Search

This paper contributes to the literature that postulates a relationship between income inequality and the relative importance of "market" and "organization" in the direction of resources. The paper emphasizes that both are endogenous; therefore, the empirical associations observed in the empirical data between inequality measures and production organization variables cannot be interpreted as indicative of causal relationships. The paper solves for the composition and size of occupational groups, the distribution of firm size, and the distribution of income as market equilibrium outcomes of an occupational choice economy, and performs a comparative static analysis. We find that the interaction between cross‐economy differences in the distribution of general skills in the labor force and the loss of control in the supervision of workers by managers can explain the empirical regularities observed in the relationship between the organization of production (distribution of firm size) and income inequality (distribution of labor income). This explanation of the empirical regularities differs from others proposed in the literature, such as those based on institutional constraints or the market power of firms. [ABSTRACT FROM AUTHOR]

A fundamental concern for researchers who analyze and design experiments is that the estimate obtained from the experiment might not be externally valid for other policies of interest. Researchers often attempt to assess external validity by comparing data from an experiment to external data. In this paper, I discuss approaches from the treatment effects literature that researchers can use to begin the examination of external validity internally, within the data from a single experiment. I focus on presenting the approaches simply using stylized examples. [ABSTRACT FROM AUTHOR]

Worker flexibility in effort allocation is a crucial factor for productivity and optimal job design. This paper runs a real‐effort experiment that manipulates both the degree and type of autonomy individuals have in scheduling their effort, and it examines the causal effects of these manipulations on final performance. The main findings come from comparing subjects with different levels of cognitive ability. Using individual data on scheduling decisions, I find significant baseline differences in performance and effort‐allocation strategies between high‐ and low‐cognitive ability subjects. Moreover, the experiment shows that high‐ability individuals reach higher performance when they have full scheduling flexibility while limiting any task‐ordering possibility increases the performance of low‐ability individuals. Overall, this paper provides new and robust evidence on the importance of cognitive ability in explaining effort‐allocation decisions, and it identifies job design interventions to increase the performance of high‐ and low‐ability workers. [ABSTRACT FROM AUTHOR]

Firms that sell vertically differentiated products infrequently roll out multiple products at the same time. In fact, it is often a firm already selling a well‐established product that decides to expand up‐ or downwards when such an opportunity arises. A critical decision in this scenario is whether to introduce the new product under an existing brand. In this paper, we develop a game‐theoretic model in which firms expand their product line to cater to a different customer segment, choosing their branding strategy, new product quality, and prices. We find that the firm's optimal branding strategy depends on both the vertical direction of the expansion and the level of competition, and identify a novel interaction effect between these factors. In particular, firms engaged in direct competition employ branding as a commitment device to soften quality competition. When these firms extend their product line upwards, this creates a misalignment between firms' actions and consumer preferences. We also derive conditions under which firms, against conventional wisdom, choose to differentiate their products more when selling them under the same brand. Finally, we characterize the welfare effects of branding in this setting, and argue that our findings are consistent with observations from the car industry. [ABSTRACT FROM AUTHOR]

The rise of peer‐to‐peer (P2P) sharing, exemplified recently by increased car‐sharing and clothing‐sharing, has altered our consumption style. One can consume goods without owning them. In fact, the ownership of goods can be monetized through P2P rental markets. These changes are regarded as influencing various strategies of manufacturers of goods being shared. Specifically, this paper examines aspects of product variety and design. A stylized model is examined in which a manufacturing firm makes a product variety decision of whether to launch a niche product line in addition to an existing mass product line. Consumers are of two types, including average consumers, who value the niche product less than the mass product, and snob consumers, who evaluate the niche product highly. Results demonstrate that the existence of P2P sharing makes consumers' ownership decisions immaterial, which alleviates difficulties of cannibalization between mass and niche product lines and which therefore encourages firms to widen their product variety. Moreover, to address issues of product design, the model is extended to allow the firm to choose the degree of niche‐serving of the second product line endogenously. Results show that P2P sharing deters a firm from designing a niche for the second product line. [ABSTRACT FROM AUTHOR]

This paper examines the prevalent mechanism of financing advertising and temporary price reductions through trade spend budgets. A manufacturer and a retailer interact for a number of periods with a plan to hold a sale in the last period. During the nonpromotional periods, the retailer accumulates the funds in this budget in proportion to the size of its order from the manufacturer. In the sale period, the budget is used to finance the discount offered by the manufacturer and advertising. I find that the manufacturer drops its price in the sale period to increase the profitability of promotions for the retailer. To be able to sell more units during the sale period, the retailer needs to accumulate a larger trade spend. This is accomplished by setting a smaller mark‐up over the manufacturer's price in the regular periods. The manufacturer takes advantage of the retailer's softer pricing by increasing its regular wholesale price. As long as such trade spends are used to finance advertising, the total profits of each firm increase. Using fixed trade spends, where the manufacturer allocates a fixed amount for the retailer, does not lead to an increase in profits. [ABSTRACT FROM AUTHOR]

This paper examines one million land transactions and firm census data sets to determine the effect of market concentration on entry deterrence in China from 2006 to 2013. We find that a one standard deviation increase in the Herfindahl–Hirschman Index leads to a one standard deviation decrease in local government‐designated industrial land sales to nonlocal firms and to a 2.9 standard deviation increase in land cost. Further evidence suggests that firms with high market power lobby their local governments to deter the entry of nonlocal firms. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the author talks about the topics discussed within the issue including perspectives on economics research on multisided platforms, mergers and entry in media markets, and problems in network effect estimation.

We document a causal impact of online user‐generated information on real‐world economic outcomes. In particular, we conduct a randomized field experiment to test whether additional content on Wikipedia pages about cities affects tourists' choices of overnight visits. Our treatment of adding information to Wikipedia increases overnight stays in treated cities compared to nontreated cities. The impact is largely driven by improvements to shorter and relatively incomplete pages on Wikipedia. Our findings highlight the value of digital public goods for informing individual choices. [ABSTRACT FROM AUTHOR]

Governments and donors around the world spend billions of dollars subsidizing entrepreneurship training programs. Unbiased evaluation estimates are paramount to understanding whether subsidies and investments in these programs are justified. The goal of this paper is to compare nonexperimental to experimental methods for evaluating the effectiveness of entrepreneurship training programs that provide training in management, marketing, accounting, legal, and other aspects of starting and running businesses. For the comparison, I take advantage of an unprecedented setting in which experimental and nonexperimental estimates are derived from the same underlying population of study participants. The Growing America through Entrepreneurship field experiment provides a uniquely large sample allowing for a separate nonexperimental analysis using only the control group. Experimental estimates indicate null effects of entrepreneurship training on business outcomes: business ownership, sales, and employment. In contrast, nonexperimental estimates using an extremely rich set of controls, including typically unobservable characteristics, such as previous family business experience, credit problems, and personality traits, find large, positive, and statistically significant effects. The nonexperimental estimates range from 21 to 22 percentage points (pp) for business ownership, $1300–2000 for average monthly sales, and 4–6 pp for hiring any employees at 1.5‐ and 5‐year follow‐ups. Nearest‐neighbor and propensity‐score matching models using detailed individual characteristics provide similarly large, positive, and statistically significant effects of entrepreneurship training on business outcomes. The findings have implications for choosing evaluation methods of government programs and provide evidence of positive selection bias which has more general implications on the scalability of entrepreneurship training programs to broader populations. [ABSTRACT FROM AUTHOR]

This paper shows that, in a repeated competitive procurement, a buyer can use the reserve price in a low‐price auction as a "public"—hence nondiscriminatory—incentive device to elicit unverifiable quality. We study a model with many firms and one buyer, who is imperfectly informed on the firms' costs. When firms are ex ante identical, the provision of quality is sustained by a sufficiently high reserve price to reward firms for the quality provision and by the threat of setting a low reserve price forever, if quality is not delivered. The buyer can elicit the desired level of unverifiable quality provided her baseline valuation of the project is not too high and the net benefit from unverifiable quality is not too low. These results are robust to firms' heterogeneity in their time preferences when the punishment for a deviation is finite but sufficiently long. [ABSTRACT FROM AUTHOR]

This paper proposes a framework to analyze holdout in patent licensing negotiations. We show that when the validity of a patent is probabilistic, a potential downstream user has incentives to shun to pay the price offered by a patent holder to license the technology and risk being brought to court. These incentives are exacerbated when jurisdictions are local, and the downstream producer can approach courts sequentially. The informational spillovers across trials imply that this firm often finds optimal to go to court aiming to invalidate the patent in a jurisdiction due to the knock‐on effect on future jurisdictions. This process results in excessive litigation compared to when the jurisdiction is global. The distortions from sequential litigation are likely to be aggravated when final competition is accounted for or when patent injunctions are not allowed. [ABSTRACT FROM AUTHOR]

This paper examines hedging against a large market‐wide shock in a model with heterogeneous firms and sunk costs of entry. If hedging is voluntary only the most efficient firms hedge against this shock, a finding in line with empirical evidence but at odds with standard motivations for risk management. Hedging affects the critical level of the marginal cost needed to operate in the market. A setting with mandatory hedging is associated with stronger competition than when hedging is voluntary which, in turn, is associated with stronger competition than when hedging is unavailable. [ABSTRACT FROM AUTHOR]

This paper explores how social interactions among consumers shape markets. In a two‐country model, consumers meet and exchange information about the quality of the goods. As information spreads, demand evolves, affecting the prices and quantities manufactured by profit‐maximizing firms. We show that market prices with informational frictions reach the duopoly price with full information at the limit. However, this convergence can take different paths depending on the size asymmetry between countries. In particular, when the country producing the low‐quality good is relatively large, the single market does not immediately turn into a duopoly and can be temporarily trapped in a situation of price instability where no Nash equilibrium in pure (but only in mixed) strategies exists and prices can fluctuate between their monopoly and duopoly levels. It follows that the classical price‐reducing effects of international trade may take longer to appear. In view of an intense globalization process, understanding how social meetings affect market outcomes is critical for understanding the performance of international economic integration. [ABSTRACT FROM AUTHOR]

Markets with network effects are typically concentrated. The aim of this paper is to discuss some recent work on "incumbency advantage." That is, the fact that firms already installed generate higher profits than entrants even if the latter offer identical or even better terms (in terms of price and quality) to consumers. In particular, we review recently known sources of the advantage and potential mitigating factors and point to a number of open issues. [ABSTRACT FROM AUTHOR]

This paper studies the effects of asymmetric punishment of bribery on both bribery and compliance with regulations. The bribe amount is decided via Nash bargaining and regulatory compliance and whistle‐blowing are strategic decisions. Moreover, investigations of bribery and noncompliance occur in a manner that may be interdependent. We show that, under symmetric punishment, inducing whistle‐blowing has no effect on the frequency of bribery. When the bribery and noncompliance investigations are independent, a switch from symmetric to asymmetric punishment either makes no difference or induces more nonharassment bribery. Only when bribery detection increases the chance of noncompliance detection and asymmetric punishment leads to whistle‐blowing for both types of entrepreneurs, can the shift succeed in reducing noncompliance. The result is robust to the case where legalization of bribe‐giving is not feasible for nonharassment bribes. [ABSTRACT FROM AUTHOR]

Existing studies on partial ownership usually overlook the effects of vertically related markets. Our paper highlights the importance of the upstream market on downstream firms' incentives to acquire partial ownership and the consequent welfare implications. In the main model, we assume that there are three firms in the downstream market, two of which may form a partial ownership arrangement. We find several results that are in contrast to those in the literature. First, the two firms will engage in partial ownership if the upstream market is an oligopoly (triopoly or duopoly). Second, partial ownership may raise total production, consumer surplus, and social welfare. This happens when the upstream market consists of a duopoly and the two firms involved in partial ownership are supplied by different suppliers. Third, the outsider, commonly known as a free rider in the literature, may become a victim of partial ownership. Our results are robust to several extensions, including a general n $n$‐firm framework, product differentiation, and uniform pricing by upstream firms. We also provide the conditions under which the curvature of the demand function and the convexity of the cost function motivate firms to form partial ownership. [ABSTRACT FROM AUTHOR]

Standard‐essential patents (SEPs) have become a key element of technical coordination via standard‐setting organizations. Yet, in many cases, it remains unclear whether a declared SEP is truly standard‐essential. To date, there is no automated procedure that allows for a scalable and objective assessment of SEP status. This paper introduces a semantics‐based method for approximating the standard essentiality of patents. We provide details on the procedure that generates the measure of standard essentiality and present the results of several validation and robustness exercises. We illustrate the measure's usefulness in estimating the share of true SEPs in firm patent portfolios for several telecommunication standards. [ABSTRACT FROM AUTHOR]

Hybrid marketplaces, such as Amazon's and Zalando's stores or Apple's and Google's app stores, which distribute their own products and services in competition with those of third‐party sellers, play a significant and growing role in the Internet economy. This paper shows that, other things equal, such platforms would maximize their profits if they lowered the fees charged to sellers and the prices charged to consumers in response to cooperation agreements between third‐party sellers: horizontal mergers or collusive agreements. It also shows that such cooperation can be pro‐competitive when the platform is a vertically integrated gatekeeper, adopts the agency business model, is a close competitor to the third‐party sellers it hosts, and observes (or correctly anticipates) the third‐party sellers' agreement. The discussion here is of significant policy relevance, since third‐party sellers in online marketplaces may find it easier to collude and may respond to the bargaining power of certain gatekeeper platforms by merging their activities. [ABSTRACT FROM AUTHOR]

In markets where consumers have switching costs and firms cannot price-discriminate, firms have two conflicting strategies. A firm can either offer a low price to attract new consumers and build future market share or a firm can offer a high price to exploit the partial lock-in of their existing consumers. This paper develops a theory of competition when overlapping generations of consumers have switching costs and firms produce differentiated products. Competition takes place over an infinite horizon with any number of firms. This paper shows that the relationship between the level of switching costs, firms' discount rate, and the number of firms determines whether firms offer low or high prices. Similar to previous duopoly studies, switching costs are likely to facilitate lower (higher) equilibrium prices when switching costs are small (large) or when a firm's discount rate is large (small). Unlike previous studies, this paper demonstrates that the number of firms also determines whether switching costs are pro- or anticompetitive, and with a sufficiently large (small) number of firms switching costs are pro- (anti-) competitive. [ABSTRACT FROM AUTHOR]

In this paper, we study mergers in two-sided industries and, in particular, the effects of mergers in the newspaper industry. We present a model which shows that mergers in two-sided markets may not necessarily lead to higher prices for either side of the market. We test our conclusions by examining a spate of mergers in the Canadian newspaper industry in the late 1990s. Specifically, we analyze prices for both circulation and advertising to try to understand the impact that these mergers had on consumer welfare. We find that greater concentration did not lead to higher prices for either newspaper subscribers or advertisers. [ABSTRACT FROM AUTHOR]

The article discusses various reports published within the issue including the impact of the local environment and requirement for entrepreneurship, the impact of selection into entrepreneurship arising from social interactions and relationships with other entrepreneurs, and the evaluation of the conditions and requirements for breakthrough entrepreneurship and innovation.

In this article, the author considers what it is about the conduct of economics that led so many able economists to choose error rather than truth in the example of General Motors' acquisition of Fisher Body. The events in this example, the author claims, never happened. The author discusses references to opportunism in the relations of Fisher Body and GM, the first of which being in a paper by Benjamin Klein, Robert Crawford, and Armen Aclhian, which claimed GM became unhappy with the price they paid for bodies.

This article provides information about symposium on organizational change. This symposium presents three articles on how firms change their organizations to improve performance in areas such as profits, productivity, and employee satisfaction. In contrast to a production-function approach, the authors look at improvements in performance due not only to changes in the quality of inputs, but also to changes in the way inputs are mixed together. Thus, the articles look at the impact of changes in relationships among the factors of production, including incentive structures, measurement systems, and work organization. These articles were first presented at a National Bureau of Economic Research conference in April 1999. The conference was funded by a generous grant from the Alfred P. Sloan Foundation as part of the NBER Project on Industrial Technology and Productivity. These papers have in common an attention to field research that is unusual among economists. All of the papers report extensive interviews with economic actors and direct observation of firms.

Abstract: This paper discusses the construction of a new longitudinal database tracking inventors and patent‐owning firms over time. We match granted patents between 2000 and 2011 to administrative databases of firms and workers housed at the U.S. Census Bureau. We use inventor information in addition to the patent assignee firm name to improve on previous efforts linking patents to firms. The triangulated database allows us to maximize match rates and provide validation for a large fraction of matches. In this paper, we describe the construction of the database and explore basic features of the data. We find patenting firms, particularly young patenting firms, disproportionally contribute jobs to the U.S. economy. We find that patenting is a relatively rare event among small firms but that most patenting firms are nevertheless small, and that patenting is not as rare an event for the youngest firms compared to the oldest firms. Although manufacturing firms are more likely to patent than firms in other sectors, we find that most patenting firms are in the services and wholesale sectors. These new data are a product of collaboration within the U.S. Department of Commerce, between the U.S. Census Bureau and the U.S. Patent and Trademark Office. [ABSTRACT FROM AUTHOR]

Abstract: This paper provides technical documentation to a database built up from firm‐level sources titled Micro Moments Database (MMD) that is made available for researchers through Eurostat. The MMD is an internationally harmonized research database of statistical moments collected from linked longitudinal firm‐level data in a large selection of EU national statistical offices. The underlying sources for the database are business registers, firm‐level surveys on production, usage of Information and Communications Technologies (ICT) and innovative activities, as well as recorded information on trade and worker education, all linked at the firm level. The unit of observation in the MMD represents groups of firms within industries and allows research that bridges micro and macroanalysis. The paper delineates the type of research questions that uniquely can be addressed with the MMD, and the advantages and disadvantages of using MMD for questions where alternative data sets are available. The paper next presents the methodology underlying construction of the MMD and provides documentation of the rich set of features. Finally, the paper provides descriptive statistics that highlight the unique character of the data and reviews some of the cross‐country analytical work already conducted using the MMD. [ABSTRACT FROM AUTHOR]

This paper investigates whether firms' responsiveness to customer reviews affects firms' online reputation. Responsiveness is measured by the intensity (fraction) of reviews that are responded to whereas online reputation is measured using TripAdvisor's average customer review rating (1–5 scale). Our analysis is applied to the hotel market in Manhattan (New York). To deal with the endogeneity of a hotel's responsiveness, we instrument it with the responsiveness level displayed by nearby competitors. This identification strategy is motivated by the fact that hotels have a greater tendency to respond to reviews not only because a particular review demands attention, but also because they seek to comply (catch up) with their competitors' level of responsiveness. The results show that one standard deviation increase in a hotel's responsiveness level would result in an improvement of 0.055 stars in TripAdvisor's average online rating (equivalently, an increase of 0.09 SD). Importantly, not accounting for endogeneity would lead to an erroneous conclusion that such effect is nonexistent. In addition, our results show that the effect is heterogeneous. Specifically, the effect is particularly strong for: (a) hotels responding more intensely to negative reviews, (b) independent hotels (vis‐à‐vis chain hotels), (c) hotels with a less established online reputation, (d) hotels with more volatile online ratings, and (e) hotels with more experience responding to negative reviews. We discuss the possible mechanism between firms' responsiveness and online reputation. [ABSTRACT FROM AUTHOR]

This paper estimates the impact of environmental regulation on foreign investment using the 2003 Pollution Discharge Fee Reform in China as a quasi‐natural experiment. Using a Difference‐in‐Differences method to investigate foreign investment from 2000 to 2007, we propose the "Pollution Deterrence Hypothesis" and the "Green Strategy Hypothesis" and provide evidence for the debate between these two hypotheses. We find that foreign investors' strategic responses to enhanced environmental regulations depend on their initial shareholder status in a firm. More specifically, after increased environmental regulation, foreign investors are less likely to invest in pollution‐intensive firms in which they have held relatively small shares. However, foreign investors are more inclined to increase their shares in pollution‐intensive firms in similar situations if they already held a relatively large number of shares. Based on the heterogeneous analysis, we suggest that our results are most apparent in regions with better local governance. [ABSTRACT FROM AUTHOR]

A common form of Corporate Social Responsibility (CSR) by firms is to agree to donate a fixed portion of private good revenues to a charitable cause. In this paper, we explore a new rationale for such CSR known commonly as Cause‐Related Marketing (CRM). We argue that linking private good purchase with charitable donations to a partnering nongovernmental organization (NGO) allows the firm to price discriminate between altruistic consumers who wish to make charitable donations out of their income and nonaltruistic consumers who do not place any value on such donations. The disparity in altruistic propensities translates into a difference in private good value which limits the firm's ability to extract consumer surplus in the private good market. Linking private good sales to charity brings down the variation in private good value and enables the firm to appropriate greater surplus. At the same time, by inducing nonaltruistic consumers to donate through their purchase of the charity‐linked good, CRM may also increase charitable donations to the NGO beyond the level that would be achieved under the standard voluntary contributions equilibrium. We extend our model to consider the effects of CRM on profits and donations when altruistic consumers can choose between donating directly to the NGO out of their income and donating through their purchase of the charity‐linked good. We consider this choice in the context of CRM advertising where firms make the altruism of their consumers public and thus provide exhibition value to donations made through the charity‐linked good. We find that the case for CRM strengthens when we allow the firm to appropriate exhibition utility through advertising while enabling greater donations for the NGO through direct donations as well as CRM. [ABSTRACT FROM AUTHOR]

This paper studies information acquisition under competitive pressure and proposes a model to examine the relationship between product market competition and the level of innovative activity in an industry. Our paper offers theoretical support for recent empirical results that point to an inverted-U shape relationship between competition and innovation. The model presents an optimal timing decision problem where a firm endowed with an idea trades the benefits of waiting for additional information on whether this idea can be converted into a successful project against the cost of delaying innovation: a given firm's profit following innovation is decreasing in the number of firms that invested at earlier dates. By recognizing that a firm can intensify its innovative activity on two dimensions, a risk dimension and a quantitative dimension, we show that firms solve this trade-off precisely so as to generate the inverted-U shape relationship. The dynamic setup of our model offers insights not just in the cross-section on the relationship between competition and innovation, but also intertemporally on the optimal timing of innovation at firm level. [ABSTRACT FROM AUTHOR]

Modern market economies are characterized by the reallocation of resources from less productive, less valuable activities to more productive, more valuable ones. Businesses in the High Tech sector play a particularly important role in this reallocation by introducing new products and services that impact the entire economy. In this paper we describe an extension to the Census Bureau's Business Dynamics Statistics that tracks job creation, job destruction, startups, and exits by firm and establishment characteristics, including sector, firm age, and firm size in the High Tech sector. We preview the resulting statistics, showing the structural shifts in the High Tech sector over the past 30 years, including the surge of entry and young firm activity in the 1990s that reversed abruptly in the early‐2000s. [ABSTRACT FROM AUTHOR]

Despite the limited incentives they provide for idiosyncratic investment, temporary work arrangements are becoming increasingly common. Using evidence from a field experiment conducted among salespeople in a Kenyan insurance firm, this paper examines the consequences of providing job training for temporary workers. The findings show that providing access to training significantly increases firm revenue, primarily due to performance increases among higher‐ability workers. The findings from the study are consistent with temporary workers willingness to invest in job training when the job‐specific returns from doing so are sufficiently high. [ABSTRACT FROM AUTHOR]

Postmerger scenarios often lead to a reallocation of resources and production across the merged entity. Production rationalization, the process of reallocating production across facilities so as to reduce total costs, results in firms equating marginal costs across markets. This results in marginal costs, and hence prices, being higher in some markets and lower in others than otherwise would be without production rationalization. This paper proposes a model of competition that elicits these effects and the resulting consequences on consumer and producer surplus. The paper also presents empirical evidence to show that production rationalization, in the form of fleet reoptimization, affected prices following the US Airways/American Airlines merger. Prices of the merged firm increased 10% on routes typically served by US Airways relative to routes typically served by American Airlines, and by 12% relative to US Airways' rivals' prices. Price‐cost regressions confirm such price hikes were likely due to fleet reoptimization. [ABSTRACT FROM AUTHOR]

In this essay, we identify several themes of the digital business transformation, with a particular focus on the economy‐wide impacts of artificial intelligence and digital platforms. In doing so, we highlight specific industries, beyond just the high‐profile "Big Tech" firms, where the digital business revolution is having, or promises to have, significant impact. The papers in this special issue (flagged with bold font below) provide a deeper analysis of the themes and applications we touch on here. [ABSTRACT FROM AUTHOR]

Online platforms have emerged as a dominant business model in numerous industries in the new millennium. In light of the substantial and burgeoning body of empirical platform research, this article synthesizes extant studies and identifies the evolution of underlying research methodologies and topics. Building upon a database of 860 empirical online platform papers in premier journals during the first two decades of the new millennium, this article presents a categorization framework based on the online platform type (including search platforms, e‐commerce platforms, online communities, and mobile platforms) and research perspective (including platform participants, platform orchestrators, and platform ecosystems). We provide a critical review of noteworthy trends and highlight directions for future research in each category of the proposed framework. A comprehensive bibliometric analysis is then conducted to visualize and track scholarship in empirical online platform research. Lastly, we adopt an interdisciplinary lens to synthesize our critical review of empirical online platform research into lessons and research opportunities that emerge from multiple disciplines. [ABSTRACT FROM AUTHOR]

Early commercial applications of artificial intelligence technologies (AITs) were narrow but extremely profitable. Comparable uses of those technologies throughout the economy would lead to a growth boom. Firms which emulated the early applications successfully would make tremendous strategic gains. This is a situation familiar from earlier rounds of information and communication technology. However, for AITs to become a general‐purpose technology across many commercial applications sectors will require some new innovations. This paper examines the innovation paths that could lead to that desirable outcome, the ones that have stalled, the ones in the process now, and the ones that might occur in the future. Strikingly, early AIT use, both commercial and with technical customers, occurred where Digital Transformation was not required for it to succeed. The innovation paths all require Digital Transformation as key steps. [ABSTRACT FROM AUTHOR]

This paper discusses how digitization and the associated emergence of distribution platforms have affected product discovery, as well as new opportunities, in the content industries. First, we describe the traditional ways in which content creators reached consumers, as well as how platforms have transformed the product discovery process. Second, we present the promise and challenges of the information aggregation role that platforms perform, with discussions of both the positive effects of platform‐collected product ratings, as well as the prevalence and implications of misleading information. Third, we describe the promise and challenges arising from platform curation and product recommendations, with a focus on the measurements of platform power as well as possible biases in platform product recommendations. Finally, we discuss how platforms may affect which sorts of products are produced in the first place. [ABSTRACT FROM AUTHOR]

This paper studies how automation impacts the structure of decision‐making in organizations. We develop a theoretical model of a firm, where a principal makes a decision about how much to prioritize the new product development division when the division is led by a manager who holds private information specific to this division and has misaligned preferences with the principal. The principal chooses whether to decentralize this decision by delegating it to the manager, resulting in more informed but unbiased decision. In this setting, we investigate how automation which reduces operational variability may alter this choice of organizational structure. The findings from our analysis show that firms deploy automation resources differently depending on their organizational structure: centralized firms choose to automate divisions that face more uncertainty, while decentralized firms do the opposite. Moreover, increasing access to automation results in higher centralization of decision‐making in firms. In the extensions, we show that the strategic use of automation reduces the informativeness of intrafirm communication, and also, that automation can be a strategic substitute to monetary contracts. [ABSTRACT FROM AUTHOR]

This paper studies the price‐setting behavior of a monopoly facing two capacity constraints: one on the number of its consumers, and the other on the amount of products it can sell. The characterization of the firm's optimal pricing and optimal customer mix as a function of its two capacities reveals a rich structure. In contrast to the results under one‐dimensional capacity constraints with constant marginal cost of production, a firm may optimally respond to an exogenous reduction in one of its capacities by decreasing one of its prices. Moreover, neglecting the existence of the second capacity constraint can reverse some policy interventions' effects on consumer welfare. In particular, easing a regulatory restriction on one of the constraints may harm the average consumer. [ABSTRACT FROM AUTHOR]

This paper examines whether partial ownership of a trading partner can alleviate hold‐up problems and promote relationship‐specific investments. Unlike a silent financial interest, which does not give the owner control over the partner and promotes both parties' investments, partial control over the partner could reduce the partner's investment and lead the owner to overinvest, thereby decreasing the joint surplus. The inability of the owner to restrain himself from abusing his control limits the effectiveness of partial ownership. An analysis of the control environment should be part of the empirical analysis of partial ownership and the assessment of its potential benefits by competition authorities. [ABSTRACT FROM AUTHOR]

In this paper, I study how and why consumers react differently to package downsizing and package price increases that result in the same degree of unit price increases. Utilizing differential responses of South Korean milk manufacturers to the production cost rise in 2018, I first show that consumers strongly prefer downsizing to package price increases, and this tendency does not diminish over time. Then, I develop a theoretical model whose prediction is consistent with the empirical findings, providing a simple but novel explanation of why fully informed consumers would be less sensitive to downsizing than package price increases. [ABSTRACT FROM AUTHOR]

The introduction of new products has always been an important source of economic development and improvement in consumer welfare. With retail coffee data spanning 5 years after the single‐cup brew coffee pods were introduced to grocery chains, this paper empirically studies the market effects of new product introduction in the brew‐at‐home coffee market. We use a structural model of demand and supply to capture the changes in consumers' preference for this new product over time. The demand estimates suggest that consumers' relative preference and willingness‐to‐pay for the new product grew substantially over the sample periods. The analysis reveals the extent to which the introduction and growing presence of the new product simultaneously expanded the relevant market and cannibalized the sales of pre‐existing substitute products (traditional auto‐drip brew coffee products). Furthermore, we quantify the annually expanding welfare gains of the average consumer attributable to the new product. [ABSTRACT FROM AUTHOR]

This paper investigates how bidders in an auction become antagonized over their successful bid. Using data from a large‐scale sales campaign on eBay shows that auction buyers use the platform's feedback system to punish the seller when they discover that the same item is later offered for a lower fixed price. Specifically, it finds that (i) the probability of receiving unfavorable feedback is four times larger for auction sales than when the same item is sold by the same seller for the fixed price and (ii) that this probability is increasing in the auction price, even though reviewing bidders shape this price themselves. Exploiting a temporal variation in how salient the fixed‐price offer was and using text analysis tools on buyer comments shows that these effects on feedback are best explained by ex post reference‐price shifts. An additional survey experiment with exogenous variation in reference prices provides further evidence for this channel. [ABSTRACT FROM AUTHOR]

This paper examines the profitability of interfirm bundling among independent single‐good producers in a two‐dimensional Hotelling framework. We show that interfirm bundling tends to relax price competition by preventing consumers from mixing and matching (i.e., making it difficult to switch brands) and therefore is more profitable than separate sales, provided that firms are sufficiently symmetric. Hence, firms have mutual incentives to offer their products as a bundle or to make exclusive dealing arrangements. This result sheds new light on the competitive effect of bundling in oligopolies that have been neglected in the literature. [ABSTRACT FROM AUTHOR]

This paper provides a solution to a puzzle in the analysis of tournaments, that of why there is no agent discrimination or differential contracting in certain business practice settings. The paper examines the problem of a principal contracting with multiple agents whose activities are subject to common shocks. The presence of common shocks invites the use of relative performance evaluation to minimize the costs of moral hazard. But, in the additional presence of adverse selection, the analysis shows that there may be no need for ex ante screening through menus of offers. This is so because the principal becomes better informed ex post about agent types, via the realization of common uncertainty, and can effectively penalize or reward the agents ex post. Thus, unlike the standard adverse selection problem without common uncertainty where the principal always benefits from ex ante screening, it is shown that ex post sorting through relative performance evaluation reduces the scope for ex ante screening through menus, and can eliminate it completely if agents are known to not be very heterogeneous. This is consistent with observed practice in industries where the primary compensation mechanism is a cardinal tournament which is uniform among employees. The analysis connotes that by using relative instead of absolute performance measures, firms with employees who are not substantially heterogeneous not only can alleviate the agency problem, but there is also no need to extract the agents' ex ante private information about their innate abilities via a screening menu. [ABSTRACT FROM AUTHOR]

This paper explores the conditions under which a monopolist selling a system consisting of a main component and differentiated secondary compo nents can increase profits by allowing competition in the aftermarket for the secondary components. Opening the system in this fashion can increase profits by giving consumers an added incentive to incur the setup cost of purchasing the main component. This paper extends the second-sourcing literature by showing the explicit effects of various parameters of demand on the decision to open the system. The results show that an open system is likely to be more profitable than a closed one when demand for the system is more elastic, when secondary-component variety is more valued, and when the share of the main component in the total system budget of the consumer is high. [ABSTRACT FROM AUTHOR]

Existing theories of competition with behavior‐based price discrimination (BBPD, also known as price discrimination based on purchase history), 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. When consumers are sufficiently massed at the center of the market (e.g., triangular distribution), BBPD boosts industry profits at the expense of consumers. Otherwise, the usual findings prevail. Our results highlight how assumptions on the density of consumer valuations play a decisive role on pricing and welfare outcomes. [ABSTRACT FROM AUTHOR]

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. Moreover, two potential channels are validated to interpret the positive pollution‐pay linkage: income comparison and executive shortage. Finally, we show that air pollution attenuates the pay‐performance sensitivity, indirectly confirming an essential role of the living environment in determining CEO compensation. [ABSTRACT FROM AUTHOR]

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. As the periods with no‐trade reduce the value of the relationship, the optimal relational contract minimizes the equilibrium punishment while preserving the supplier's incentives. We show that making the relational penalties conditional on additional supplier's performance measures increases total surplus. We also provide a rationale for "forgiveness" in relational contracting. The buyer may optimally forgive (decide not to sanction at all or to impose a lesser sanction) the supplier despite a bad outcome when some additional information is positive. We start with a binary performance measure, but we extend our analysis to more complex performance measures such as scorecards. Finally, we rank the scorecards in terms of their informativeness and we characterize the optimal investment in the design and improvement of these performance measures. [ABSTRACT FROM AUTHOR]

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. In male‐intensive industries with high elasticity of substitution and regions with more skewed local sex ratios, firms are more innovative, demonstrating that the market size effect of the directed technical change theory is also at play. [ABSTRACT FROM AUTHOR]