Featured Articles:
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Volume 27, Issue 4, Winter 2018

Store brands and retail grocery competition

Rong Luo

Grocery retailers rank store brands as the most important factor that differentiates them from their competitors. Retailer competition should have a stronger impact on the more substitutable national brands than the more differentiated store brands. However, the literature has not studied the impacts empirically. In this paper, I quantify the different impacts of retailer competition on national brands and store brands using the scanner data of a U.S. chain retailer. I estimate a structural demand and supply model that incorporates the differentiation effect and retailer competition. The results show that national brand consumers are more likely to switch stores than store brands consumers. By analyzing two counterfactual cases, I find that 1) if the retailer did not sell store brands, its profit would decrease, and the loss would be greater in markets with more competitors; and 2) if the retailer competition had increased, then the national brands’ retail prices would decrease more than the store brands’ prices.

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Rong Luo

Peer‐to‐peer sharing in the lodging market: Evaluating implications for social welfare and profitability

Esther Gal-Or

With a focus on the lodging market, we investigate the nature of competition between a peer‐to‐peer platform and a traditional lodging provider (hotel), in an environment where both possess the market power to affect the final lodging price established in the market. To understand such an environment, we investigate the strategy choices of the three types of players active in this market: the platform, the hotel, and individuals in the population who consider supplying or demanding lodging capacity. We use our analysis to predict how the emergence of the peer‐to‐peer platform affects the profits of the hotel and the welfare of consumers. We characterize two types of equilibria: Partial Coverage and Full Coverage. The former type arises if each individual’s demand for lodging while on vacation is relatively low in comparison to her supply. In this case, the level of demand originating from vacationers is insufficient to make it worthwhile for the platform to lower its service fee in order to attract capacity from every individual in the population. In contrast, when the demand for lodging while on vacation is relatively high, it may become profitable for the platform to implement the Full Coverage equilibrium, in which case every individual supplies lodging capacity to the platform. We demonstrate that the entry of the platform to the market will definitely increase the consumer surplus if the platform chooses to implement the Full Coverage equilibrium. At the Partial Coverage equilibrium, the consumer surplus might actually decline upon the entry of the platform. This might happen because the entry of the platform can sometimes lead to higher lodging prices, and as a result, can hurt individuals when vacationing. Because the entry of the platform raises the income of individuals in the economy, their willingness to pay for lodging while on vacation may rise. Such higher prices may also sometimes lead to higher profits for the hotel, in spite of the competition with the platform. In the special case that individuals experience no disutility when offering a portion of their housing space to the platform because this space has no alternative use for the individual, the entry of the platform will always lead to higher consumer welfare and lower profits for the hotel, irrespective of whether Full or Partial Coverage arises as equilibrium.

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Esther Gal-Or

Previously Featured Articles

27.2, Summer 2018

27.1, Spring 2018

26.3, Fall 2017

Web of Science Most Cited (2015-2018)
      1. Crowdfunding: Geography, Social Networks, and the Timing of Investment Decisions, by Ajay Agrawal, Christian Catalini, and Avi Goldfarb, Summer 2015
      2. Privacy Regulation and Market Structure, by James Campbell, Avi Goldfarb, and Catherine Tucker, Spring 2015
      3. Endowment Origin, Demographic Effects, and Individual Preferences in Contests, by Curtis R. Price and Roman M. Sheremeta, Fall 2015
      4. The Provision of Relative Performance Feedback: An Analysis of Performance and Satisfaction, by Ghazala Azmat and Nagore Iriberri, Spring 2016
      5. Promotion Signals, Experience, and Education, by Michael Bognanno and Eduardo Melero, Spring 2016
Web of Science Most Cited (All Time)
    1. Private Politics, Corporate Social Responsibility, and Integrated Strategy, by David P. Baron, Spring 2001
    2. Value‐based Business Strategy, by Adam M. Brandenburger and Harborne W. Stuart, Jr., Spring 1996
    3. How Well Do Social Ratings Actually Measure Corporate Social Responsibility? by Aaron K. Chatterji, David I. Levine, and Michael W. Toffel, Spring 2009
    4. A Practitioner’s Guide to Estimation of Random‐Coefficients Logit Models of Demand, by Aviv Nevo, Winter 2000
    5. An Empirical Analysis of the Strategic Use of Corporate Social Responsibility, by Donald S. Siegel Donald F. Vitaliano, Fall 2007

Recently Published Articles

Volume 27, Issue 4, Winter 2018 (current issue)

Special Issue: Innovation Economics III: Patents, Trademarks, and Technology Standards Datasets

Economic influence activities

Davin Raiha
Firms frequently make operational and strategy decisions to gain political influence. They locate plants, expand workforces, or choose suppliers, with the aim of affecting the economy and the electoral success of politicians. This behavior constitutes a nontraditional form of influence, which I refer to as economic influence activities (EIA). In this paper, I show how such activities influence policymaking and why firms may prefer it to more traditional influence activities such as campaign contributions.

Corporate social responsibility and product quality

Aleix Calveras and Juan‐José Ganuza
We study both theoretically and empirically the relationship between different types of corporate social responsibility (CSR) and a firm's product quality. We show that CSR may serve as a tool for a firm's product differentiation strategy, finding that both internal and external CSR enhance a firm's product quality.

On the role of outside options in wage renegotiation

Fengjiao Chen, Chiu Yu Ko, and Duozhe Li
We study a game‐theoretic model of wage renegotiation. A worker, after receiving a superior outside offer, initiates a wage renegotiation with his current employer. During the renegotiation, whenever a proposal is rejected, the worker decides whether to opt out. When the two parties are sufficiently patient, any wage level between the outside offer and the entire net surplus can be sustained in equilibrium. Opting out may also arise in equilibrium.

Contract contingency in vertically related markets

Emanuele Bacchiega, Olivier Bonroy, and Emmanuel Petrakis
We study the optimal precontractual arrangement offers of an upstream monopolist producing an essential input that may sell to two vertically differentiated downstream firms. A powerful supplier always opts for an exclusive contract. By contrast, a weaker supplier offers nonexclusive contracts and makes each of them contingent or noncontingent such as to guarantee the most favorable outside option in its negotiations.

Managerial turnover and entrenchment

Zenan Wu and Xi Weng
We consider a two‐period model in which the success of the firm depends on the effort of a first‐period manager (the incumbent) as well as the effort and ability of a second‐period manager. Our model predicts that it is optimal for the board to design a contract to induce entrenchment (respectively, anti‐entrenchment) if the signal regarding the incumbent manager's ability becomes sufficiently uninformative (respectively, informative).

On the determinants and consequences of informal contracting

Ricard Gil and Giorgio Zanarone
As documented by Macauley and others, informal contracts are pervasive in modern economies. Yet, systematic empirical evidence on them is still limited. In this paper, we provide a framework to investigate the determinants and consequences of informal contracting.

Platform pricing and consumer foresight: The case of airports

Ricardo Flores‐Fillol, Alberto Iozzi, and Tommaso Valletti
We analyze the optimal behavior of a platform providing essential inputs to downstream firms selling a primary and a second complementary good. Final demand is affected by consumer foresight, that is, consumers may not anticipate the ex post surplus from the secondary good when purchasing the primary good.

Peer‐to‐peer sharing in the lodging market: Evaluating implications for social welfare and profitability

Esther Gal‐Or
With a focus on the lodging market, we investigate the nature of competition between a peer‐to‐peer platform and a traditional lodging provider (hotel), in an environment where both possess the market power to affect the final lodging price established in the market.

Selling through referrals

Daniele Condorelli, Andrea Galeotti, and Vasiliki Skreta
We endogenize intermediaries' choice to operate as agents or merchants in a market where there are frictions due to asymmetric information about consumption values.

Volume 27, Issue 3, Fall 2018

Special Issue: Innovation Economics III: Patents, Trademarks, and Technology Standards Datasets

Micro Moments Database for cross‐country analysis of ICT, innovation, and economic outcomes

Eric Bartelsman, Eva Hagsten, and Michael Polder
This paper provides technical documentation to a database built up from firm‐level sources titled Micro Moments Database (MMD) that is made available for researchers through Eurostat. The MMD is an internationally harmonized research database of statistical moments collected from linked longitudinal firm‐level data in a large selection of EU national statistical offices. 

Making the patent scope consistent with the invention: Evidence from Japan

Yoshimi Okada, Yusuke Naito, and Sadao Nagaoka
It is a crucial function of patent examination to make the patent scope consistent with the contribution of the invention to the state of the art. We assess this function using newly developed data on the scope of Japanese patent applications and grants.

Constructing a Chinese patent database of listed firms in China: Descriptions, lessons, and insights

Zi-Lin He, Tony W. Tong, Yuchen Zhang, Wenlong He
Although China is now the largest patent filing country in the world, there is little firm-level research using Chinese patents due to difficulties in integrating Chinese patent data with firm data. To partially address this gap, we construct a Patent Database linking State Intellectual Property Office (SIPO) patents to all listed firms and their subsidiaries in China, and we are making the database publicly available to the research community.

The USPTO Patent Examination Research Dataset: A window on patent processing

Stuart J.H. Graham, Alan C. Marco, and Richard Miller
This article describes the “USPTO Patent Examination Research Dataset” (PatEx) and explores possible selection issues and the representativeness of the nearly 9.2 million US patent application records it contains.

Machine learning and natural language processing on the patent corpus: Data, tools, and new measures

Benjamin Balsmeier, Mohamad Assaf, Tyler Chesebro, Gabe Fierro, Kevin Johnson, Scott Johnson, Guan‐Cheng Li, Sonja Lück, Doug O'Reagan, Bill Yeh, Guangzheng Zang, and Lee Fleming
Drawing upon recent advances in machine learning and natural language processing, we introduce new tools that automatically ingest, parse, disambiguate, and build an updated database using U.S. patent data. 

Mapping standards to patents using declarations of standard‐essential patents

Justus Baron and Tim Pohlmann
This paper describes a new database of declared standard‐essential patents (SEPs), discusses methods for matching declared SEPs to specific standard documents, and presents empirical evidence on technology standards subject to declared SEPs. It discusses opportunities for new empirical research using databases of declared SEPs and data on patenting in standard‐related technology classes.

Technology Standards and Standard Setting Organizations: Introduction to the Searle Center Database

Justus Baron and Daniel F. Spulber
This paper describes the Searle Center Database on Technology Standards and Standard Setting Organizations (SSOs). This database combines comprehensive information on technology standards, SSO membership, and SSO characteristics in a format designed for economic research. The paper describes how to combine these data with other new databases on standard‐related patents and standardization processes at 3GPP; and sketches avenues for empirical research.

Unpacking 3GPP standards

Justus Baron and Kirti Gupta
This paper describes a new database with detailed information on standardization procedures at the 3rd Generation Partnership Project (3GPP). 3GPP is the most relevant standard‐setting organization (SSO) in the field of mobile telecommunications.  The present database contains information on membership, meeting attendance, chairmanship, work items, contributions, and votes at 3GPP. These data shed light on the technical complexity of standard development and illustrate the importance of voluntary contributions from SSO members.

Monetizing marks: Insights from the USPTO Trademark Assignment Dataset

Stuart J. H. Graham, Alan C. Marco, and Amanda F. Myers
This article describes the USPTO Trademark Assignment Dataset, a database of over 785,000 transactions recorded during 1952–2013 affecting almost 4.2 million trademark registrations and applications. We provide a comprehensive description and present key trends.

Volume 27, Issue 2, Summer 2018

Multibrand pricing as a strategy for consumer search obfuscation in online markets

Stephen McDonald and Colin Wren
This paper argues that a firm with multiple brands can obfuscate consumer search by excluding the brands of other firms from a consumer's consideration set. This is examined empirically by regressing price data for a leading U.K. motor insurance price comparison site (or “shopbot”).

Contractual structures and consumer misperceptions

Christian Michel
We analyze how firms can design contracts to strategically induce consumer misperceptions. A fraction of consumers is naive and underestimates the costs of claiming a warranty payment in the event of product breakdown. This leads to an inference error that makes consumers prone to overpredict product quality, which a firm can profitably exploit.

Inefficient NGO labels: Strategic proliferation and fragmentation in the market for certification

Anthony Heyes and Steve Martin
Nongovernmental organization (NGO) certification is a prerequisite for corporate engagement in enhanced social behaviors in many settings. Labels with broad scope (like “sustainability”) coexist with niche competitors much narrower in scope (like “bird-friendliness”). Modeling multi-issue competition between NGOs allows us to be the first to analyze label fragmentation and provide a novel perspective on proliferation that has frustrated practitioners.

Poaching in media: Harm to subscribers?

Elias Carroni
Two media platforms compete for heterogeneous users bothered by commercials and sell advertising spaces to firms. Within-group price discrimination intensifies media competition on the firms' side, as some firms advertise only on one media outlet (single-home), where they can meet early users and switchers. However, price discrimination also induces stronger within-group competition to poach the rival's users. Depending on the balance between these two forces, conditioning subscription prices on past behavior might be beneficial or detrimental to users, whereas it is always detrimental to platforms.

Behavior‐ and characteristic‐based price discrimination

Stefano Colombo
We develop a model of behavior‐ and characteristic‐based discriminatory pricing where consumers are heterogeneous both in tastes and in price sensitivity.

The role of performance appraisals in motivating employees

Jurjen J.A. Kamphorst Otto H. Swank
Workers' rewards and career perspectives often depend on how their supervisors perceive their performance. However, evaluating a worker's performance is often difficult. Supervisors give, on average, “too” positive appraisals, and both positive and negative feedback can (de)motivate workers.

Skill development, bargaining power, and a theory of job design

Seongwuk Moon
We examine the job design decision in the context of skill development and bargaining power. The choice between specialization and multitasking requires employees to develop either specialized or varied task‐specific skills. Employees' (i.e., the owners of the acquired skills) bargaining power depends on their skill sets, which differentiate their ability to hold up production and threaten to leave a firm.

Licensing and innovation with imperfect contract enforcement

Richard Gilbert and Eirik Gaard Kristiansen
Licensing promotes technology transfer and innovation, but enforcement of licensing contracts is often imperfect. We model contract enforcement as a game with perfect information but probabilistic enforcement and explore the implications of weak enforcement on the design of licensing contracts, the conduct of firms, and market performance.

Asymmetric sequential search under incomplete information

Yizhaq Minchuk Aner Sela
We study a multistage sequential search model with n agents who compete for one job. We also investigate the relation between the optimal ability thresholds as well as the optimal order of agents in all stages according to the agents' distributions of abilities.

Volume 27, Issue 1, Spring 2018

Do retail mergers affect competition? Evidence from grocery retailing

Daniel S. Hosken, Luke M. Olson, and Loren K. Smith
This study estimates the price effects of horizontal mergers in the U.S. grocery retailing industry. We find that mergers in highly concentrated markets are most frequently associated with price increases, and mergers in less concentrated markets are most often associated with price decreases.

The magic of the new: How job changes affect job satisfaction

Adrian Chadi and Clemens Hetschko
We investigate a crucial event for job satisfaction: changing one's workplace. For representative German panel data, we show that the reason why the previous employment ended is strongly linked to satisfaction with the new job.

First mover or higher quality? Optimal product strategy in markets with positive feedbacks

P.J. Lamberson and Scott E. Page
Conventional wisdom holds that in markets with positive feedbacks being first to market can matter more than product quality. In this paper, we test that intuition within a generalized Pólya urn model. We find that if we assume constant feedbacks, in the long run, higher quality products dominate the market regardless of initial market shares, contradicting the common wisdom. However, when we allow for variable feedbacks, initial advantages persist almost indefinitely. 

Learning quality through prices and word-of-mouth communication

Carla Guadalupi
This paper studies the effect of word-of-mouth communication on the optimal pricing strategy for new experience goods.The main result is that word-of-mouth communication is essential for the existence of separating equilibria, wherein the high-quality monopolist signals high quality through a low introductory price (lower than the monopoly price), and the low-quality one charges the monopoly price. 

Price and quality competition with quality positions

Shogo Kurokawa and Nobuo Matsubayashi
In this study, we investigate price and quality decisions in a duopoly in the presence of firms’ quality positions, which are determined by the quality levels of their existing core products. Our results show that the presence of repositioning costs restricts firms’ abilities to improve profitability and differentiate themselves vertically. 

The O-ring theory of the firm

Michael T. Rauh
We develop an O-ring production function characterized by specialization and division of labor and where shirking or negative shocks can have major adverse consequences. We show that when the principal can monitor individual output, the firm tends be large (potentially larger than first best), with a high degree of specialization and division of labor, weak incentives, and low pay as in traditional nonunion manufacturing.

The burden of glory: Competing for nonmonetary incentives in rank-order tournaments

Raja Kali, David Pastoriza, and Jean-François Plante
In an environment in which elite, highly paid professionals compete for nonmonetary rewards, we find evidence of underperformance. Our analysis suggests that choking under pressure from high-stakes nonmonetary rewards is behind the underperformance.

Contests with endogenous deadlines

Christian Seel
This paper analyzes the problem of a contest designer who chooses a starting time and a deadline of the contest to maximize discounted total effort by the contestants. I analyze how the optimal starting time and deadline change for a variable contest prize, different types of asymmetries, a Tullock lottery contest success function, and different goal functions of the designer.

Are patent fees effective at weeding out low-quality patents?

Gaétan de Rassenfosse and Adam B. Jaffe
The paper investigates whether patent fees are an effective mechanism to deter the filing of low-quality patent applications. The study analyzes the effect on patent quality of the Patent Law Amendment Act of 1982, which resulted in a substantial increase in patenting fees at the U.S. Patent and Trademark Office.