficient firm would increase by 61%-points.


[pdf]


Competitive Procurement Design: Evidence from German Railway Passenger Services

(with Matthias Hunold)

Abstract: We study competitive awarding procedures of short haul railway passenger services in Germany from 1995 to 2011 by means of a newly collected data set. In particular, we use regression techniques to investigate the determinants of the number of bidders, the identity of the winning bidder and the subsidy level. We find that there are more bidders when the contract duration is high and the revenue risk low. The dominant operator is more likely to win contracts if it is the incumbent, the network is large, the contract duration is high, when used rolling stock is admitted and when there are few other bidders.

[pdf]

Mergers


An Empirical Evaluation of EU Merger Decisions

(with Konrad Stahl and Nadine Hahn)

[in progress]


Christoph Carnehl

Bocconi University
Department of Economics
Via Roentgen 1
20136 Milan, Italy
+39 02 5836 5277
christoph.carnehl@gmail.com