The typical concern about vertical mergers is the foreclosure of downstream rivals. In a vertically related industry where downstream firms have a common supplier, margins can reveal whether upstream competition constrains that supplier. I develop a test (based on margins) to identify whether the supplier is constrained premerger and, consequently, cannot raise input prices postmerger. However, even without foreclosure in equilibrium, vertical mergers can harm consumers. Vertical mergers increase consumer prices and benefit all firms, including downstream rivals, when downstream (horizontal) competition weakens sufficiently. This theory of harm differs from typical theories, which pit the merged entity against downstream rivals.
{"title":"Vertical mergers without foreclosure","authors":"Alessandro S. Kadner‐Graziano","doi":"10.1111/jems.12611","DOIUrl":"https://doi.org/10.1111/jems.12611","url":null,"abstract":"The typical concern about vertical mergers is the foreclosure of downstream rivals. In a vertically related industry where downstream firms have a common supplier, margins can reveal whether upstream competition constrains that supplier. I develop a test (based on margins) to identify whether the supplier is constrained premerger and, consequently, cannot raise input prices postmerger. However, even without foreclosure in equilibrium, vertical mergers can harm consumers. Vertical mergers increase consumer prices and benefit all firms, including downstream rivals, when downstream (horizontal) competition weakens sufficiently. This theory of harm differs from typical theories, which pit the merged entity against downstream rivals.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"20 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142191009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Forward contracting in an ‐firm quantity‐setting oligopoly with heterogeneous costs introduces the possibility that relatively efficient firms deter the activity of inefficient rivals by reducing their margins. The equilibrium number of firms producing positive quantities can be any of depending on the level of demand relative to firm‐specific activity thresholds, with more firms active at higher demand levels. If only one firm is active, the Bertrand outcome is obtained. This potential reduction of the number of active firms may lessen the procompetitive effect of forward sales, but does not eliminate it entirely. We explore the competition policy implications of the endogenous activity of firms, in particular for merger analysis.
{"title":"Forward contracting and the endogenous activity of heterogeneous firms","authors":"Sébastien Mitraille, Henry Thille","doi":"10.1111/jems.12610","DOIUrl":"https://doi.org/10.1111/jems.12610","url":null,"abstract":"Forward contracting in an ‐firm quantity‐setting oligopoly with heterogeneous costs introduces the possibility that relatively efficient firms deter the activity of inefficient rivals by reducing their margins. The equilibrium number of firms producing positive quantities can be any of depending on the level of demand relative to firm‐specific activity thresholds, with more firms active at higher demand levels. If only one firm is active, the Bertrand outcome is obtained. This potential reduction of the number of active firms may lessen the procompetitive effect of forward sales, but does not eliminate it entirely. We explore the competition policy implications of the endogenous activity of firms, in particular for merger analysis.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"23 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142191011","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes a two‐period membership market with two symmetric firms charging a membership fee, allowing consumers to buy products or services at a given price. Firms can offer short‐term (ST) or long‐term (LT) memberships. When firms employ LT memberships, they have incentives to prevent their old customers from being poached by competitors and price‐discriminate them based on purchase behavior. Conversely, ST memberships lead to no unit price discrimination for old customers, but instead, they lead to membership fee discrimination, increasing the share of switchers. We find that, under general assumptions, ST memberships are offered in equilibrium. This result is robust to various extensions, including switching coupons or discounts, naive consumers, sunk costs, and asymmetric differentiation parameters. We find that firms are indifferent between ST and LT memberships only when the customer's switching coupon or discount is high relative to the transportation cost.
本文分析了一个两期会员制市场，其中有两家对称的公司收取会员费，允许消费者以给定的价格购买产品或服务。企业可以提供短期（ST）或长期（LT）会员资格。当企业采用 LT 会员制时，它们有动力防止老客户被竞争对手挖走，并根据购买行为对老客户进行价格歧视。相反，ST 会员制不会导致对老客户的单位价格歧视，反而会导致会员费歧视，增加转换者的比例。我们发现，在一般假设条件下，ST 会员资格是均衡提供的。这一结果对各种扩展都是稳健的，包括转换优惠券或折扣、幼稚消费者、沉没成本和非对称差异化参数。我们发现，只有当客户的转换优惠券或折扣相对于运输成本较高时，企业才会对 ST 和 LT 会员资格漠不关心。
{"title":"Dynamic competition for customer memberships","authors":"Cristian Chica, Julian Jimenez‐Cardenas, Jorge Tamayo","doi":"10.1111/jems.12605","DOIUrl":"https://doi.org/10.1111/jems.12605","url":null,"abstract":"This paper analyzes a two‐period membership market with two symmetric firms charging a membership fee, allowing consumers to buy products or services at a given price. Firms can offer short‐term (ST) or long‐term (LT) memberships. When firms employ LT memberships, they have incentives to prevent their old customers from being poached by competitors and price‐discriminate them based on purchase behavior. Conversely, ST memberships lead to no unit price discrimination for old customers, but instead, they lead to membership fee discrimination, increasing the share of switchers. We find that, under general assumptions, ST memberships are offered in equilibrium. This result is robust to various extensions, including switching coupons or discounts, naive consumers, sunk costs, and asymmetric differentiation parameters. We find that firms are indifferent between ST and LT memberships only when the customer's switching coupon or discount is high relative to the transportation cost.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"15 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142191010","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We present a novel model of fraud and certification in green production. We focus on settings where firms decide between a green or a standard version of a product together with an advertising strategy that can include fraud. In addition, green firms can choose to certify their production to guarantee the truthfulness of their claims. This results in four production‐advertising possibilities (standard, genuine green, fraudulent green, and certified green), by which we provide new insights about the prevalence of fraud and certification. We characterize the perfect Bayesian equilibrium of the resulting game for given green production costs, certification costs, and consumers' willingness to pay for standard production, and we perform comparative statics for the main parameters of the resulting game. We find that changes in certification and green production costs affect consumers' beliefs differently, whereby increases in certification and decreases in green production costs can broaden the likelihood of fraud. These novel results are robust to different market structures and question the general desirability of public subsidies for promoting green production without accompanying certification.
{"title":"On fraud and certification of green production","authors":"Carmen Arguedas, Esther Blanco","doi":"10.1111/jems.12609","DOIUrl":"https://doi.org/10.1111/jems.12609","url":null,"abstract":"We present a novel model of fraud and certification in green production. We focus on settings where firms decide between a green or a standard version of a product together with an advertising strategy that can include fraud. In addition, green firms can choose to certify their production to guarantee the truthfulness of their claims. This results in four production‐advertising possibilities (standard, genuine green, fraudulent green, and certified green), by which we provide new insights about the prevalence of fraud and certification. We characterize the perfect Bayesian equilibrium of the resulting game for given green production costs, certification costs, and consumers' willingness to pay for standard production, and we perform comparative statics for the main parameters of the resulting game. We find that changes in certification and green production costs affect consumers' beliefs differently, whereby increases in certification and decreases in green production costs can broaden the likelihood of fraud. These novel results are robust to different market structures and question the general desirability of public subsidies for promoting green production without accompanying certification.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"30 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-08-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141944774","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
House of representatives (H.R.) 5900, which was passed by Congress in July 2010, legislated more restrictive pilot rest requirements and increased the number of pilot training hours required to obtain an airline transport pilot license. This paper examines the effect that raising the occupational licensing standards has had on airline service quality. A priori, the effect is ambiguous since putting in place more restrictive licensing requirements reduces the available pool of replacement pilots and may cause airline pilots to behave opportunistically and put forth less effort, which suggests a detriment to on‐time performance. On the other hand, well‐rested and more experienced pilots may provide enhanced productivity leading to improved on‐time performance. Our event study analysis surrounding the effective date of H.R. 5900 (August 2013) shows an increase in traditional delays in the short run amid an ongoing pilot shortage, while extended delays were also exacerbated in the short run as a result of binding work schedule restrictions.
{"title":"An evaluation of legislation designed to improve airline pilots' safety and performance","authors":"Nicholas G. Rupp, Kerry M. Tan","doi":"10.1111/jems.12607","DOIUrl":"https://doi.org/10.1111/jems.12607","url":null,"abstract":"House of representatives (H.R.) 5900, which was passed by Congress in July 2010, legislated more restrictive pilot rest requirements and increased the number of pilot training hours required to obtain an airline transport pilot license. This paper examines the effect that raising the occupational licensing standards has had on airline service quality. A priori, the effect is ambiguous since putting in place more restrictive licensing requirements reduces the available pool of replacement pilots and may cause airline pilots to behave opportunistically and put forth less effort, which suggests a detriment to on‐time performance. On the other hand, well‐rested and more experienced pilots may provide enhanced productivity leading to improved on‐time performance. Our event study analysis surrounding the effective date of H.R. 5900 (August 2013) shows an increase in traditional delays in the short run amid an ongoing pilot shortage, while extended delays were also exacerbated in the short run as a result of binding work schedule restrictions.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"99 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141885539","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study empirically investigates strategic entry‐deterrence behavior under oligopolistic competition. I develop a structural econometric model describing incumbents' entry‐deterrence behavior based on the framework of Gilbert and Vives. I show theoretically that incumbents' marginal costs are interval‐identified under the assumption that incumbents deter entry in equilibrium. The structural model is estimated using data from the Japanese aluminum smelting industry. A Vuong‐type model selection test utilizing an instrument demonstrates that the entry‐deterrence model is more consistent with the data than an ordinary Cournot competition model without entry threats.
{"title":"Inference on noncooperative entry deterrence","authors":"Seiichiro Mizuta","doi":"10.1111/jems.12608","DOIUrl":"https://doi.org/10.1111/jems.12608","url":null,"abstract":"This study empirically investigates strategic entry‐deterrence behavior under oligopolistic competition. I develop a structural econometric model describing incumbents' entry‐deterrence behavior based on the framework of Gilbert and Vives. I show theoretically that incumbents' marginal costs are interval‐identified under the assumption that incumbents deter entry in equilibrium. The structural model is estimated using data from the Japanese aluminum smelting industry. A Vuong‐type model selection test utilizing an instrument demonstrates that the entry‐deterrence model is more consistent with the data than an ordinary Cournot competition model without entry threats.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"47 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141868825","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Esmée S. R. Dijk, José L. Moraga‐González, Evgenia Motchenkova
An entrant and an incumbent allocate their research funds across a rival and a non‐rival market. The prospect of an acquisition distorts both players' incentives to allocate funding. Allowing for acquisitions may improve both players' innovation direction and consumer surplus. Under conditions, the incumbent, anticipating monopolization rents in the rival market, moves R&D towards that market. This “incumbency for buyout” effect lowers the rents the entrant obtains from the contestable market, which gives it incentives to move R&D resources away from the rival market. Such strategic interaction in the R&D market has implications for the assessment of start‐up acquisitions.
{"title":"Start‐up acquisitions, strategic R&D, and the entrant's and incumbent's direction of innovation","authors":"Esmée S. R. Dijk, José L. Moraga‐González, Evgenia Motchenkova","doi":"10.1111/jems.12606","DOIUrl":"https://doi.org/10.1111/jems.12606","url":null,"abstract":"An entrant and an incumbent allocate their research funds across a rival and a non‐rival market. The prospect of an acquisition distorts both players' incentives to allocate funding. Allowing for acquisitions may improve both players' innovation direction and consumer surplus. Under conditions, the incumbent, anticipating monopolization rents in the rival market, moves R&D towards that market. This “incumbency for buyout” effect lowers the rents the entrant obtains from the contestable market, which gives it incentives to move R&D resources away from the rival market. Such strategic interaction in the R&D market has implications for the assessment of start‐up acquisitions.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"76 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141868354","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Monopolists selling complementary products charge a higher price in a static equilibrium than a single (multiproduct) monopolist would, reducing both the industry profits and consumer surplus. Firms could instead reach a Pareto improvement by lowering prices to the single‐monopolist level. We analyze pricing data of railroad coal shipping in the United States. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that the price in case (2) is higher than the price in case (1), suggesting that the complementary monopolist pricing inefficiency is absent in this market. Our findings are robust to propensity score blocking, causal machine learning algorithms, and difference‐in‐differences analysis. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, elimination of double marginalization, and royalty stacking and patent thickets.
在静态均衡中，销售互补产品的垄断者比单一（多产品）垄断者收取更高的价格，从而减少了行业利润和消费者剩余。相反，企业可以通过将价格降到单一垄断者的水平来实现帕累托改进。我们分析了美国铁路煤炭运输的定价数据。我们比较了两种情况下煤炭生产商从 A 地运往 C 地的运输路线：(1) 同一条铁路拥有 AB 和 BC；(2) 不同的铁路拥有 AB 和 BC。我们没有发现第（2）种情况下的价格高于第（1）种情况下的价格，这表明该市场不存在互补性垄断定价低效。我们的研究结果对倾向得分阻断、因果机器学习算法和差分分析都是稳健的。我们的研究结果对纵向兼并、反公地悲剧、销售互补品的企业兼并、消除双重边际化、版税堆叠和专利丛林都有影响。
{"title":"Double marginalization in the pricing of complements: The case of US freight railroads","authors":"Alexei Alexandrov, Russell Pittman, Olga Ukhaneva","doi":"10.1111/jems.12604","DOIUrl":"https://doi.org/10.1111/jems.12604","url":null,"abstract":"Monopolists selling complementary products charge a higher price in a static equilibrium than a single (multiproduct) monopolist would, reducing both the industry profits and consumer surplus. Firms could instead reach a Pareto improvement by lowering prices to the single‐monopolist level. We analyze pricing data of railroad coal shipping in the United States. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that the price in case (2) is higher than the price in case (1), suggesting that the complementary monopolist pricing inefficiency is absent in this market. Our findings are robust to propensity score blocking, causal machine learning algorithms, and difference‐in‐differences analysis. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, elimination of double marginalization, and royalty stacking and patent thickets.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"7 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141785300","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Empirical studies show that women have lower chances of reaching top management positions, known as the glass‐ceiling effect. To study women's careers, we develop a search and matching model where job ladders consist of three hierarchical levels and workers can progress in the career by means of internal promotions or by transitioning to another firm. Both, formal applications and referral hiring via endogenous social networks can be used for moving between firms. We show that when female workers are minority in the labor market and social link formation is gender‐biased (homophilous), there are too few female contacts in the social networks of their male colleagues. This disadvantage implies that female workers are referred less often and, thereby, become underrepresented in top‐level management positions of firms relative to their fraction in the market. Our main theoretical results are consistent with the empirical evidence based on the German Socio‐Economic Panel.
{"title":"Social networks, promotions, and the glass‐ceiling effect","authors":"Michael Neugart, Anna Zaharieva","doi":"10.1111/jems.12603","DOIUrl":"https://doi.org/10.1111/jems.12603","url":null,"abstract":"Empirical studies show that women have lower chances of reaching top management positions, known as the glass‐ceiling effect. To study women's careers, we develop a search and matching model where job ladders consist of three hierarchical levels and workers can progress in the career by means of internal promotions or by transitioning to another firm. Both, formal applications and referral hiring via endogenous social networks can be used for moving between firms. We show that when female workers are minority in the labor market and social link formation is gender‐biased (homophilous), there are too few female contacts in the social networks of their male colleagues. This disadvantage implies that female workers are referred less often and, thereby, become underrepresented in top‐level management positions of firms relative to their fraction in the market. Our main theoretical results are consistent with the empirical evidence based on the German Socio‐Economic Panel.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"93 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141610032","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The growth of nonemployer businesses as a share of the working‐age population has been little studied relative to the decline of employer business rate in the United States. We show that local labor markets specializing in routine task‐intensive jobs have experienced a higher adoption of information technology as well as the growth of nonemployer businesses primarily through increasing self‐employment in nonroutine manual task‐intensive jobs that are less frequently outsourced to business service firms.
{"title":"Information technology adoption and the growth of nonemployer businesses","authors":"Younjun Kim, Eric Thompson","doi":"10.1111/jems.12601","DOIUrl":"https://doi.org/10.1111/jems.12601","url":null,"abstract":"The growth of nonemployer businesses as a share of the working‐age population has been little studied relative to the decline of employer business rate in the United States. We show that local labor markets specializing in routine task‐intensive jobs have experienced a higher adoption of information technology as well as the growth of nonemployer businesses primarily through increasing self‐employment in nonroutine manual task‐intensive jobs that are less frequently outsourced to business service firms.","PeriodicalId":47931,"journal":{"name":"Journal of Economics & Management Strategy","volume":"1 1","pages":""},"PeriodicalIF":1.9,"publicationDate":"2024-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141505835","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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