Issue 1

Volume 27 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
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.

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. 

Rent sharing to control noncartel supply in the German cement market

Joseph E. Harrington Jr., Kai Hüschelrath, and Ulrich Laitenberger
A challenge for many cartels is avoiding a destabilizing increase in noncartel supply in response to having raised price. In the case of the German cement cartel that operated over 1991–2002, the primary source of noncartel supply was imports from Eastern European cement manufacturers. Testimonies in a private enforcement case have claimed that the cartel sought to control imports by sharing rents with intermediaries in order to discourage them from sourcing foreign supply. We investigate this claim by first developing a theory of collusive pricing that takes account of the option of bribing intermediaries.