Working Papers:

Health Insurance Contracts and Provider Networks (JMP) 

This paper examines the design of optimal health insurance menus amid varying provider quality for various diseases, focusing on monopolistic and competing insurers through theoretical and empirical approaches. Theoretical findings indicate that a monopolist offers broader (more efficient) networks at higher premiums, while competing insurers prefer narrower networks to limit competition. Using a rich dataset on Chile's private health insurance system, I develop a version of the theory model suitable for estimation. Then, the empirical analysis assesses the effects of transforming the regulated competing insurers market into a single-insurer model. It finds that consumer demand for providers is inelastic, driven more by geographic factors and perceived quality than out-of-pocket costs. Furthermore, the estimates show that consumers’ choices closely resemble the most efficient allocation due to regulations mandating insurers to cover at least what the public insurer does. In light of the theoretical results, this resemblance would not persist in an unregulated environment, highlighting the crucial role of regulation in these markets.

Manufacturer’s Retailing Problem, Screening and Incentives 

This paper analyses the vertical relationship of a manufacturer and multiple retailers. The manufacturer sells an essential, indivisible input to retailers and chooses the retail price to charge. However, it does not observe the retailer’s unit costs and an action they make that is of interest to it (given rise to moral hazard and adverse selection information asymmetries). Furthermore, the manufacturer is interested in a project’s success, where the probability of success increases in the actions and decreases in the retail prices. When only one retailer is available, each information asymmetry alone distorts retail prices upwards, while moral hazard also distorts the action downwards. However, these effects can be countervailed (partially) by having more than one retailer. The interaction between them disciplines the informational rents each retailer gets by making them compete for the retail market (in the adverse selection part). Also, competition decreases the cost of implementing any desirable action, as the cost of the action is spread between retailers. Therefore, the marginal cost decreases (as the cost function is convex). In both pure cases, the higher the manufacturer’s valuation for success, the lower the retail prices, and the higher the action induced in the pure moral hazard case.

Work in progress:

Equilibrium Characterization in Exotic Auctions (joint work with T. Larroucau, T. Mylovanov and R. Vohra) 

This paper introduces a novel auction design: the Hybrid Dutch auction, which was implemented in Ukraine to sell distressed banking assets after a broad banking sector collapse. The design featured multiple rounds with minimum bid increments. It was meant to improve value revelation and participation in markets where information is sparse and concentrated on a few non-efficient bidders (insiders). This paper finds the equilibrium of this new design and compares it to a traditional first sealed-bid auction. It finds that the participation of non-insiders increases when the bid increment is not that high compared to the extra efficiency that non-insiders can achieve and the initial price is small. On the other hand, the round structure helps for value revelation as when insiders do not drop from the auction, they are signaling that the asset is of higher value. The results are particularly important for emerging economies where the participation of insiders in large-scale auctions is a concern.

Urban Transportation Pricing and its Effects on the Labor Market (joint work with H.Silva) 

This paper extends Parry & Small (2005) optimal taxation model to add a public transport mode as an alternative to private transport; this additional mode features a positive externality: higher demand for services induces the service provider to increase its fleet and frequency to accommodate the load of passengers, which in turn reduces waiting times (Mohring Effect). The paper decomposes the optimal fuel taxes and public transport fares when the planner can only choose one. In particular, optimal fuel taxes consider the traditional pricing of private transport externalities (accidents, harm to the environment, and transport congestion) but also its substitution effect into increased public transport (which increases the optimal tax if the public transport mode is not subsidized enough), an additional benefit from the increase tax collection, which alleviates the pressure on labor taxes. Simulations of the model indicate that the additional mode of transport increases the difference in optimal fuel taxes between cities like London and Los Angeles.