Journal of Economics & Management Strategy最新文献

Pricing and output decisions are often delegated to managers compensated on the basis of sales. Prior literature has shown that when firms are homogeneous, the delegation of pricing or output decisions to managers, compensated on the basis of sales, does not facilitate collusion. We show that when firms are heterogeneous, either in marginal cost or product quality, sales-based compensation can facilitate collusion under both price and quantity competition. As a result, compensating managers on the basis of sales can increase firm profits and reduce consumer welfare. Additionally, we find that owners can strategically design managerial compensation structures to incentivize collusion between rival managers.

We analyze the performance of the championing and shaming inquiries by a Nongovernmental Organization in a signaling game played by a monopoly that sells a credence good to an uninformed consumer. Championing (shaming) means certifying (uncovering) a firm that sells a high (low) quality product. An inquiry alters the whole information structure of the signaling game. It provides redundant hard information in a separating equilibrium but it lowers the set of separating prices. We show that a high-quality producer and the consumers welcome this inquiry in a pooling equilibrium as it enhances their expected payoffs. They prefer a championing over a shaming inquiry when the likelihood of a high-quality producer is low. A championing inquiry may lower the consumer's expected payoff if it is run before the monopoly sets its price since the consumer may prefer paying a low pooling price for a credence good rather than a high price for a certified high-quality good.

Firms are used to registering trademarks for intellectual property protection which ultimately increases their innovations. Using a novel data set tracking firm-level trademark registrations of Chinese listed firms between 2005 and 2017, this article sheds light on the role of a firm's first trademark in its patents and the related provision's implication in the developing world. We implement a difference-in-difference model to find approximately a 30% increase in the number of a firm's patents after its first trademark application. Moreover, we take advantage of the latest amendment of China's Trademark Law in 2013 as an exogenous shock to investigate the influence of law protection on trademark-induced innovations. The results suggest a strengthened effect of first trademark applications on patent numbers after the 2013 amendment.

We consider a market where each firm is created by the combination of two complementary assets that are heterogeneous in their productivity. After assets match endogenously, their owners choose between two ownership structures: centralized organization (integration) and arm's length organization (nonintegration). Our main focus is on the interplay between productivity heterogeneity and firm boundary decisions. When firms choose between distinct ownership structures, the standard single-crossing condition that guarantees positive assortative matching may fail to hold. We provide a novel condition—the congruent marginal contributions property—which guarantees monotone matching with respect to asset productivity. Furthermore, we provide conditions under which integration at the bottom of the productivity ladder is the market equilibrium; an organizational pattern that has been largely unexplored by the theoretical and empirical literature. We investigate the effect of model primitives on the equilibrium distribution of output. Moreover, our model offers interesting testable implications regarding firm boundary decisions.

We develop a consumer search model in which consumers may remain uncertain about product quality even after inspecting the product. We first consider the postsearch uncertainty regarding vertical quality, and characterize the separating equilibrium in which firms with different quality levels charge different prices. If quality information is not sufficiently transparent after the search, then prices between the low- and the high-quality products can either diverge or converge as the search cost decreases, depending on the degrees of horizontal and vertical product differentiation. We further extend the model to include the postsearch uncertainty about the horizontal match value and to endogenize the firm's quality choice.

Firms that sell vertically differentiated products infrequently roll out multiple products at the same time. In fact, it is often a firm already selling a well-established product that decides to expand up- or downwards when such an opportunity arises. A critical decision in this scenario is whether to introduce the new product under an existing brand. In this paper, we develop a game-theoretic model in which firms expand their product line to cater to a different customer segment, choosing their branding strategy, new product quality, and prices. We find that the firm's optimal branding strategy depends on both the vertical direction of the expansion and the level of competition, and identify a novel interaction effect between these factors. In particular, firms engaged in direct competition employ branding as a commitment device to soften quality competition. When these firms extend their product line upwards, this creates a misalignment between firms' actions and consumer preferences. We also derive conditions under which firms, against conventional wisdom, choose to differentiate their products more when selling them under the same brand. Finally, we characterize the welfare effects of branding in this setting, and argue that our findings are consistent with observations from the car industry.

The rise of peer-to-peer (P2P) sharing, exemplified recently by increased car-sharing and clothing-sharing, has altered our consumption style. One can consume goods without owning them. In fact, the ownership of goods can be monetized through P2P rental markets. These changes are regarded as influencing various strategies of manufacturers of goods being shared. Specifically, this paper examines aspects of product variety and design. A stylized model is examined in which a manufacturing firm makes a product variety decision of whether to launch a niche product line in addition to an existing mass product line. Consumers are of two types, including average consumers, who value the niche product less than the mass product, and snob consumers, who evaluate the niche product highly. Results demonstrate that the existence of P2P sharing makes consumers' ownership decisions immaterial, which alleviates difficulties of cannibalization between mass and niche product lines and which therefore encourages firms to widen their product variety. Moreover, to address issues of product design, the model is extended to allow the firm to choose the degree of niche-serving of the second product line endogenously. Results show that P2P sharing deters a firm from designing a niche for the second product line.

Merger-specific efficiencies alleviate anticompetitive concerns of horizontal mergers. However, organizational challenges inherent in mergers pose a threat to achieving these efficiencies and could negatively impact the merged firm's productivity and market outcomes. We separately measure the organizational and strategic effects of mergers on quality provision using administrative data from the US airline industry, leveraging an industry-specific regulation. We find that organizational challenges (e.g., combining workforces) cause a significant reduction in the quality supplied by a merged firm. In contrast, strategic effects (e.g., market strategy) have a minor impact on quality. Also, we find that a merger can reduce the performance of both merging firms. Our results suggest a merger's organizational challenges create uncertain efficiency gains.

We show theoretically that when high-quality, low-price counterfeits exist and are visibly indistinguishable from authentic products, the status-seeking wealthy may embrace a “less is more” purchasing strategy or what we refer to as the minimalist luxury strategy, to signal their status. These are the wealthy who have a high disutility of shopping for counterfeits. Specifically, in our model, only buyers know the authenticity of their own purchases. Because of this information asymmetry, these wealthy buyers may purposefully restrain from consuming luxury goods as a sacrifice of functional utility to stand out, a signaling strategy that the rest are not willing to mimic. Thus, “less” functional utility allows those status-seeking wealthy to enjoy “more” symbolic utility that the society bestows on their perceived status. This minimalist luxury strategy is in sharp contrast to Veblen's conspicuous consumption strategy, as well as to the maximalist luxury strategy proposed by Liu et al. We derive this minimalist luxury equilibrium, discuss how signaling in our context can differ from that of Veblen and Liu et al., and explore its managerial implications for the luxury goods industry.

This paper studies how automation impacts the structure of decision-making in organizations. We develop a theoretical model of a firm, where a principal makes a decision about how much to prioritize the new product development division when the division is led by a manager who holds private information specific to this division and has misaligned preferences with the principal. The principal chooses whether to decentralize this decision by delegating it to the manager, resulting in more informed but unbiased decision. In this setting, we investigate how automation which reduces operational variability may alter this choice of organizational structure. The findings from our analysis show that firms deploy automation resources differently depending on their organizational structure: centralized firms choose to automate divisions that face more uncertainty, while decentralized firms do the opposite. Moreover, increasing access to automation results in higher centralization of decision-making in firms. In the extensions, we show that the strategic use of automation reduces the informativeness of intrafirm communication, and also, that automation can be a strategic substitute to monetary contracts.