Extended Research Statement ∗

My primary research interest concerns product pricing with market power. In some cases my research is motivated by observing perplexing pricing patterns and asking what about the environment, the objectives of sellers, or biases of customers can lead to such pricing? In other cases my motivation is reversed: I am intrigued by an interesting environment or regulatory intervention and ask what are its implications for optimal pricing? In either case, I approach the problem using a combination of economic theory and empirical observation and testing. Pricing is a broad research topic, but I am particularly interested in situations in which consumers or other relevant market participants act like real people rather than Homo economicus because they are biased, boundedly rational, or have non-standard preferences. In other words, I study questions that fall within the emerging field of Behavioral Industrial Organization. A prime example is a branch of my research that I describe in “Dynamic Nonlinear Pricing: biased expectations, inattention, and bill shock” (International Journal of Industrial Organization 2012), and that I outline below in Section 2. A sequence of three of my papers highlights the importance of modeling and measuring both bias and inattention to understand firms’ pricing decisions and evaluate public policies such as the Federal Communication Commission’s (FCC) recent bill-shock agreement with cellular carriers (Grubb, 2009, 2015b; Grubb and Osborne, 2015). In “Selling to Overconfident Consumers” (American Economic Review 2009), which I describe in Section 2.1, I show that consumer overconfidence can explain why cellular phone service plans include ‘free’ minutes or data followed by steep overage fees for additional usage. The paper highlights the importance of consumers’ expectations about future consumption at the time of contracting