Issue 3

Volume 30 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Fall 2021

Organization of R&D outsourcing: Asymmetric cross-effects between locations

María García-Vega and Elena Huergo
When companies acquire R&D from external national providers, would they benefit if they also acquired knowledge from foreign providers? And the other way around? In this paper, we try to answer these questions by empirically examining the cross-effects of international and national R&D outsourcing to generate innovation.

Can information economics explain the organization of productive facilities?

Phillip J. Lederer and Xiaobo Zheng
A management system exists to coordinate, control, and make decisions about activities within an organization. These functions are information intensive, and therefore the design of management hierarchy has much to do with information-processing economics. Most economic entities' management structures are described by “an organization chart” which is a network of departments. The goal of this paper is to take an analytical look at management hierarchy modeled as a tree with information-processing departments at nodes.

Information gathering by overconfident agents

Justin Downs
A principal hires an agent to both gather information about a project's costs and implement it. The agent's information-gathering effort and what he learns are his private information. I allow the agent to be overconfident in the sense that he underestimates his expected cost of implementation and study the effects this overconfidence has on the efficiency of information acquisition and implementation.

On the precision of information

Samuel C. A. Pereira
This paper explores a model in which the agent's effort affects (solely) the precision (variance) of a performance measure (signal) of the outcome. When moral hazard and adverse selection are considered together, and there is enough uncertainty related to adverse selection, the risk-sharing rule is above the first-best for more efficient types, but below the first-best for less efficient types. Further, the precision of the signal increases with the expected outcome.

When market unraveling fails and mandatory disclosure backfires: Persuasion games with labeling and costly information acquisition

Ennio Bilancini and Leonardo Boncinelli
In this paper, we develop a variant of the persuasion game by Milgrom and Roberts to study the emergence and the desirability of product labeling when buyers can acquire information on the quality of the product by paying a cost. Labeling is modeled as the (verifiable) public disclosure of an otherwise unobservable trait of the seller that is correlated with the quality of the product. Our main finding is that market unraveling can fail, in which case imposing mandatory disclosure can backfire.

Experiments on creativity and work design

Cortney S. Rodet
This study uses a controlled laboratory experiment to understand the impact of time constraints and goal setting on creativity. I find that reducing task constraints by making time constraints ambiguous increases the creativity of ideas without undermining their quantity, relative to the baseline. I also find that a nonbinding quantity-oriented goal increases the quantity of ideas without reducing creative quality. Likewise, a nonbinding creativity-oriented goal increases the creativity of ideas without decreasing the number of ideas.

Product selection in online marketplaces

Federico Etro
A marketplace such as Amazon hosts many products by third party sellers and acts as a first party or private label retailer. Assuming an advantage of Amazon in logistics and of sellers in marketing, we investigate whether entry by Amazon is excessive from the point of view of consumers.

Exclusive content in two‐sided markets

Akifumi Ishihara and Ryoko Oki
This study investigates the role of exclusive content provision in two‐sided markets in which both sides are allowed to join multiple platforms.

Intertemporal stability of survey-based measures of risk and time preferences

Andreas C. Drichoutis and Achilleas Vassilopoulos
This paper provides theory and evidence on airline bag fees, offering insights into a real-world case of product unbundling. The theory predicts that an airline's fares should fall when it introduces a bag fee, but that the full-trip price (the bag fee plus the new fare) could either rise or fall.

A vertical oligopoly in which entry increases every firm’s profit

Tatsuhiko Nariu, David Flath, and Makoto Okamura
We develop a model in which each of m manufacturers forms a differentiated final product by assembling n components that are provided by its own n independent suppliers. Each supplier produces a unique component and sells to only one of the manufacturers. The manufacturers engage in product‐differentiated Cournot competition. We show that if initially the number of manufacturers is sufficiently small, and if the number of components is large enough, then, as the number of manufacturers increases, every firm—including downstream manufacturers and their upstream component suppliers—earns more profit.