Journal of Economics & Management Strategy最新文献

We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. In addition to price, the chains may also compete along a quality dimension, and quality is always set locally. We show that absent quality competition, the chains will never use national pricing. However, if quality competition is sufficiently strong there exist equilibria where at least one of the chains adopts national pricing. We also identify cases in which national pricing benefits (harms) all consumers, even in markets where such a pricing strategy leads to higher (lower) prices.

Existing studies on partial ownership usually overlook the effects of vertically related markets. Our paper highlights the importance of the upstream market on downstream firms' incentives to acquire partial ownership and the consequent welfare implications. In the main model, we assume that there are three firms in the downstream market, two of which may form a partial ownership arrangement. We find several results that are in contrast to those in the literature. First, the two firms will engage in partial ownership if the upstream market is an oligopoly (triopoly or duopoly). Second, partial ownership may raise total production, consumer surplus, and social welfare. This happens when the upstream market consists of a duopoly and the two firms involved in partial ownership are supplied by different suppliers. Third, the outsider, commonly known as a free rider in the literature, may become a victim of partial ownership. Our results are robust to several extensions, including a general $��n�$-firm framework, product differentiation, and uniform pricing by upstream firms. We also provide the conditions under which the curvature of the demand function and the convexity of the cost function motivate firms to form partial ownership.

We analyze an important but little-studied institution for balancing supply risk in the management of procurement operations: performance bonding. By adding the surety as a third party that guarantees contract fulfillment between supplier and buyer, performance bonding aims to streamline the purchasing process by influencing both contractor selection in the bidding phase and contract enforcement during project execution. Using the data on US government procurement from 2005 to 2015 and exploiting an exogenous variation in the threshold for its application to construction contracts, we find that performance bonding improves contract outcomes by 10.5% and 3.7% in terms of delays and extra costs, respectively. Net of bond premia, which by law are included in the award amounts, this effect translates into savings of about 4% in the budget for federal construction projects and 16% for mid-size projects. We provide suggestive evidence on the effectiveness of selection and monitoring by sureties as driving channels.

This study provides an assessment of the R&D–patent relation of European pharmaceutical firms that are not flawed by endogeneity biases. Firms invest in R&D and generate latent knowledge which then manifests in observable patent outcomes through a Poisson model. The process of turning R&D into knowledge is described by a production process subject to inefficiency and endogeneity. To estimate a Poisson stochastic frontier model, the suggested novel copula-based approach directly accounts for the dependence between the endogenous regressors and the inefficiency component. Hence, its implementation does not require any instrumental variables. Simulation results underline that the proposed estimator outperforms conventional instrumental variable estimators. Neglecting endogeneity leads to a substantial underestimation of the R&D elasticity of patents generated in the European pharmaceutical industry.

We analyze entry of a firm with a new and differentiated product into a market with two properties: An existing incumbent has a captive consumer base, and all consumers have heterogeneous tastes. The interaction between the share of captive consumers and the degree of taste heterogeneity leads to nonmonotone effects of both parameters on entry: The captive share can have an inverse-U relation with entry profits, and higher taste heterogeneity (i.e., less product substitutability) can impede entry in the presence of captive consumers.

Governments often make public announcements that call into question firms' misuse of market power. Yet little is known about how firms respond to them. We study gasoline retailers' price responses to antitrust announcements shaming them for price gouging during the COVID-19 pandemic. We identify price effects using a high-frequency event-study leveraging unique real-time station-level price data and well-identified, discrete antitrust announcements. We find evidence of announcement effects that depend on firms' preannouncement margins and hence exposure to being publicly shamed. Public statements by antitrust questioning firms' misuse of market power can indeed contain signals that affect equilibrium outcomes.

Using carefully designed discrete choice surveys, we measure individuals' valuation of online privacy across countries (United States, Mexico, Brazil, Colombia, Argentina, and Germany) and data types (personal information on finances, biometrics, location, networks, communications, and web browsing). We find that Germans value privacy more than do people in the United States and Latin American countries. Across countries, people most value privacy for financial (bank balance) and biometric (fingerprint) information. People had to be paid the least for permission to receive ads—respondents in Argentina, Colombia, and Mexico would even pay for them—followed by location privacy. We discuss privacy policy implications.

This paper investigates whether firms' responsiveness to customer reviews affects firms' online reputation. Responsiveness is measured by the intensity (fraction) of reviews that are responded to whereas online reputation is measured using TripAdvisor's average customer review rating (1–5 scale). Our analysis is applied to the hotel market in Manhattan (New York). To deal with the endogeneity of a hotel's responsiveness, we instrument it with the responsiveness level displayed by nearby competitors. This identification strategy is motivated by the fact that hotels have a greater tendency to respond to reviews not only because a particular review demands attention, but also because they seek to comply (catch up) with their competitors' level of responsiveness. The results show that one standard deviation increase in a hotel's responsiveness level would result in an improvement of 0.055 stars in TripAdvisor's average online rating (equivalently, an increase of 0.09 SD). Importantly, not accounting for endogeneity would lead to an erroneous conclusion that such effect is nonexistent. In addition, our results show that the effect is heterogeneous. Specifically, the effect is particularly strong for: (a) hotels responding more intensely to negative reviews, (b) independent hotels (vis-à-vis chain hotels), (c) hotels with a less established online reputation, (d) hotels with more volatile online ratings, and (e) hotels with more experience responding to negative reviews. We discuss the possible mechanism between firms' responsiveness and online reputation.

A common form of Corporate Social Responsibility (CSR) by firms is to agree to donate a fixed portion of private good revenues to a charitable cause. In this paper, we explore a new rationale for such CSR known commonly as Cause-Related Marketing (CRM). We argue that linking private good purchase with charitable donations to a partnering nongovernmental organization (NGO) allows the firm to price discriminate between altruistic consumers who wish to make charitable donations out of their income and nonaltruistic consumers who do not place any value on such donations. The disparity in altruistic propensities translates into a difference in private good value which limits the firm's ability to extract consumer surplus in the private good market. Linking private good sales to charity brings down the variation in private good value and enables the firm to appropriate greater surplus. At the same time, by inducing nonaltruistic consumers to donate through their purchase of the charity-linked good, CRM may also increase charitable donations to the NGO beyond the level that would be achieved under the standard voluntary contributions equilibrium. We extend our model to consider the effects of CRM on profits and donations when altruistic consumers can choose between donating directly to the NGO out of their income and donating through their purchase of the charity-linked good. We consider this choice in the context of CRM advertising where firms make the altruism of their consumers public and thus provide exhibition value to donations made through the charity-linked good. We find that the case for CRM strengthens when we allow the firm to appropriate exhibition utility through advertising while enabling greater donations for the NGO through direct donations as well as CRM.

This paper estimates the impact of environmental regulation on foreign investment using the 2003 Pollution Discharge Fee Reform in China as a quasi-natural experiment. Using a Difference-in-Differences method to investigate foreign investment from 2000 to 2007, we propose the “Pollution Deterrence Hypothesis” and the “Green Strategy Hypothesis” and provide evidence for the debate between these two hypotheses. We find that foreign investors' strategic responses to enhanced environmental regulations depend on their initial shareholder status in a firm. More specifically, after increased environmental regulation, foreign investors are less likely to invest in pollution-intensive firms in which they have held relatively small shares. However, foreign investors are more inclined to increase their shares in pollution-intensive firms in similar situations if they already held a relatively large number of shares. Based on the heterogeneous analysis, we suggest that our results are most apparent in regions with better local governance.