In a rapidly growing industry, potential entrants strategically choose which local markets to enter. Facing the threat of additional entrants, a potential entrant may lower its expectation of future profits and delay entry into a local market, or it may accelerate entry due to preemptive motives. Using the evolution of local market structures of broadband Internet service providers from 1999 to 2007, we find that the former effect dominates the latter after allowing for spatial correlation across markets and accounting for endogenous market structure. On average, it takes 2 years longer for threatened markets to receive their first broadband entrant. Moreover, this entry delay has long‐run negative implications for the divergence of the U.S. broadband infrastructure: 1 year of entry delay translates into an 11% decrease on average present‐day download speeds.

Kyle Wilson

Mo Xiao

Peter F. Orazem

Previously Featured Articles

Can asymmetric punishment deter endogenous bribery

Lin Hu and Mandar Oak
This paper studies the effects of asymmetric punishment of bribery on both bribery and compliance with regulations. We show that, under symmetric punishment, inducing whistle-blowing has no effect on the frequency of bribery.

Upstream market structure and downstream partial ownership

Jie Shuai, Mengyuan Xia, and Chenhang Zeng
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.

National pricing with local quality competition

Tommy Staahl Gabrielsen, Bjørn Olav Johansen, and Odd Rune Straume
We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. 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.

Knowledge diffusion and morality: Why do we freely share valuable information with Strangers?

Charles Ayoubi and Boris Thurm
This article offers a model integrating heterogeneously moral preferences to overcome the seemingly irrational tendency of individuals to freely share data and knowledge. Our analysis highlights the limit of financial incentives and the importance of promoting a sharing culture by enhancing awareness.

Optimal promotions of competing firms in a frictional labour market with organizational hierarchies

Herbert Dawid, Mariya Mitkova, Anna Zaharieva
We study optimal promotion decisions of hierarchical firms, with one junior and one senior managerial position, which interact in a search and matching labour market.

Truly standard-essential patents? A semantics-based analysis

Lorenz Brachtendorf, Fabian Gaessler, and Dietmar Harhoff
This paper introduces a semantics-based method for approximating the standard essentiality of patents. We provide details on the procedure that generates the measure of standard essentiality and present the results of several validation and robustness exercises.

Which is better for durable goods producers, exclusive or open supply chain?

Hiroshi Kitamura, Noriaki Matsushima, and Misato Sato
We explore the supply chain problem of a downstream durable goods monopolist, who chooses one of the following trading modes: an exclusive supply chain with an incumbent supplier or an open supply chain, allowing the monopolist to trade with a new efficient entrant in the future.

The location of cross-border and national mergers and acquisitions within the United States

Steven Brakman, Harry Garretsen, Charles van Marrewijk, and Arjen van Witteloostuijn
Using a detailed firm-level data set for M&As in the period 1985–2012, we compare location choices of cross-border versus national M&As. We find that cross-border M&As are more spatially concentrated, and tend to sort into larger agglomerations than national M&As.

On sellers’ cooperation in hybrid marketplaces

Michele Bisceglia and Jorge Padilla
Hybrid marketplaces play a significant and growing role in the Internet economy. This paper shows that, other things equal, such platforms would maximize their profits if they lowered the fees charged to sellers and the prices charged to consumers in response to cooperation agreements between third-party sellers: horizontal mergers or collusive agreements
      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

Recently Published Articles

Volume 32, Issue 3, Fall 2023 (current issue)

Inferno: A guide to field experiments in online display advertising

Garrett A. Johnson
Online display advertising is a hostile medium for field experiments. Display-ad effects are tiny and necessitate large-scale experiments.

How to examine external validity within an experiment

Amanda E. Kowalski
A fundamental concern for researchers who analyze and design experiments is that the estimate obtained from the experiment might not be externally valid for other policies of interest. Researchers often attempt to assess external validity by comparing data from an experiment to external data. In this paper, I discuss approaches from the treatment effects literature that researchers can use to begin the examination of external validity internally, within the data from a single experiment.

Dangers of a double-bottom line? A poverty targeting experiment misses both targets

Dean Karlan, Adam Osman, and Jonathan Zinman
Two for-profit Philippine banks, aiming to increasing microlending to the poor, incorporated a widely used poverty measurement tool into their loan applications and tested the tool using randomized training content. The strategy backfired, leading to no additional poor applicants and potentially lower-performing loans. This cautionary tale is an example of why management may want include social outcomes directly into employee performance evaluations, or silo corporate social responsibility efforts from core operations.

Infringing use as a path to legal consumption: Evidence from a field experiment

Hong Luo, Julie Holland Mortimer
Digitization has transformed how users find and use copyrighted goods, but many existing legal options remain difficult to access, possibly leading to infringement.

Worker reciprocity and the returns to training: Evidence from a field experiment

Jan Sauermann
Do reciprocal workers have higher returns to employer-sponsored training? Using a field experiment with random assignment to training combined with survey information on workers' reciprocal inclinations, the results show that reciprocal workers reciprocate employers' training investments by higher posttraining performance.

Performance feedback in a group contest: A field experiment on electricity conservation

Chia-Wen Chen, Josie I. Chen, Ming-Jen Lin
We conduct a field experiment on electricity conservation to study whether revealing both the competitive state and the social state in a group contest affects individual beliefs and efforts. Our experiment randomizes group composition, participation, and types of information received in the contest.

Management, supervision, and healthcare: A field experiment

Felipe A. Dunsch, David K. Evans, Ezinne Eze-Ajoku, Mario Macis
We used a randomized management consulting intervention with 80 public-sector healthcare facilities in Nigeria to study the role of information, training, and supervision on the adoption of improved organizational practices.

Evaluating entrepreneurship training: How important are field experiments for estimating impacts?

Robert W. Fairlie
Governments and donors around the world spend billions of dollars subsidizing entrepreneurship training programs. Unbiased evaluation estimates are paramount to understanding whether subsidies and investments in these programs are justified.

Improving the outcomes of youth with medical limitations: Evidence from the National Job Corps Study

Heinrich Hock, Dara Lee Luca, Tim Kautz, David Stapleton
Improving work outcomes for youth with disabilities and reducing their reliance on disability benefits are important policy priorities, but existing interventions have shown limited promise.

Volume 32, Issue 2, Summer 2023

Dangers of a double-bottom line? A poverty targeting experiment misses both targets

Dean Karlan, Adam Osman, and Jonathan Zinman
Two for-profit Philippine banks, aiming to increasing microlending to the poor, incorporated a widely used poverty measurement tool into their loan applications and tested the tool using randomized training content. The strategy backfired, leading to no additional poor applicants and potentially lower-performing loans. This cautionary tale is an example of why management may want include social outcomes directly into employee performance evaluations, or silo corporate social responsibility efforts from core operations.

Infringing use as a path to legal consumption: Evidence from a field experiment

Hong Luo and Julie Holland Mortimer
Digitization has transformed how users find and use copyrighted goods, but many existing legal options remain difficult to access, possibly leading to infringement. In a field experiment, we contact firms that are caught infringing on expensive digital images. Our results suggest that ex-post monetization (e.g., licensing after use) may expand the market, and that rights holders can create value by minimizing search and transactions costs.

Worker reciprocity and the returns to training: Evidence from a field experiment

Jan Sauermann
Using a field experiment with random assignment to training combined with survey information on workers' reciprocal inclinations, the results show that reciprocal workers reciprocate employers' training investments by higher posttraining performance. This finding provides an alternative rationale to explain firm training investments even with the risk of poaching.

Performance feedback in a group contest: A field experiment on electricity conservation

Chia-Wen Chen, Josie I. Chen, and Min-Jen Lin
We conduct a field experiment on electricity conservation to study whether revealing both the competitive state and the social state in a group contest affects individual beliefs and efforts. We find that contestants without feedback about relative performance had difficulty assessing their group's competitive status, and laggards within a group tended to be overconfident about their relative contribution.

Management, supervision, and healthcare: A field experiment

Felipe A. Dunsch, David K. Evans, Ezinne Eze-Ajoku, and Mario Macis
We used a randomized management consulting intervention with 80 public-sector healthcare facilities in Nigeria to study the role of information, training, and supervision on the adoption of improved organizational practices.

Evaluating entrepreneurship training: How important are field experiments for estimating impacts?

Robert W. Fairlie
Governments and donors around the world spend billions of dollars subsidizing entrepreneurship training programs. Unbiased evaluation estimates are paramount to understanding whether subsidies and investments in these programs are justified. The goal of this paper is to compare nonexperimental to experimental methods for evaluating the effectiveness of entrepreneurship training programs that provide training in management, marketing, accounting, legal, and other aspects of starting and running businesses.

Improving the outcomes of youth with medical limitations: Evidence from the National Job Corps Study

Heinrich Hock, Dara Lee Luca, Tim Kautz, and David Stapleton
Improving work outcomes for youth with disabilities and reducing their reliance on disability benefits are important policy priorities, but existing interventions have shown limited promise. We provide new evidence to inform this discussion by re-analyzing data from the 1990s National Job Corps Study, a randomized field experiment conducted nationwide in the United States.

Wikipedia matters

Marit Hinnosaar, Toomas Hinnosaar, Michael Kummer, and Olga Slivko
We document a causal impact of online user-generated information on real-world economic outcomes. In particular, we conduct a randomized field experiment to test whether additional content on Wikipedia pages about cities affects tourists' choices of overnight visits.

Volume 32, Issue 1, Spring 2023

Can asymmetric punishment deter endogenous bribery

Lin Hu and Mandar Oak
This paper studies the effects of asymmetric punishment of bribery on both bribery and compliance with regulations. We show that, under symmetric punishment, inducing whistle-blowing has no effect on the frequency of bribery.

Upstream market structure and downstream partial ownership

Jie Shuai, Mengyuan Xia, and Chenhang Zeng
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.

National pricing with local quality competition

Tommy Staahl Gabrielsen, Bjørn Olav Johansen, and Odd Rune Straume
We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. 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.

Knowledge diffusion and morality: Why do we freely share valuable information with Strangers?

Charles Ayoubi and Boris Thurm
This article offers a model integrating heterogeneously moral preferences to overcome the seemingly irrational tendency of individuals to freely share data and knowledge. Our analysis highlights the limit of financial incentives and the importance of promoting a sharing culture by enhancing awareness.

Optimal promotions of competing firms in a frictional labour market with organizational hierarchies

Herbert Dawid, Mariya Mitkova, Anna Zaharieva
We study optimal promotion decisions of hierarchical firms, with one junior and one senior managerial position, which interact in a search and matching labour market.

Truly standard-essential patents? A semantics-based analysis

Lorenz Brachtendorf, Fabian Gaessler, and Dietmar Harhoff
This paper introduces a semantics-based method for approximating the standard essentiality of patents. We provide details on the procedure that generates the measure of standard essentiality and present the results of several validation and robustness exercises.

Which is better for durable goods producers, exclusive or open supply chain?

Hiroshi Kitamura, Noriaki Matsushima, and Misato Sato
We explore the supply chain problem of a downstream durable goods monopolist, who chooses one of the following trading modes: an exclusive supply chain with an incumbent supplier or an open supply chain, allowing the monopolist to trade with a new efficient entrant in the future.

The location of cross-border and national mergers and acquisitions within the United States

Steven Brakman, Harry Garretsen, Charles van Marrewijk, and Arjen van Witteloostuijn
Using a detailed firm-level data set for M&As in the period 1985–2012, we compare location choices of cross-border versus national M&As. We find that cross-border M&As are more spatially concentrated, and tend to sort into larger agglomerations than national M&As.

On sellers’ cooperation in hybrid marketplaces

Michele Bisceglia and Jorge Padilla
Hybrid marketplaces play a significant and growing role in the Internet economy. This paper shows that, other things equal, such platforms would maximize their profits if they lowered the fees charged to sellers and the prices charged to consumers in response to cooperation agreements between third-party sellers: horizontal mergers or collusive agreements

Volume 31, Issue 4, Winter 2022

Price discrimination through cause-related marketing

Kameshwari Shankar and Suman Ghosh
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.

Submarine trademarks

Carsten Fink, Andrea Fosfuri, Christian Helmers, and Amanda F. Myers
We analyze the trade-off through the lens of “submarine trademarks” in the United States—submarine trademarks are trademarks whose publication and hence disclosure to the public are strategically delayed. We provide the first systematic evidence of submarine trademarks and explore their effectiveness in reducing the disclosure of information, their determinants, and their blocking effect on third-party trademark filings. We also provide evidence on the effect of trademark disclosure on third-party trademark filings.

How much is privacy worth around the world and across platforms?

Jeffrey T. Prince and Scott Wallsten
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.

Environmental regulation and foreign investment: Evidence from China

Yunyi Hu, Haitao Yin, and Jon J. Moon
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.

Which two heads are better than one? Uncovering the positive effects of diversity in creative teams

Glenn Dutcher and Cortney S. Rodet
We examine how diversity affects teams' output in the creative uses task. Diversity among team members' experience or knowledge leads to greater creative output; however, diversity over observable characteristics has no measurable impact. Surprisingly, we find no correlation between experiential diversity and diversity over observable characteristics in our sample. We propose that creative organizations can benefit by also emphasizing experiential diversity when constructing diversity policy to foster effective teams.

Firm responsiveness to consumers’ reviews: The effect on online reputation

Erfan Rezvani and Christian Rojas
This paper investigates whether firms' responsiveness to customer reviews affects firms' online reputation. 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). We discuss the possible mechanism between firms' responsiveness and online reputation.

Price effects of calling out market power: A study of the COVID-19 oil price shock

Aaron Barkley, David P. Byrne, and Xiaosong Wu
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.

Endogeneity in pharmaceutical knowledge generation: An instrument-free copula approach for Poisson frontier models

Rouven E. Haschka and Helmut Herwartz
This study provides an assessment of the R&D–patent relation of European pharmaceutical firms that are not flawed by endogeneity biases.

Challenging the incumbent: Entry in markets with captive consumers and taste heterogeneity

Christian Oertel and Armin Schmutzler
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.

Volume 31, Issue 3, Fall 2022

Market effects of new product introduction: Evidence from the brew-at-home coffee market

Philip G. Gayle and Ying Lin
With retail coffee data spanning 5 years after the single-cup brew coffee pods were introduced to grocery chains, this paper empirically studies the market effects of new product introduction in the brew-at-home coffee market. We use a structural model of demand and supply to capture the changes in consumers’ preference for this new product over time.

Reference-price shifts and customer antagonism: Evidence from reviews for online auctions

Tobias Gesche
This paper investigates how bidders in an auction become antagonized over their successful bid. Using data from a large-scale sales campaign on eBay shows that auction buyers use the platform's feedback system to punish the seller when they discover that the same item is later offered for a lower fixed price.

Dynamic monopoly and consumers profiling accuracy

Didier Laussel, Ngo Van Long, and Joana Resende
Using a Markov-perfect equilibrium model, we show that the use of customer data to practice intertemporal price discrimination will improve monopoly profit if and only if information precision is higher than a certain threshold level. This U-shaped relationship lends support to a popular view that knowledge is good only if it is sufficiently refined.

Platform price parity clauses and market segmentation

Joan Calzada, Ester Manna, and Andrea Mantovani
Price parity clauses (PPCs) are widely adopted by online platforms to force client sellers not to lower their prices elsewhere. We investigate under what conditions online travel agencies (OTAs) decide to apply PPCs, and how this affects hotels' listing decisions on OTAs.

Information accuracy and collusion

Stefano Colombo and Aldo Pignataro
In this study, we investigate firms' ability to collude when price discrimination based on the inherited market is possible, but the information accuracy about the inherited market is imperfect. We show that the level of information accuracy affects collusion sustainability nonmonotonically, according to the starting level of information and the consumers' reservation price. Moreover, we show that banning price discrimination might increase the sustainability of tacit collusion.

On the profitability of interfirm bundling in oligopolies

Sang-Hyun Kim and Jong-Hee Hahn
This paper examines the profitability of interfirm bundling among independent single-good producers in a two-dimensional Hotelling framework. We show that interfirm bundling tends to relax price competition by preventing consumers from mixing and matching (i.e., making it difficult to switch brands) and therefore is more profitable than separate sales, provided that firms are sufficiently symmetric.

Information technology and the spatial reorganization of firms

Youngho Kang and Jeongmeen Suh
This study investigates how the adoption of an enterprise resource planning (ERP) system affects firms' spatial organization. We first provide a conceptual framework that explains how a firm reallocates different types of labor across establishments in different locations by adopting an ERP system, to lower internal coordination costs. Guided by this framework, we empirically find that ERP adopters increase production activities in non-headquarter (HQ) establishments, while they decrease these activities in their HQ.

The local bias in equity crowdfunding: Behavioral anomaly or rational preference?

Lars Hornuf, Matthias Schmitt, and Eliza Stenzhorn
We use data on individual investment decisions to analyze whether investors in equity crowdfunding direct their investments to local firms and whether specific investor types can explain this behavior. We then examine whether investments exhibiting a local bias are more or less likely to fail. We show that investors exhibit a local bias, even when we control for those with personal ties to the entrepreneur.

Decentralizing investment: Evidence from municipal organization after close elections

Gabriel Natividad
I use close municipal elections in a nonparametric regression discontinuity framework to study the organizational dimension of local public investment following a decentralization reform in Peru.