Antonio Rosato joined UTS in July 2013 after obtaining his PhD in Economics from UC Berkeley.
Personal web page: https://sites.google.com/site/rosatoecon/.
The effect of reference-dependent preferences in auctions and negotiations; Bargaining; Auctions; Takeovers; Contract Theory and Mechanism Design; Behavioral IO; Tax Evasion.
Microeconomics; Industrial Organization; Behavioral Economics.
© 2016 Elsevier B.V. This paper analyzes sequential negotiations with exogenous breakdown risk between a risk-neutral seller and a loss-averse buyer who is privately informed about his valuation. I show that, compared to the risk-neutral benchmark, loss aversion on the buyer's side softens the rent-efficiency trade-off for the seller. The reason is that the higher the buyer's valuation is, the more he has to lose by rejecting the seller's offer. Thus, in equilibrium the seller's profits and overall efficiency are both higher than in the risk-neutral case. Moreover, I also show that loss aversion has a redistributive effect by increasing the equilibrium payoff of some low-valuation buyers and decreasing that of high-valuation ones.
Pagnozzi, M. & Rosato, A. 2016, 'Entry by takeover: Auctions vs. bilateral negotiations', International Journal of Industrial Organization, vol. 44, pp. 68-84.View/Download from: UTS OPUS or Publisher's site
© 2015 Elsevier B.V. Firms often enter new markets by taking over an incumbent. We analyze a potential entrant's choice of target under two (exogenously given) takeover mechanisms: (i) auctions, where other incumbents can bid for the target against the entrant, and (ii) bilateral negotiations between the entrant and the target. The entrant's choice of target depends on the mechanism, and it may not maximize its ex-post profit (nor consumer welfare). In an auction, the entrant pays a higher price to take over a target with higher synergies, because these impose stronger negative externalities on incumbents and increase their willingness to pay for preventing entry. Auctions increase the price obtained by the target, but reduce welfare compared to negotiations because they may discourage the entrant from acquiring a target with higher synergies.
Rosato, A. 2016, 'Selling Substitute Goods to Loss-Averse Consumers: Limited Availability, Bargains and Rip-offs', RAND Journal of Economics, vol. 47, no. 3, pp. 709-733.View/Download from: UTS OPUS or Publisher's site
This article derives the optimal pricing and product-availability strategies for a retailer selling two substitute goods to loss-averse consumers and shows that limited-availability sales manipulate consumers into an ex ante unfavorable purchase. The seller maximizes profits by raising the consumers' reference point through a tempting discount on a good available only in limited supply (the bargain), and cashing in with a high price on the other (the rip-off), which consumers buy if the bargain is not available to reduce their disappointment. The seller might prefer to offer a deal on the more valuable product, using it as a bait.
Pagnozzi, M. & Rosato, A. 2014, 'Entry by Takeover: Auctions vs. Negotiations'.
We compare two mechanisms through which a potential entrant can take over an incumbent in a market with asymmetric firms: auctions (where other incumbents can bid for the target) and bilateral negotiations between the entrant and the target. The entrant's choice of target depends on the mechanism, and it may not maximize ex-post profit or consumer welfare. In an auction, the entrant pays a higher price to take over a target with higher synergies, because they impose stronger negative externalities on incumbents and increase their willingness to pay for preventing entry. This provides a new rationale for takeover premia. Auctions increase the price obtained by the target, but reduce welfare compared to negotiation because they may discourage the entrant from acquiring a target with higher synergies.