At DICE, we examine current issues related to competition, regulation, and the behavior of businesses and consumers. Our research projects combine theoretical and empirical approaches and are funded by the German Research Foundation (DFG) and other public institutions, among others.
Current Projects
The two-year research project conducted by Prof. Dr. Mehmet Karaçuka, with the participation of Prof. Dr. Justus Haucap, examines the relationship between digitalization, the informal economy, and tax revenue in Sub-Saharan Africa. It aims to support the development of policies that promote a sustainable and equitable transition towards formal economic activity.
Project description:
For many people in Sub-Saharan Africa, the informal economy represents the only available source of income. At the same time, a large informal sector makes tax collection more difficult and limits governments’ ability to provide essential public services and reduce poverty.
Using cross-country panel data, the project investigates how digital technologies—such as mobile payment systems and digital marketplaces—affect informal activities, formalization processes, and tax revenue. It considers mechanisms including increased transparency, lower compliance costs, and more efficient tax administration.
The project also examines potential barriers and risks, including the digital divide, regulatory constraints, and unequal access to digital technologies. Based on its findings, it will develop policy recommendations on how digitalization can broaden the tax base, reduce gender inequality, and support sustainable economic development.
Scholarship holder/project lead:
Prof. Dr. Mehmet Karaçuka
Additional participating researcher:
Prof. Dr. Justus Haucap
Funding: Meyer-Struckmann Scholarship
Project duration: 2025-2027
This project, jointly led by Prof. Dr. Christian Wey (DICE, Heinrich-Heine-Universität Düsseldorf) and Prof. Dr. Markus Dertwinkel-Kalt (University of Münster), was approved by the DFG in August 2026. It examines how current German and European energy and climate policy measures affect companies, consumers, and markets.
Project Description:
The transition to a climate-neutral economy presents Germany and the European Union with the challenge of reconciling climate goals with international competitiveness, affordable energy, and social acceptance. The project investigates both the intended effects and potential unintended consequences of current energy and climate policy measures. The research is structured into four sub-projects:
Sub-project A examines European emissions standards for automobile manufacturers from a microeconomic perspective, focusing primarily on the effects of pooling agreements.
Sub-project B analyzes the incentive effects of purchase subsidies for electric vehicles and compares them with alternative instruments, such as income-based support or scrappage schemes.
Sub-project C is dedicated to analyzing industrial electricity pricing. It investigates whether this support prevents the relocation of production and fosters investment in climate-friendly technologies—or whether it creates long-term subsidy dependencies, weakens investment incentives, and incurs unexpectedly high fiscal costs.
Finally, Sub-project D rounds off the overall project with an experimental approach. The focus here is on how the general public understands and evaluates energy and climate policy measures. Results from survey and decision-making experiments thus provide key insights for a holistic understanding of behavioral and market responses.
Project Leads: Prof. Dr. Christian Wey and Prof. Dr. Markus Dertwinkel-Kalt
Participating Institutions: DICE/Heinrich-Heine-Universität Düsseldorf and University of Münster
Duration: Three years
The project, secured by Prof. Dr. Andreas Grunewald and Prof. Dr. Paul Heidhues, has been funded by the German Research Foundation (DFG) since 2023. It examines how consumer inertia affects firms’ strategies and market outcomes, as well as the effectiveness of different regulatory measures in offline and online markets.
Project description:
Consumers often remain in existing contracts even when switching could provide substantial benefits. The project develops dynamic market models to investigate the causes of this behavior and how firms respond to it. Among other factors, the models consider technological developments, contract design, consumer learning, and consumer protection.
The project also analyzes empirically how firms influence purchasing behavior through website design. Experimental measurements of consumer mistakes and preferences are combined with cookie data for this purpose. The findings are then used to study current policy questions concerning online consumer protection and the regulation of large digital platforms.
Applicants:
Prof. Dr. Andreas Grunewald, Frankfurt School of Finance & Management
Prof. Dr. Paul Heidhues, Heinrich Heine University Düsseldorf
Funding: German Research Foundation (DFG)
Funding period: since 2023
Research unit: FOR 5392 “Consumer Preferences, Consumer Mistakes, and Firm Responses”
The project, secured by Prof. Dr. Markus Dertwinkel-Kalt and André Romahn, Ph.D., has been funded by the German Research Foundation (DFG) since 2023. It investigates how financial firms can exploit retail investors’ limited attention when designing and marketing financial products.
Project description:
Retail investors are often unable to consider all available information when making investment decisions. The project examines how product labels and positioning, the choice of benchmark indices, and the prominent marketing of certain investment strategies influence their decisions.
Using experiments, field and market data, and structural models, the researchers analyze whether firms deliberately employ such salience effects to make products appear more attractive and increase their profit margins. The project also examines how restricting niche benchmarks and encouraging investors to consider relevant information could affect investor welfare and the profits of fund and index providers.
Applicants:
Prof. Dr. Markus Dertwinkel-Kalt, University of Münster
André Romahn, Ph.D., University of Hamburg
Responsible project researcher:
Dr. Simon Martin, Heinrich Heine University Düsseldorf
Funding: German Research Foundation (DFG)
Funding period: since 2023
Research unit: FOR 5392 “Consumer Preferences, Consumer Mistakes, and Firm Responses”
The project, secured by Prof. Dr. Markus Dertwinkel-Kalt and Prof. Dr. Hans-Theo Normann, is funded by the German Research Foundation (DFG) since 2023. It investigates how firms strategically respond to and make use of consumers’ limited and non-directed attention.
Project description:
When making economic decisions, consumers are often unable to process all the available information. Their attention may therefore be drawn automatically to particularly noticeable features. The project studies this behavior using loot boxes in video games, through which users purchase the chance to receive random virtual rewards.
Laboratory and field experiments are used to identify which features of loot boxes increase consumers’ willingness to pay and whether firms employ these features strategically. The project also examines whether transparency regulations and greater competition can reduce potential harm to consumers.
Project leaders:
Prof. Dr. Markus Dertwinkel-Kalt, University of Münster
Prof. Dr. Hans-Theo Normann, Heinrich Heine University Düsseldorf
Funding: German Research Foundation (DFG)
Funding period: since 2023
Research unit: FOR 5392 “Consumer Preferences, Consumer Mistakes, and Firm Responses”
The project, secured by Prof. Dr. Paul Heidhues and Prof. Dr. Andreas Grunewald, has been funded by the German Research Foundation (DFG) since 2023. It examines how consumers allocate their limited attention and how firms and consumer-protection policies respond to this behavior.
Project description:
Consumers cannot devote equal attention to every product, price, and contractual condition. Using experiments and theoretical models, the project investigates how consumers distribute their attention across different activities and how consumer-protection measures affect these decisions.
It also analyzes how firms respond strategically to consumers’ limited attention. Field data will additionally be used to examine whether firms discriminate against less attentive consumers or individuals with lower cognitive abilities. The findings are intended to improve our understanding of the benefits and disadvantages of different approaches to consumer protection.
Project leaders:
Prof. Dr. Paul Heidhues, Heinrich Heine University Düsseldorf
Prof. Dr. Andreas Grunewald, Frankfurt School of Finance & Management
Funding: German Research Foundation (DFG)
Funding period: since 2023
Research unit: FOR 5392 “Consumer Preferences, Consumer Mistakes, and Firm Responses”
This project, secured by Dr André Romahn, has been funded by the German Research Foundation (DFG) since 2023. With the participation of Professor Christine Zulehner (University of Vienna), this subproject of Research Unit FOR 5392 examines how incomplete information and limited attention influence consumer choices and firms’ strategic behaviour.
Project description
Consumers frequently make purchasing decisions without being fully informed about all the products available to them. The project develops a structural demand model that allows consumers to differ in both their preferences and their level of information. Its objective is to estimate which products individual consumers actually consider when making a choice.
Identification is based on observed substitution patterns between products. If consumers respond asymmetrically when a product becomes unavailable, this may indicate that they are unaware of or do not consider all the available alternatives. These patterns make it possible to estimate the probability that an individual consumer considers a particular product.
The approach also allows prices, product characteristics, and marketing activities to affect both consumers’ perceived utility and their attention. It therefore provides a more flexible and realistic model of consumer demand.
The model is applied empirically using extensive Kilts-Nielsen data covering numerous categories of the US consumer-goods industry. The project examines whether firms have increased their profitability by systematically directing consumer attention and how this behaviour affects markups and the consequences of horizontal mergers. Its findings are therefore also relevant to competition policy and merger control.
Project leader: Dr André Romahn
Additional project participant: Professor Christine Zulehner
Funding: German Research Foundation (DFG), Subproject 3 of Research Unit FOR 5392
Funding period: Since 2023
This project, secured by Professor Florian Heiß (Heinrich Heine University Düsseldorf), has been funded by the German Research Foundation (DFG) since 2023. As Subproject 2 of Research Unit FOR 5392, it uses large consumer-panel datasets and machine-learning methods to examine how brand loyalty, inertia, and other departures from fully rational behavior influence everyday purchasing decisions.
Project description
Traditional choice models often assume that consumers carefully compare all available alternatives. In practice, however, purchasing decisions are frequently shaped by habits, brand loyalty, previous choices, and limited information processing. These behavioral patterns affect not only consumer demand but also the pricing and product strategies of manufacturers and retailers.
Existing research generally focuses on individual product categories. This project instead analyses numerous interconnected purchasing decisions made by the same household. Machine-learning methods are used to model demand across multiple product categories simultaneously. This makes it possible, for example, to examine whether brand loyalty observed in one category also predicts decisions in other categories.
The analysis draws on a large Nielsen consumer-panel dataset. The project investigates how brand loyalty and inertia vary across individuals, whether these characteristics remain stable across product categories, and how advertising, product availability, or bundling strategies affect future choices.
The methods and behavioral insights developed in the project will also be used to study the strategic conduct of manufacturers and retailers in highly concentrated markets and to assess potential implications for competition policy and regulation.
Project leader: Professor Florian Heiß
Funding: German Research Foundation (DFG), Subproject 2 of Research Unit FOR 5392
Funding period: Since 2023
This joint project, secured by Professor Sebastian Ebert (Heidelberg University) and Professor Hannah Schildberg-Hörisch (DICE, Heinrich Heine University Düsseldorf), has been funded by the German Research Foundation (DFG) since 2023. As a subproject of Research Unit FOR 5392, it investigates the causes, stability, and behavioural consequences of time inconsistency and limited self-control.
Project description
People do not always behave as they originally planned. Even when their decision-making environment remains unchanged, they may abandon long-term objectives in favour of short-term benefits. This behaviour, known as time inconsistency, plays a central role in understanding time preferences and self-control problems.
The project develops new instruments for measuring time preferences and examines how accurately people assess their own future decisions and potential self-control problems. It analyses the theoretical causes of time inconsistency, its empirical stability, and its consequences for individual behaviour.
Another central question is whether self-control should be understood as a single characteristic or as a broader category comprising several partially related abilities. To address this question, the project systematically brings together measures of self-control from different academic disciplines and compares their convergent validity—that is, the extent to which they characterise the same individual in similar ways.
The project combines axiomatic and applied theory with econometric methods and empirical analysis. Its findings will provide new foundations for behavioural-economic research on time preferences, self-control, and individual decision-making.
Project leaders: Professor Sebastian Ebert and Professor Hannah Schildberg-Hörisch
Additional project participants: Professor Deborah Cobb-Clark, Wei Wei, and Professor Xunyu Zhou
Funding: German Research Foundation (DFG), subproject of Research Unit FOR 5392
Funding period: Since 2023
This project, led by Professor Ulrike Neyer (Heinrich Heine University Düsseldorf) and funded by the Deutsche Bundesbank, examines how differences between households influence the transmission of monetary policy in the euro area. Daniel Stempel and Alexandra Stevens also participate in the project.
Project description
Conventional New Keynesian models frequently analyse the effects of monetary policy on aggregate output, employment, and prices by assuming a representative household. In reality, however, households differ considerably in terms of income, wealth, age, gender composition, and consumption patterns. As a result, they may experience different inflation rates and respond differently to monetary policy measures.
The project captures these differences using HANK models—macroeconomic models with heterogeneous households. Existing HANK models primarily account for income and wealth inequality. This project extends them by incorporating income- and wealth-specific consumption patterns and differences in the inflation rates experienced by individual households.
The models will also incorporate further socio-demographic characteristics, including household age structure and gender composition. The project examines how these dimensions of household heterogeneity affect monetary policy transmission. Its findings will provide insights into the effective implementation of monetary policy and help identify its potential distributional consequences.
Project leader: Professor Ulrike Neyer
Participating researchers: Daniel Stempel and Alexandra Stevens
Funding: Deutsche Bundesbank
Funding period: 2024 - 2026
The VINTAGE project, jointly secured by Professor Katharina Erhardt and Professor Joel Stiebale (DICE, Heinrich Heine University Düsseldorf), examines how vertical mergers and acquisitions affect firm performance, prices, market power, competition, and innovation. Funded by the Fritz Thyssen Foundation, the project runs from 1 October 2024 to 30 September 2026.
Project description
Competition policy has traditionally focused primarily on horizontal mergers between direct competitors. However, vertical mergers involving firms at different stages of the value chain are becoming increasingly important. While existing studies often concentrate on individual sectors, VINTAGE examines the effects of vertical mergers across a broader range of industries and countries.
The project investigates whether vertical mergers improve firm efficiency or weaken competition. It analyses their direct and indirect effects on firm performance, prices, market power, and competitors. It also studies the role of innovation and compares domestic and cross-border transactions.
The analysis draws on an extensive dataset containing balance sheets, profit and loss accounts, international transactions, and firm-specific relationships with suppliers, customers, and competitors. Using modern econometric methods, the project first examines the characteristics and determinants of vertical mergers. It then evaluates their effects on the firms involved and their competitors and considers how global production and customer networks shape these effects.
The findings will support a more informed assessment of vertical mergers and provide valuable evidence for policymakers and competition authorities.
Project leaders: Professor Katharina Erhardt and Professor Joel Stiebale
Funding: Fritz Thyssen Foundation
Project duration: 1 October 2024–30 September 2026
This joint project, secured by Dr Barbara Felderer (GESIS), Professor Jannis Kück (DICE, Heinrich Heine University Düsseldorf), and Professor Martin Spindler (University of Hamburg), has been funded by the German Research Foundation (DFG) since 2024. It investigates the causes of nonresponse in panel surveys and develops new methods for reducing the resulting bias.
Project description
Nonresponse presents a major challenge to the quality and reliability of survey data. This is particularly important in panel surveys, in which the same individuals are interviewed repeatedly and the number of participants often declines over time. Survey results may become biased if particular population groups systematically discontinue their participation.
The first part of the project uses the GESIS Panel to examine how participant and survey characteristics influence participation in subsequent waves. It investigates whether the causes of nonresponse change over the course of a panel and whether the findings can be transferred to comparable panel studies. Because many potentially correlated factors may affect participation, the analysis applies machine-learning and Double Machine Learning methods. These methods will be extended to estimate dynamic and heterogeneous effects in panel data and released as open-source R and Python packages.
The second part examines whether interventions such as additional financial incentives, SMS or email reminders, and summaries of previous study results can improve response behaviour. The project also develops a targeted approach for assigning these interventions in a way that reduces differences in participation as effectively as possible.
Project leaders: Dr Barbara Felderer, Professor Jannis Kück, and Professor Martin Spindler
Participating institutions: GESIS, DICE/Heinrich Heine University Düsseldorf, and the University of Hamburg
Funding: German Research Foundation (DFG)
Funding period: Since 2024
Schumpeter Calling - Innovation behavior of companies in times of increased competition (DFG)
This project, secured by Professor Katharina Erhardt (DICE, Heinrich Heine University Düsseldorf) and funded by the German Research Foundation (DFG) since 2023, examines how firms adjust their innovation activities in response to increased competitive pressure. It uses the unexpected appreciation of the Swiss franc in January 2015 as a natural experiment.
Project description
Competition is often regarded as an important driver of growth and innovation. However, it remains unclear whether stronger competitive pressure encourages firms to innovate or whether larger firms operating in more concentrated markets are better positioned to undertake innovative activities.
The project uses the sudden appreciation of the Swiss franc in January 2015, which unexpectedly exposed Swiss firms to greater international competitive pressure. This exchange-rate shock provides a unique opportunity to identify the causal effect of increased competition on firm-level innovation.
Innovation is defined broadly within the project. In addition to traditional measures such as research and development expenditure and patents, the analysis considers adjustments in supply-chain organisation, market-access strategies, and organisational structures. Swiss foreign-trade data are combined with investment and innovation surveys, firm-network data, and patent records.
The project aims to explain why firms and industries respond differently to competitive pressure and to quantify the long-term consequences of their adjustment strategies. Its findings will improve our understanding of the relationship between competition, innovation, economic growth, and welfare and provide guidance for effective innovation policy.
Project leader: Professor Katharina Erhardt
Funding: German Research Foundation (DFG)
Funding period: Since 2023
Producer and Retailer Markets Organization (PARETO)
The ANR–DFG project PARETO, jointly secured by Professor Joel Stiebale (DICE, Heinrich Heine University Düsseldorf) and Professor Biliana Yontcheva (University of Hamburg) together with their French project partners, examines how the organisation of producer and retail markets affects prices, market power, and the impact of inflation. The project runs from September 2024 to August 2027.
Project description
Consumers have experienced substantial price increases, particularly in food and retail markets. These increases may result from external events such as the COVID-19 pandemic, rising energy costs, and international conflicts, but also from regulation and the exercise of market power at different levels of the production and retail chain. PARETO investigates why price developments differ across countries, product markets, producers, and retailers.
The project consists of four research areas. First, it analyses how changes in costs, including energy costs and taxes, are passed through to producer and consumer prices and identifies which households are most severely affected by inflation. A second focus is the market power of producers and retailers and the development of their markups.
The project also develops new methods for estimating consumer demand that account for multiple purchases and relationships between product categories. Finally, it examines how the entry and exit of retailers and products, the growth of online retailing, and the increasing importance of discount retailers affect prices and product variety.
To address these questions, the project combines new theoretical approaches with cross-country scanner and production data from 17 European countries. Its findings will improve our understanding of inflation and market power and provide a basis for evidence-based economic policy recommendations.
Project leaders: Professor Joel Stiebale, Professor Biliana Yontcheva, and Claire Chambolle
Funding: German Research Foundation (DFG) and French National Research Agency (ANR)
Project duration: September 2024 to August 2027