R. Preston McAfee (on leave to Yahoo!, 2007-9)

J. Stanley Johnson Professor of Business Economics and Management

> Home Page

Research interests

Business strategy, pricing, auctions, organizations, incentives, industrial organization.

Research Statement

Airline pricing dynamic price discrimination: a 3 paper series with Caltech undergraduate Vera te Velde. The first paper is a survey of the economic and operations research literatures on yield management, and the results of a massive data collection effort to evaluate the theories in light of the data. This paper is available online. The second paper shows that the constant elasticity yield management model has a closed form solution, and derives properties of that solution. The third looks at competition between two firms with capacity constraints, playing a repeated model along the lines of Burdett & Judd's price dispersion model.

Voting and candidate integrity, joint with UCSD professor Navin Kartik. Adding a voter desire for integrity to standard median voter models, where integrity involves advocating a position even if it is unpopular. Non-integrity types imitate integrity types by randomizing their positions and a unique random equilibrium arises. The equilibrium has a continuous density, so the candidates advocate distinct positions with probability one, and all elections are tied.

The use of the antitrust laws to inhibit competition, a multi-paper series joint with several distinct authors. These papers assess, from both empirical and theoretical perspectives, the extent to which firms can use the antitrust laws to inhibit competition from rivals. Three papers available on the website.

A queue-processing model of corporate activity, joint with Caltech undergraduate Ben Golub. This paper develops a model of corporate activity where things (documents, tasks, jobs, goods) flow from point to point, in a manner akin to the value chain, although actually modeled more realistically like a Brandenberger Nalebuff value net. The model can then be used to determine the optimal transfer prices, assess when the the system can be decentralized without loss of efficiency, and evaluate the gains from merger.

The effect of budget constraints on license sales, joint with Roberto Burguet. Investigates the consumer surplus of selling licenses to firms with budget constraints, which means that service deployment is reduced by higher license prices. Selling n licenses to firms with binding budget constraints, shows that auction is suboptimal the elasticity of demand . is less than 1 + 1/n, and that an auction is optimal if the expenditures on deployment, as a fraction of the license fee plus the deployment expenditure, is greater than 1/.. This condition seems to be met empirically, suggesting that auctions maximized consumer surplus.

Introduction to Economic Analysis, a free, open source microeconomics text.

Publications

Competitive Solutions: A Strategist's Toolkit, Princeton University Press, January, 2003.

Coarse Matching, Econometrica, vol. 70, issue 5, pages 2025-2034.

Equilibrium Price Dispersion with Consumer Inventories, Journal of Economic Theory, 105 n.2, August 2002, 503-17. (with Pilky Hong and Ashish Nayyar).

Measuring Anticompetitive Effects of Mergers When Buyer Power is Concentrated, Texas Law Review, (2001) vol. 79, no. 6, pp. 1621-1639 (with Kenneth Hendricks, Joshua M. Fried, Melanie Stallings Williams and Michael Williams).

Auctioning Entry into Tournaments, Journal of Political Economy, 107, no. 3, June, 1999, 573-605 (with Richard Fullerton).

Tarrifying Auctions, Rand Journal of Economics, 30, no. 1, Spring, 1999 (with Daniel Vincent and Wendy Takacs).