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Faculty of Law, Business & Economics

International Economics – Juniorprofessor Christian Fischer-Thöne

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Current Research

My research evolves around the following areas and topics:

  • International Trade
    Global value chains
    Firm trade dynamics
    Institutional reform and trade policy
  • Industrial Organization
    Firm pricing strategies
    Consumer protection

Working papers:

  • Optimal Payment Contracts in Trade Relationships [New version: January 2022]

    Revised and Resubmitted, Journal of International Economics

    Abstract. In buyer-seller trade relationships, long-term collaboration and payment contract selection are mutually dependent: While the provision of trade credit to buyers increases the stability of trade relationships, its availability varies systematically as relationships evolve. To explain this reciprocity, we model the optimal provision dynamics of trade credit when the information of sellers about buyers is incomplete and parties can sign contracts with limited enforceability. We investigate how self-enforcing relational contracts and formal contracts complement each other and show how their interaction determines optimal payment contract choice. We find that payment contracts can be interpreted as screening technologies and imply distinct learning opportunities for the seller about the buyer's reliability. When buyers are liquidity-constrained and sellers can verify occurring liquidity problems the screening properties of payment contracts are sufficient to predict that all transitions that occur between payment terms lead to the provision of seller trade credit in the long run.

  • Institutional Reform and Global Value Chains (with Hartmut Egger)

    Abstract. This paper sets up a model of trade, in which two countries with differing levels of technology specialize on the production of subsets of the global value chain. In the open economy equilibrium, the technologically backward country exports intermediates in exchange for imports of a homogeneous consumption good from the technologically advanced country. This vertical specialization pattern gives the two countries access to different instruments for appropriating rents in the open economy. The technologically advanced country can impose an import tariff on intermediates to lower foreign wages and increase national welfare. An import tariff is ineffective for the technologically backward economy, which can instead lower institutional quality and allow its workers to partially expropriate firms and directly consume intermediate goods at a utility discount. In a non-cooperative policy equilibrium, welfare levels of the two countries will fall to their autarky levels. This gives scope for a trade agreement that conditions tariff reductions on institutional quality improvements and is beneficial for both countries. A beneficial trade agreement may not exist if the import tariff has an upper bound.

  • Complex Pricing and Consumer-Side Attention (with Alexander Rasch and Tobias Wenzel)

    Abstract. This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and in which some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms' ability to price discriminate: (i) diminishing the range of contracts via a reduction in the number of two-part tariffs offered (which prohibits inter-group price discrimination), and (ii) a reduction in tariff complexity via the abolishment of linear fees (which prohibits inter- and intra-group price discrimination). We characterize the effects of these interventions on firm profits and (informed and uninformed) consumer welfare, and identify conditions for the optimal policy. Our results provide insights for the evaluation of recent policy interventions (e.g., the regulation of roaming charges in the EU market).

Work in progress:

  • Relational Contracts and Foreign Direct (Over-)Investment (with Matthias Fahn)

  • Investment Agreements and Strategic Firm Fragmentation (with Hartmut Egger and Miriam Frey-Knoll)

  • Learning in Relational Contracts (with Guillem Roig)

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