Issue 2

Volume 31 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Summer 2022

Price competition online: Platforms versus branded websites

Oksana Loginova
The focus of this theoretical study is price competition when some firms operate their own branded website while others sell their products through an online platform, such as Amazon Marketplace. I derive the equilibrium prices and profits, analyze the firms' behavior in the long run, and compare the equilibrium outcome with the social optimum.

A theory of maximalist luxury

Zhenqi (Jessie) Liu, Pinar Yildirim, and Z. John Zhang
The availability of high-quality, low-price counterfeits in many luxury markets threatens the role of luxury goods as a status symbol. If those counterfeits look and feel the same as the authentic counterparts, as many professional authenticators observe, and they are available at a fraction of the price of authentic goods, why would self-interested consumers purchase authentic luxury goods? In this paper, we propose that the presence of high-quality, low-price counterfeits can, surprisingly, motivate the wealthy consumers to pursue what we term as the “maximalist luxury” strategy.

Behavior-based price discrimination with nonuniform distribution of consumer preferences

Rosa-Branca Esteves, Qihong Liu, and Jie Shuai
Existing theories of competition with behavior-based price discrimination typically assume that consumer valuations are distributed uniformly. This assumption implies that the availability of BBPD creates a prisoner's dilemma in which firms are worse off and consumers better off in equilibrium, relative to uniform pricing. In this paper, we consider a wider class of consumer distributions and show that profit and welfare results change qualitatively.

Consumer informedness: A key driver of differentiation

Amit Pazgal, David Soberman, and Raphael Thomadsen
Minimum Differentiation is the equilibrium in spatial models with fixed prices, while firms move apart to reduce the intensity of competition when firms set prices. Nevertheless, firms collocate in many industries where marketing-active firms compete on price. This puzzle is called the Hotelling paradox. We offer a resolution of this puzzle by noting that imperfect information about the availability of all products can soften competition, allowing firms to produce similar products without engaging in intense price competition.

Reliance on science by inventors: Hybrid extraction of in-text patent-to-article citations

Matt Marx and Aaron Fuegi
We curate and characterize a complete set of citations from patents to scientific articles, including 16.8 million from the full text of USPTO and EPO patents. In-text citations are more diverse temporally, geographically, and topically; moreover, they are less self-referential and less likely to be copied from one patent to the next. In replicating two articles that use only front-page citations, we show that failing to capture in-text citations leads to understating the role of academic science in commercial invention.

Supply chain technology spillover, customer concentration, and product invention

Po-Hsuan Hsu, Hai-Ping Hui, Hsiao-Hui Lee, and Kevin Tseng
Using a panel of approximately 1670 US technology-intensive supplier firms during the period 2001–2013, we find that the number and value of new products of a supplier firm are positively related to technology spillover it receives from its supply chain partners (i.e., buyer firms). However, this positive relation is negatively related to customer concentration, which may be attributed to the supplier firm's narrowed technology search scope.

Does female labor scarcity encourage innovation? Evidence from China’s gender imbalance

Taoran Chen, Zhibo Tan, and Xiaobo Zhang
This paper studies how the scarcity of different types of workers in a region shapes firm innovation across industries, using the unbalanced regional sex ratios in China as a source of identification strategy. The empirical results show that the shortage of female workers has spurred firms in female-intensive industries to innovate more, particularly in industries with low substitution between female and male workers, consistent with the price effect of the directed technical change theory.

Air pollution and CEO compensation: Evidence from China

Kam C. Chan, Tao Chen, Baohua Liu, and Junfeng Wu
This paper complements the literature on green finance by probing whether air pollution matters for CEO compensation. Using a sample covering 240 cities in 31 provinces in China from 2005 to 2017, we document a positive association between air pollution and CEO compensation. These findings indicate that firms headquartered in areas with unhealthy air compensate their CEOs with higher pay than those headquartered in areas with better air quality.

Designing relational sanctions in buyer–supplier relationships

Juan-José Ganuza and Fernando Gomez
This paper explores the role of supplier performance measures (scorecards and others) in the internal design of relational contracts. We analyze a simple supplier–buyer repeated interaction in which incentives arise by the threat of terminating the relationship—temporarily or permanently.

On the paradox of mediocracy

Qiang Fu, Ming Li, and Xue Qiao
We consider a two-agent hierarchical organization with a leader and a specialist in a reputation-signaling model. A paradox of mediocracy emerges: The organization may benefit from a seemingly mediocre leader, as a mediocre leader motivates the specialist to exert effort, which offsets the efficiency loss due to incorrect decisions.