Why Do Supply Disruptions Lead to Inflation? Survey Evidence from the COVID Pandemic
Joint work with Jean-Paul L’Huillier, Gregory Phelan, and Maximilian Weiß
Current version: September 2025
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.