Social and Behavioral Sciences Commons^™

Trust In Cohesive Communities, Felipe Balmaceda Assoc Prof., Juan Escobar Assistant Professor

Felipe Balmaceda

This paper studies which social networks maximize trust and welfare when agreements are implicitly enforced. We study a repeated trust game in which trading opportunities arise exogenously and a social network determines the information each player has. We show that cohesive communities, modeled as social networks of complete components, emerge as the optimal community design. Cohesive communities generate some degree of common knowledge of transpired play that allows players to coordinate their punishments and, as a result, yield relatively high equilibrium payoffs. We also show that when news swiftly travel through the network, Pareto efficient networks are minimally connected: the …

Competitive Intensity And Its Two-Sided Effect On The Boundaries Of Firm Performance, Joao Montez, Francisco Ruiz-Aliseda, Michael D. Ryall

Michael D Ryall

The new perspective emerging from strategy's value-capture stream is that the effects of competition are two-fold: competition for an agent bounds its performance from below, while that for its transaction partners bounds from above. Thus, assessing the intensity of competition on either side is essential to understanding firm performance. Yet, the literature provides no formal notion of "competitive intensity" with which to make such assessments. Rather, some authors use added value as their central analytic concept, others the core. Added value is simple, but misses the crucial, for-an-agent side of competition. The core is theoretically complete, but difficult to interpret …

Costly Location In Hotelling Duopoly, Jeroen Hinloopen, Stephen Martin

Jeroen Hinloopen

We introduce a cost of location into Hotelling’s (1929) spatial duopoly. We derive the general conditions on the cost-of-location function under which a pure strategy price-location Nash equilibrium exists. With linear transportation cost and a suitably specified cost of location that rises toward the center of the Hotelling line, symmetric equilibrium locations are in the outer quartiles of the line, ensuring the existence of pure strategy equilibrium prices. With quadratic transportation cost and a suitably specified cost of location that falls toward the center of the line, symmetric equilibrium locations range from the center to the end of the line.

Research And Development Cooperatives And Market Collusion: A Global Dynamic Approach, Jeroen Hinloopen, Grega Smrkolj, Florian Wagener

Jeroen Hinloopen

We present a continuous-time generalization of the seminal research and development model of d’Aspremont and Jacquemin (Am Econ Rev 78(5):1133–1137, 1988) to examine the trade-off between the benefits of allowing firms to cooperate in research and the corresponding increased potential for product market collusion. Weshow the existence of a solution to the optimal investment problem using a combination of results from viscosity theory and the theory of planar dynamical systems. In particular, we show that there is a critical level of marginal cost at which firms are indifferent between doing nothing and starting to develop the technology.We findthat colluding firms …

Optimal Task Assignments, Felipe Balmaceda Assoc Prof.

Felipe Balmaceda

This paper studies optimal task assignments in a risk neutral principal-agent model in which agents are compensated according to an aggregated performance measure. The main trade-off involved is one in which specialization allows the implementation of any possible effort profile, while multitasking constraint the set of implementable effort profiles. Yet, the implementation of any effort profile in this set is less expensive than that under specialization. The principal prefers multitasking to specialization except when tasks are complements and the output after success is small enough so that it is not second-best optimal to implement high effort in each task. This …

The Bidder's Curse: Comment, Henry S. Schneider

Henry S Schneider

The prices of auctions on eBay often exceed eBay’s fixed-price “Buy-It-Now” prices. I investigate the causes of this overbidding, focusing on the interpretation in Malmendier and Lee (2011) that the observed overbidding cannot be explained “without allowing for nonstandard preferences or beliefs” and that the “strongest direct evidence points to limited attention.” Using data from their study and new data from eBay, I provide evidence that a key condition for identifying nonstandard behavior may not have been met, and that the observed overbidding is not inconsistent with standard behavior once we allow for the likely presence of search costs.

The Economics Of Retail Markets For New And Used Cars, Charles Murry, Henry S. Schneider

Henry S Schneider

In this chapter we describe the institutions and economics of new- and used-car retailing. Our aim is to provide a resource for researchers interested in the automobile market. We focus on three categories of economic concepts relevant to car retailing: dealership location choice, including agglomeration, entry, and exit; determinants of car pricing; and information, which is central to the used-car market but also affects the new-car market. We also provide a primer on the institutions of car retailing and a reference on data sources for researchers interested in empirical work involving cars.

Beautiful Lemons: Adverse Selection In Durable-Goods Markets With Sorting, Jonathan R. Peterson, Henry S. Schneider

Henry S Schneider

We document a basic characteristic of adverse selection in secondhand markets for durable goods: goods with higher observed quality may have more adverse selection and hence lower unobserved quality. We provide a simple theoretical model to demonstrate this result, which is a consequence of the interaction of sorting between drivers over observed quality and adverse selection over unobserved quality. We then offer empirical support using data on secondhand prices and repair rates of used cars from the Consumer Expenditure Survey, and discuss a number of implications for everyday advertising and consumer questions.

Nonstandard Bidder Behavior In Real-World Auctions, Joseph U. Podwol, Henry S. Schneider

Henry S Schneider

Empirical work on auctions has found that bidders deviate from standard behavior in important ways. We investigate a range of these behaviors, including nonrational herding, auction fever, quasi-endowment effect, and escalation of commitment. Our innovations are to more completely control for unobservables by using new data from a field experiment on eBay, and by accounting for censoring of bids below the starting price. Consistent with standard auction theory and in contrast to the predictions of the nonstandard behaviors, we find that auction starting price has no effect on bidder willingness to pay in a private-values setting. We conclude that there …

The Price Of Unobservability: Moral Hazard And Limited Liability, Felipe Balmaceda Assoc Prof.

Felipe Balmaceda

This article studies a principal-agent problem with discrete outcome and effort space. The principal and the agent are risk neutral and the latter is subject to limited liability. For a given monitoring technology, we consider the maximum possible ratio between the first best social welfare to the social welfare arising from the principal's optimal pay-for-performance contract (the price of unobservability). Our main results provide tight bounds for this price. Key parameters to these bounds are number of possible efforts, the likelihood ratio evaluated at the highest outcome, and the ratio between costs of the highest and the lowest efforts. The …

Capital Stock Series Of The Mexican Regions, Vicente German-Soto

Vicente German-Soto

Database of the physical capital stock series of the Mexican states industrial sector.

The Equity Beta Of Telcos Operating In Small Island Nations, Bruno E. Viani

Bruno E. Viani

Analysts often use the capital assets pricing model (CAPM) to estimate the cost of equity capital. A key parameter in estimating that cost is the so-called equity beta. Estimates of equity betas for telecommunications firms, or telcos, in small island nations are not readily available, so analysts often rely on estimated equity betas from larger firms in jurisdictions with much larger markets. Doing so may introduce significant errors if the equity risk premium for telcos in large markets differs significantly from those in small markets. In this research note we explore this hypothesis. We find that the equity betas of …

Game Theory In Transport & Logistic World, Sajjad Khaksari

SAJJAD KHAKSARI

"OV & DP and BRT" some assumptions and a Case Study for studying John Nash "Game Theory" method in logistics and transportation world and that is only a briefly attempt to get familiar with the idea. A thought which asks "Is it possible to model and analyze one of the authenticity of the transport or logistics service request with respect to the Game Theory optimization idea?

Administrative Procedures, Bureaucracy, And Transparency: Why Does The Fcc Vote On Secret Texts?, Scott J. Wallsten

Scott J. Wallsten

The U.S. Federal Communications Commission (FCC) does not reveal the text of regulations on which it votes. Instead, after the vote the Commission grants the relevant bureau “editorial privileges” to continue drafting the order. It then releases the final version days, weeks, or even months after the vote. As a result, it is not possible to know if everything in the final rule was actually subject to a vote. In particular, it raises the question of whether the delay between vote and publication is truly for “editorial” changes or if more substantive changes occur after the vote.

In this paper, …

Updated Database Of Mexican States Gdp, Vicente German-Soto

Vicente German-Soto

GDP Database of the Mexican States (1940-2013) at constant prices of 1993. They were estimated as in German-Soto (2005) for the 1940-1992 period. Between 1993 and 2006 they are official figures by INEGI: Sistema de Cuentas Nacionales. Since 2006 the base changed to 2008, therefore figures published in this database for 2007 to 2013 were estimated applying the rate of growth of the gross state product in base 2008 (of those years) on series at constant prices of 1993 since 2006. As a result, we have a homogenous database for the period 1940-2013 in prices of 1993. A project to …

Licensing And Innovation With Imperfect Contract Enforcement, Richard J. Gilbert, Eirik Gaard Kristiansen

Richard J Gilbert

Licensing promotes technology transfer and innovation, but enforcement of licensing contracts is often imperfect. We explore the implications of weak enforcement of contractual commitments on the licensing conduct of firms and market performance. An upstream firm develops a technology that it can license to downstream firms using a fixed fee and a per-unit royalty. Strictly positive per-unit royalties maximize the licensor's profit if competition among licensees limits joint profits. Although imperfect contract enforcement lowers the profits of the upstream firm, weak enforcement lowers prices, increase downstream innovation, and in some circumstances can increase total economic welfare.

Checklists And Worker Behavior: A Field Experiment, Henry S. Schneider, C. Kirabo Jackson

Henry S Schneider

We analyze data from a field experiment in which an auto-repair firm provided checklists to mechanics and monitored their use. Revenue was 20 percent higher during the experiment, and the effect is equivalent to that of a 1.6 percentage point (10 percent) commission increase. Checklists appear to boost productivity by serving both as a memory aid and a monitoring technology. Despite the large benefits to the firm, mechanics did not use checklists without the firm directly monitoring their use. We show that a moral hazard can explain why mechanics do not otherwise adopt checklists.

[Slides] Resale Price Maintenance In The Age Of Showrooming, Jeanine Miklos-Thal, Greg Shaffer

Jeanine Miklos-Thal

We examine the leading pro-competitive justification for RPM, free-riding on dealer services, in today’s context of brick-and-mortar versus online retailing. Market research studies show that many consumers visit a brick-and-mortar store to examine a product and select its features, but then purchase it at a discounted price from an online retailer. An often-voiced concern is that such “showrooming” will discourage traditional retailers from providing demand-enhancing sales services. According to the classic free-riding theory (Telser, 1960), manufacturers can solve this problem by imposing price floors that prevent online retailers from undercutting brick-and-mortar retailers. Counter to this widely used argument, we find …

[Slides] Resale Price Maintenance When Playing Favorites Is Prohibited, Jeanine Miklos-Thal, Greg Shaffer

Jeanine Miklos-Thal

We consider a monopolistic supplier’s optimal choice of two-part tariff contracts and resale price maintenance when downstream firms are asymmetric. We show that a ban on input price discrimination may induce the supplier to impose a minimum, maximum or fixed resale price on the downstream firms, where the supplier’s preferred form of RPM depends on demand and cost conditions. Consistent with historical evidence in the United States, we find that when minimum or maximum resale price maintenance is imposed, the resale price provision is binding on only a subset of the downstream firms. Our results are also consistent with historical …

Implications Of Export Competitiveness And Performance Of Textile And Clothing Sector Of Pakistan: Pre And Post Quota Analysis, Nawaz Ahmad

Nawaz Ahmad

Textile and Clothing sector of Pakistan has been facing different international trade reforms i.e. Multi-fiber Arrangements, Quota elimination and for some of the developing countries European union, introduced special trade arrangements like GSP plus to improve their balance of trade conditions. In the light of pre quota elimination and post quota elimination periods, this paper highlights trade performance of textile and clothing sector in depth. This study focused on finding the extent of revealed comparative advantage of textile and revealed comparative advantage of clothing sector on overall textile and clothing trade performance of Pakistan. For this purpose study applied Johansen …

The Role And Growth Of New-Car Leasing: Theory And Evidence, Justin Johnson, Henry S. Schneider, Michael Waldman

Henry S Schneider

An important change in the automobile market over the last few decades has been the substantial growth in new-car leasing. Building on recent theoretical research, we construct a model of the leasing decision in which leasing mitigates adverse selection and reduces transaction costs, but moral hazard limits its use. Also, in our model the prevalence of leasing is related to new-car reliability, so it suggests that the growth in leasing over time is at least partly due to improvements over time in new-car reliability. We use this model to derive a number of testable implications and then conduct an empirical …

The Evolution Of Innovation And The Evolution Of Regulation: Emerging Tensions And Emerging Opportunities In Communications, John W. Mayo

John W Mayo

Changes to an industry’s core technologies inevitably create tension for regulatory institutions. This is true for any sector experiencing persistent disruptive innovation, and that has been the defining feature of the communications industry for the last two decades or longer. In very short order, a century of switched voice communication networks have been supplanted by new, packet-based voice, video and data networks, rendering both the legal and regulatory framework hammered out for the switched-voice era increasingly strained. This incongruity has created tangible regulatory asymmetries. Wireline telephony provided by a “telco” is regulated by the Federal Communications Commission under Title II …

Social Media And Entrepreneurship: The Case Of Food Trucks, Scott J. Wallsten, Corwin Rhyan

Scott J. Wallsten

While the use of social media by firms is nearly ubiquitous, there has been little analysis of its effectiveness in helping small businesses succeed in a highly competitive market. To begin studying this question, we created an extensive dataset on over 250 mobile food trucks—a dynamic, somewhat homogenous, and low-entry cost business that is highly dependent on social media for its business model—which operated in the Washington, DC metro area from 2009 to 2013. We explore how their use of social media and Internet services like Twitter, Facebook, and business webpages effect their ability to stay in business. We find …

An Economic Analysis Of The Proposed Comcast-Time Warner Cable Merger, Scott J. Wallsten

Scott J. Wallsten

This paper examines the potential benefits and costs of the proposed merger between Comcast and Time Warner Cable that antitrust authorities must weigh in deciding whether to approve the deal.

Contribuciones Analíticas Al Proyecto De Ley Federal De Competencia Económica, Víctor Pavón-Villamayor

Víctor Pavón-Villamayor

No abstract provided.

Iniciativa Federal En Competencia Económica, Víctor Pavón-Villamayor

Víctor Pavón-Villamayor

No abstract provided.

Bargaining In Hospital Merger Models, David J. Balan, Keith Brand

David J. Balan

Hospital prices for commercially-insured patients are generally set through bilateral negotiations with health insurance companies. Reflecting common industry practice, contemporary models of hospital/health insurer bargaining usually assume that multi-hospital systems bargain on an all-or-nothing basis. However, hospitals within systems may bargain separately, and a commitment to do so is sometimes put forward as a remedy for an otherwise anticompetitive merger. We analyze and compare the merger-induced changes in equilibrium prices in a Nash Bargaining framework under these two modes of bargaining. We show that, while the magnitude of price effects under either mode depends critically on the degree of pre-merger …

Barreras A La Competencia Y Libre Concurrencia E Insumos Esenciales, Carlos Mena-Labarthe

Carlos Mena-Labarthe

En la Constitución Mexicana y la Ley Federal de Competencia Económica se establecen facultades para que la autoridad de competencia elimine barreras y regule insumos.

Las investigaciones de mercado son una herramienta adicional que permite obtener una perspectiva integral de los mercados para la corrección de fallas conductuales y estructurales.

Se trata de un procedimiento muy riguroso con plazos establecidos para su ejecución.

Las investigaciones de mercado han resultado exitosas en otras jurisdicciones con una sólida tradición en competencia económica.

Timing Is Everything? An Empirical Analysis Of The Determinants Of Service Quality Provision, Olivier Chatain, Alon Eizenberg

Olivier Chatain

We utilize a unique database from a large legal services provider to examine how service quality responds to the firm's available capacity, and to the nature of the firm-client relationship. We develop empirical measures of both the (internal) level of resources available to the firm at different points in time, and of the (external) value creation for customers. Our results indicate that service quality increases in the amount of the firm's available resources, suggesting that quality adjustment can be used as a means of tackling capacity constraints. We also find that service quality increases in the number of previous successful …

Patent Assertion Entities & Privateers: Economic Harms To Innovation And Competition, Robert G. Harris

Robert G Harris

This paper addresses the problems of aggressive rent-seeking activities by patent assertion entities (PAEs) and privateers. Section II explains why aggressive patent assertion is especially problematic in patent thick products and systems (such as computers, smartphones and software), and why technological developments have increased the number and “density” of patent thickets. Section III addresses the fundamental differences in the strategic positions and interests of practicing entities and PAEs, and explains why those differences affect the conduct of PAEs and increase the opportunities for, and economic harm caused by, their rent-seeking conduct and efforts to engage in patent hold-up. Section IV …