Research Interests

  • Innovation 
  • Competition Policy
  • Multinational Enterprises​

Current Research

The Breakup of Bell and its Impact on Innovation

with Martin Watzinger, University of Muenster
 Download / CRC Discussion Paper / CEPR Discussion Paper

Media: FAZ / ProMarket Blog
We analyze the effects of the 1984 breakup of the Bell System on the rate, diversity, and direction of US innovation. In the antitrust case leading to the breakup, AT&T, the holding company of the Bell System, was accused of using exclusionary practices against competitors. The breakup was intended to end these practices. After the breakup, the scale and diversity of telecommunications innovation increased. Total patenting by US inventors related to telecommunications increased by 19%, driven by companies unrelated to the Bell System. Patenting by Bell’s successor companies decreased, but not the number of top inventions.

Imperfect Price Information, Market Power, and Tax Pass-Through

with Felix Montag, Robin Mamrak and Alina Sagimuldina
September 2023
Download / CRC Discussion Paper /  CESifo Working Paper / voxEU Column

Media: ProMarket Blog
Pass-through determines how consumers respond to taxes. We investigate the impact of imperfect price information on pass-through of commodity taxes. Our theoretical model predicts that the pass-through rate increases with the share of well-informed consumers. Pass-through is higher for the minimum price, paid by well-informed consumers, than for the average price, paid by uninformed consumers. Moreover, passthrough to the average price is non-monotonic with respect to the number of sellers. An empirical analysis of multiple recent tax changes in the German and French retail fuel markets confirms our theoretical predictions. Our results have implications for tax policy and shed light on the relative effectiveness of Pigouvian taxes versus regulation.

VAT reduction as unconventional fiscal policy in Germany:
Fast but heterogeneous pass-through in the fuel market

with Felix Montag and Alina Sagimuldina
An updated version of this paper with the title "Imperfect Price Information, Market Power, and Tax Pass-Through" can be found above.

Standing on the shoulders of science

with Josh Krieger, Harvard and Martin Watzinger, University of Münster 
Download / HBS working paper / CEPR Discussion Paper / VoxEu  / Patent novelty data / Accepted for publication in Strategic Management Journal
Today's innovations rely on scientific discoveries of the past, yet only some corporate R&D builds directly on scientific output. In this paper, we analyze U.S. patents to investigate how firms generate value by building on prior art ``closer" to science and establish three new facts about the relationship between science and the value of inventions. First, we show that patent value is decreasing in distance-to-science. Patents building directly on scientific publications are on average 26% more valuable than patents in the same technology which are disconnected from science. Patents closer to science are also more likely to be in the tails of the value distribution (i.e., greater risk and greater reward). Next, we use patent text analysis to show that patent value increases with patent novelty. Third, we find that science-intensive patents are more novel. We discuss firm heterogeneity and the causes behind the science premium. Overall, firms that consistently use science for invention produce higher value patents generally, and especially when they ``build on the shoulders" of their own scientific work.

How antitrust can spur innovation: ​Bell Labs and the 1956 consent decree

with Martin Watzinger, Thomas Fackler and Markus Nagler
 Download / VoxEU/ Link to CEPR Discussion Paper / Link to published version (complimentary access)
​AEJ: Policy 12.4 (2020): 328-59.
Winner of the  AEJ Best Paper Awards

Media: New York Times / Latest Thinking / Stanford Law Revice  / The Register / Fast Company / American Progress / The Conversation 
Is compulsory licensing an effective antitrust remedy to increase innovation? To answer this question, we analyze the 1956 consent decree which settled an antitrust lawsuit against Bell, a vertically integrated monopolist charged with foreclosing the telecommunications equipment market. Bell was forced to license all its existing patents royalty-free, including those not related to telecommunications. We show that this led to a long-lasting increase in innovation but only in markets outside the telecommunications industry. Within telecommunications, where Bell continued to exclude competitors, we find no effect. Compulsory licensing is an effective antitrust remedy only if incumbents cannot foreclose the product markets.

Publications

Books

  • "Contracts in Trade and Transition: The Resurgence of Barter" (with Dalia Marin), Cambridge and London: MIT Press, 2002