Issue 2

Volume 20 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Summer 2011

Strategic Buying to Prevent Seller Exit

C. Robert Clark and Mattias K. Polborn
We consider a dynamic oligopoly model in which a seller may drop out of the market when demand for its product is insufficient in the first period. Buyers suffer some disutility if a seller exits the market and so their first-period purchase decision not only depends on current period preferences and prices, but also on the potential effect that their behavior has on the probability of seller survival.

Customer or Complementor? Intercarrier Compensation with Two-Sided Benefits

Benjamin E. Hermalin and Michael L. Katz
Both senders and receivers derive benefits from telecommunications messages. Hence, consumers’ sending and receiving decisions generate external effects. We explore whether intercarrier compensation (i.e., an access charge) can induce carriers to set retail prices that internalize these external effects.

Pricing Experience Goods: The Effects of Customer Recognition and Commitment

Bing Jing
In a two-period model of nondurable experience goods, we compare the profit and social welfare effects of behavior-based price discrimination (BBPD) and price commitment (PC) (relative to time-consistent pricing) in a monopoly. We find that when the static, full-information monopoly price is higher (lower) than the mean consumer valuation, PC yields higher (lower) profits and social welfare than BBPD.

Customization with Vertically Differentiated Products

Oksana Loginova and X. Henry Wang
We consider a duopoly market with heterogeneous consumers. The firms initially produce vertically differentiated standard products located at the end points of the variety interval. Customization provides ideal varieties for consumers but has no effect on quality. The firms first choose whether to customize their products, then engage in price competition.

Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?

Bernardo Bortolotti, Carlo Cambini, Laura Rondi and Yossi Spiegel
We study the effect of ownership structure and regulatory independence on the interaction between capital structure and regulated prices using a comprehensive panel data of publicly traded European utilities. We find that firms in our sample tend to have a higher leverage if they are privately controlled and regulated by an independent regulatory agency.

Peer Performance Evaluation: Information Aggregation Approach

Jin-Hyuk Kim
This paper studies how peer performance evaluation can elicit information on a group of workers when coworkers are competing for promotion. Although raters may have an incentive to game the system and free-ride on others’ information, the firm can implement the optimal peer evaluation system that induces truth revelation and complements supervisory evaluation.

Merger Failures

Albert Banal-Estañol and Jo Seldeslachts
This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre- and post-merger processes. We argue that failure may stem from informational asymmetries arising from the pre-merger period, and problems of cooperation and coordination within recently merged firms.

Getting Away with Robbery? Patenting Behavior with the Threat of Infringement

Amalia Yiannaka and Murray Fulton
The paper examines how an innovator's ability to enforce her patent rights affects (and is affected by) her decision to patent her innovation and her patent breadth decision. Specifically, the paper shows that the innovator may find it optimal to patent her innovation even if litigation is not pursued in the event of patent imitation.