This award funds research on two projects in economic theory. The first examines how a monopolist will choose prices over time, with a focus on how monopoly power in the product market affects how the firm makes decisions over time about production technologies. The second project is in the general area of mechanism design, the design of methods to allocate recourses. The specific application is in matching markets under incomplete information, and the work could give us new ideas about how to design allocation methods that will lead to stable outcomes. The research advances science by developing new methods that can be used to analyze situations from whether to regulate a durable goods monopolist to how labor markets can do a better job of helping employers find the right employees.
The first project explores dynamic pricing strategies of monopolists in environments with general market demands and production technologies. The goal is to characterize the relationship between monopoly power and production technology, and study how the consumer and producer surpluses in dynamic models differ from the static model. This work will provide a new and more general foundation for the fast growing literature in empirical economics on dynamic pricing of durable goods. The second project seeks to advance the study of the core and stability in matching markets with incomplete information. The research agenda includes offering practically relevant refinements of existing concepts, finding dynamic game foundations of the concept of pairwise stability, characterizing the precise relationship between the core and stability, and analyzing stable matchings in various environments such as those with costly investment and hidden types.
