Issue 4

Volume 28 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Winter 2019

Does capital structure differently affect incumbents’ responses to entry threat and actual entry?

Chao Ma
This paper studies how incumbent airlines' capital structure affects their responses to Southwest Airlines' entry threat and actual entry. The results indicate that, when responding to entry threat, lower‐leverage incumbents cut prices more aggressively than higher‐leverage incumbents; in contrast, when responding to actual entry, higher‐leverage incumbents cut prices more aggressively than lower‐leverage incumbents.

Potential competition and quality disclosure

Frederick Dongchuhl Oh and Junghum Park
This study presents a model of quality disclosure in which an incumbent, through its quality and disclosure choices, influences the potential that a new entrant enters the market.

Wage delegation in the field

Sabrina Jeworrek and Vanessa Mertins
By conducting a natural field experiment, we analyze the managerial policy of delegating the wage choice to employees. We find that this policy enhances performance significantly, which is remarkable since allocated wage premiums of the same size have no effect at all.

Dynamic incentive effects of assignment mechanisms: Experimental evidence

Thomas Gall, Xiaocheng Hu, and Michael Vlassopoulos
Optimal assignment and matching mechanisms have been the focus of exhaustive analysis. We focus on their dynamic effects, which have received less attention, especially in the empirical literature: Anticipating that assignment is based on prior performance may affect prior performance. We test this hypothesis in a lab experiment.

Team formation with complementary skills

Mürüvvet Büyükboyaci and Andrea Robbett
One explanation for the prevalence of self‐managed work teams is that they enable workers with complementary skills to specialize in the tasks they do best, a benefit that may be enhanced if workers can sort themselves into teams. To assess this explanation, we design a real‐effort experiment to study the endogenous formation of teams, and its effect on productivity, when specialization either is or is not feasible.

Optimal team composition for tool‐based problem solving

Jonathan Bendor and Scott E Page
In this paper, we construct a framework for modeling teams of agents who apply techniques or procedures (tools) to solve problems. In our framework, tools differ in their likelihood of solving the problem at hand; agents, who may be of different types, vary in their skill at using tools. We highlight three main findings: First, that cognitively diverse teams are more likely to solve problems in both settings. Second, that teams consisting of types that master diverse tools have an indirect strategic advantage because tool diversity facilitates coordination. Third, that strategic tool choice creates counterintuitive optimal hiring practices.

Automatic‐renewal contracts with heterogeneous consumer inertia

Johannes Johnen
Automatic contract renewals are a common feature in consumer markets. Since these contracts renew automatically unless a consumer actively cancels, firms can use them to exploit consumer inertia. As a source of inertia I study limited attention and investigate how firms use contract renewal to sell to consumers with different degrees of inattention.