Why Do Supply Disruptions Lead to Inflation (While Demand Booms Do Not)? Survey Evidence from the COVID Pandemic
Joint work with Jean-Paul L’Huillier, Gregory Phelan, and Maximilian Weiß
Current version: February 2026
Abstract: Firms tend to justify price increases as necessary to cover rising costs. However, standard models imply that firms not only adjust prices to cost increases, but also to changes in spending. We present a model where, instead, there is differential adjustment depending on the type of shock. The model is disciplined using a firm survey, which shows that, towards the end of the pandemic, price increases were primarily a response to higher costs. In contrast, firms report not reacting to higher demand to avoid upsetting customers. Supply shocks are responsible for most of the upward adjustment of prices.
Do Non-Compete Clauses Undermine Minimum Wages?
Joint work with Fabian Schmitz
Current version: September 2022
Abstract: Many low-wage workers in the United States have signed non-compete clauses, forbidding them to work for competitors. Empirical research has found a positive correlation between the level of the minimum wage and the prevalence of non-compete clauses. We explain this with moral hazard. By incentivizing more effort, non-compete clauses transfer utility from the agent to the principal. If the minimum wage is sufficiently high, the agent would get a rent without non-compete clauses. With a non-compete clause, the principal can extract this rent at some efficiency loss.
Cournot Competition with Asymmetric Price Caps
Current version: September 2022
Abstract: Price regulation may subject identical goods to different price caps. To analyze the welfare effects of such regulation, I incorporate asymmetric price caps into a quantity competition model. A (non-price) rationing rule determines a firm’s inverse residual demand function in the presence of price caps, and the price cap makes the inverse residual demand function flat above the price cap. If only one price cap binds, asymmetric price caps induce a trade-off: When adjusting the binding price cap to increase the total quantity, the production gets more unequal across firms, that is, more inefficient.
Fehr–Schmidt Inequality Aversion in the RICE Integrated Assessment Model
Current version: March 2026
Abstract: Standard IAMs typically use constant relative risk aversion (CRRA) welfare, where a single curvature parameter jointly governs intergenerational weighting and interregional equity, so comparative statics in “inequality aversion” necessarily change discounting. I implement Fehr–Schmidt (FS) inequality aversion in the RICE model to separate directional interregional equity (envy and guilt) from intergenerational weighting, with an optional discounting adjustment that matches CRRA one-period welfare weights. This separation changes predictions. In cooperative solutions, stronger interregional inequality aversion shifts mitigation burdens toward richer regions (under FS, even with Negishi weights). For total abatement, FS can generate a non-monotonic temperature response once rich regions reach full abatement, whereas under CRRA the response to higher curvature is dominated by steeper intergenerational weighting and therefore lower aggregate mitigation. In non-cooperative Nash equilibria, the direction of equity concerns matters: Guilt raises abatement whereas envy lowers it. In a climate coalition game, FS preferences admit a fully stable coalition with substantial participation in one specification, while under CRRA no coalition larger than two regions is internally stable.