This study presents and provides an explanation for a novel stylized fact: both high-performing public companies as well as more troubled companies withhold issuing guidance. We assume that the manager’s ability affects the level of earnings and the accuracy of the guidance, but issuing a forecast is costless for all manager types. Managers are thus able to signal their ability through accuracy in their forecasts. While high ability managers would seem to benefit the most from issuing guidance, in equilibrium we find that both high and low ability managers withhold guidance, while intermediate ability managers issue forecasts. This occurs since high ability managers do not need to rely on guidance in order to convey their ability to the market, while intermediate managers must forecast to separate from low ability managers. Hence, we find that high ability managers counter-signal in equilibrium by withholding guidance, which does not result in a subsequent “punishment” by the market. Additionally, the results offer new empirical predictions.
{"title":"No reliance on guidance: counter‐signaling in management forecasts","authors":"Cyrus Aghamolla, Carlos Corona, Rong Zheng","doi":"10.1111/1756-2171.12367","DOIUrl":"https://doi.org/10.1111/1756-2171.12367","url":null,"abstract":"This study presents and provides an explanation for a novel stylized fact: both high-performing public companies as well as more troubled companies withhold issuing guidance. We assume that the manager’s ability affects the level of earnings and the accuracy of the guidance, but issuing a forecast is costless for all manager types. Managers are thus able to signal their ability through accuracy in their forecasts. While high ability managers would seem to benefit the most from issuing guidance, in equilibrium we find that both high and low ability managers withhold guidance, while intermediate ability managers issue forecasts. This occurs since high ability managers do not need to rely on guidance in order to convey their ability to the market, while intermediate managers must forecast to separate from low ability managers. Hence, we find that high ability managers counter-signal in equilibrium by withholding guidance, which does not result in a subsequent “punishment” by the market. Additionally, the results offer new empirical predictions.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":"52 1","pages":"207-245"},"PeriodicalIF":2.3,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12367","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47438967","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Free ad(vice): internet influencers and disclosure regulation","authors":"M. Mitchell","doi":"10.1111/1756-2171.12359","DOIUrl":"https://doi.org/10.1111/1756-2171.12359","url":null,"abstract":"","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":"52 1","pages":"3-21"},"PeriodicalIF":2.3,"publicationDate":"2021-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12359","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45730721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We model a two-level supply chain where Nash bargaining occurs upstream, while firms compete in a differentiated products logit setting downstream. The parameters of this model can be calibrated with a discrete set of data on prices, margins, and market shares. Using a series of numerical experiments, we illustrate how the model can simulate the outcome of both horizontal and vertical mergers. In addition, we extend the framework to allow for downstream competition via a second score auction.
{"title":"Simulating mergers in a vertical supply chain with bargaining","authors":"Gloria Sheu, Charles S. Taragin","doi":"10.1111/1756-2171.12385","DOIUrl":"https://doi.org/10.1111/1756-2171.12385","url":null,"abstract":"We model a two-level supply chain where Nash bargaining occurs upstream, while firms compete in a differentiated products logit setting downstream. The parameters of this model can be calibrated with a discrete set of data on prices, margins, and market shares. Using a series of numerical experiments, we illustrate how the model can simulate the outcome of both horizontal and vertical mergers. In addition, we extend the framework to allow for downstream competition via a second score auction.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":"1 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12385","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"63249175","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Correction to “Attribute substitution in household vehicle portfolios”","authors":"","doi":"10.1111/1756-2171.12358","DOIUrl":"https://doi.org/10.1111/1756-2171.12358","url":null,"abstract":"","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":"1 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12358","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"63248513","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Information acquisition and voting with heterogeneous experts","authors":"Xu Tan, Quan Wen","doi":"10.1111/1756-2171.12350","DOIUrl":"https://doi.org/10.1111/1756-2171.12350","url":null,"abstract":"","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2020-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12350","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41547530","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Differentiated products demand systems are a workhorse for understanding the price effects of mergers, the value of new goods, and the contribution of products to seller networks. Berry, Levinsohn, and Pakes (1995) provide a flexible random coefficients logit model which accounts for the endogeneity of prices. This article reviews and combines several recent advances related to the estimation of BLP-type problems and implements an extensible generic interface via the PyBLP package. Monte Carlo experiments and replications suggest different conclusions than the prior literature: multiple local optima appear to be rare in well-identified problems; good performance is possible even in small samples, particularly when “optimal instruments” are employed along with supply-side restrictions. If Python is installed on your computer, PyBLP can be installed with the following command: pip install pyblp Up-to-date documentation for the package is available at https://pyblp.readthedocs.io. ∗Thanks to Steve Berry, Jeremy Fox, Phil Haile, Mathias Reynaert, and Frank Verboven and seminar participants at NYU, Rochester, and the 2019 IIOC conference. Thanks to the editor Marc Rysman and to three anonymous referees. Daniel Stackman provided excellent research assistance. Any remaining errors are our own. †New York University, Stern School of Business: cconlon@stern.nyu.edu ‡Harvard University: jgortmaker@g.harvard.edu
差异化产品需求系统是理解合并的价格效应、新产品的价值以及产品对卖方网络的贡献的重要工具。Berry, Levinsohn和Pakes(1995)提供了一个灵活的随机系数logit模型来解释价格的内生性。本文回顾并结合了与blp类型问题估计相关的几个最新进展，并通过PyBLP包实现了一个可扩展的泛型接口。蒙特卡罗实验和重复实验得出了与先前文献不同的结论:在识别良好的问题中，多个局部最优似乎很少见;即使在小样本中也可能有良好的性能，特别是当“最佳仪器”与供应侧限制一起使用时。如果您的计算机上安装了Python，可以使用以下命令安装PyBLP: pip install PyBLP该包的最新文档可在https://pyblp.readthedocs.io上获得。*感谢Steve Berry, Jeremy Fox, Phil Haile, Mathias Reynaert, Frank Verboven和纽约大学罗切斯特分校的研讨会参与者，以及2019年IIOC会议。感谢编辑Marc Rysman和三位匿名裁判。丹尼尔·斯塔克曼提供了出色的研究协助。任何剩下的错误都是我们自己的。†纽约大学斯特恩商学院:cconlon@stern.nyu.edu哈佛大学:jgortmaker@g.harvard.edu
{"title":"Best practices for differentiated products demand estimation with PyBLP","authors":"Christopher T. Conlon, J. Gortmaker","doi":"10.1111/1756-2171.12352","DOIUrl":"https://doi.org/10.1111/1756-2171.12352","url":null,"abstract":"Differentiated products demand systems are a workhorse for understanding the price effects of mergers, the value of new goods, and the contribution of products to seller networks. Berry, Levinsohn, and Pakes (1995) provide a flexible random coefficients logit model which accounts for the endogeneity of prices. This article reviews and combines several recent advances related to the estimation of BLP-type problems and implements an extensible generic interface via the PyBLP package. Monte Carlo experiments and replications suggest different conclusions than the prior literature: multiple local optima appear to be rare in well-identified problems; good performance is possible even in small samples, particularly when “optimal instruments” are employed along with supply-side restrictions. If Python is installed on your computer, PyBLP can be installed with the following command: pip install pyblp Up-to-date documentation for the package is available at https://pyblp.readthedocs.io. ∗Thanks to Steve Berry, Jeremy Fox, Phil Haile, Mathias Reynaert, and Frank Verboven and seminar participants at NYU, Rochester, and the 2019 IIOC conference. Thanks to the editor Marc Rysman and to three anonymous referees. Daniel Stackman provided excellent research assistance. Any remaining errors are our own. †New York University, Stern School of Business: cconlon@stern.nyu.edu ‡Harvard University: jgortmaker@g.harvard.edu","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2020-11-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12352","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45629612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study a recent case where most gynecologists in one city formed a trade association to bargain for better rates with insurance companies. After unsuccessful negotiations, the physicians jointly terminated their insurer contracts and set a minimum price. We find that subsequent realized prices coincided with Nash-Bertrand prices, and that the minimum price was barely binding. We show that these actions ensured the association’s stability and increased profits. Our findings shed light on the role of trade association in collusion among a large number of heterogeneous agents, and provide insights for the antitrust analysis of trade associations.
{"title":"Trade associations and collusion among many agents: evidence from physicians","authors":"Jorge Alé-Chilet, J. Atal","doi":"10.1111/1756-2171.12354","DOIUrl":"https://doi.org/10.1111/1756-2171.12354","url":null,"abstract":"We study a recent case where most gynecologists in one city formed a trade association to bargain for better rates with insurance companies. After unsuccessful negotiations, the physicians jointly terminated their insurer contracts and set a minimum price. We find that subsequent realized prices coincided with Nash-Bertrand prices, and that the minimum price was barely binding. We show that these actions ensured the association’s stability and increased profits. Our findings shed light on the role of trade association in collusion among a large number of heterogeneous agents, and provide insights for the antitrust analysis of trade associations.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2020-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12354","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41715317","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Under moral hazard, most insurance contracts are incomplete, to the extent that they condition the coverage neither on the contingencies under which policyholders choose their behavior, nor on the circumstances of the loss. This incompleteness can be explained by underwriting and auditing costs borne by insurers, by policyholders cognitive costs, and by the limits of market regulation. It opens the door to controversies and disputes between insured and insurer. In this context, we analyze how insurance law can mitigate moral hazard, by allowing insurers to cut indemnities in some circumstances, while preventing them from excessive nitpicking. We also highlight conditions under which the burden of proof should be on the policyholders, provided that insurers are threatened by bad faith penalties.
{"title":"Insurance law and incomplete contracts","authors":"Jean-Marc Bourgeon, P. Picard","doi":"10.1111/1756-2171.12356","DOIUrl":"https://doi.org/10.1111/1756-2171.12356","url":null,"abstract":"Under moral hazard, most insurance contracts are incomplete, to the extent that they condition the coverage neither on the contingencies under which policyholders choose their behavior, nor on the circumstances of the loss. This incompleteness can be explained by underwriting and auditing costs borne by insurers, by policyholders cognitive costs, and by the limits of market regulation. It opens the door to controversies and disputes between insured and insurer. In this context, we analyze how insurance law can mitigate moral hazard, by allowing insurers to cut indemnities in some circumstances, while preventing them from excessive nitpicking. We also highlight conditions under which the burden of proof should be on the policyholders, provided that insurers are threatened by bad faith penalties.","PeriodicalId":51342,"journal":{"name":"Rand Journal of Economics","volume":" ","pages":""},"PeriodicalIF":2.3,"publicationDate":"2020-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1756-2171.12356","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47035605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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