estimating the foreclosure effect of exclusive dealing evidence from the entry of specialty beer producers this paper estimates an entry model to study the effect of exclusive dealing between anheuser busch and its distributors on rival brewers entry decisions and consumer surplus the entry model accounts for post entry demand conditions and strategic spillover effects i recover a brewer s fixed costs using a two step estimator and find spillover effects on brewers entry decisions i find that a brewer has higher fixed costs at locations where anheuser busch employ exclusive distributors but the effect is only statistically significant in certain local areas the estimates also show that a brewer is less likely to enter a location that is farther from its brewery has lower expected demand or is smaller in store size i implement counterfactual experiments to study the effect of banning exclusive contracts between anheuser busch and its distributors the results show that the welfare improvement associated with banning such contracts is very small

estimating a model of strategic network choice the convenience store industry in okinawa this paper investigates a determinant of location choice for multistore retailing firms the trade off between the business stealing effect and the cost saving effect from clustering their own stores i present an empirical model of network choice by two multistore firms i use lattice theoretical results to address the computational burden of solving for an equilibrium in store networks the framework integrates the static entry game of complete information with post entry outcome data while using simulations to correct for the selection of entrants i present an application of the model to the case of the convenience store industry in okinawa island japan using unique cross sectional data on store networks and revenues i use parameter estimates to examine the impact of a hypothetical horizontal merger on store configurations costs and profits results suggest a retailer s trade off between cost savings and lost revenues from clustering its stores is positive across markets and negative within a market i find an acquirer of a hypothetical merger of two multistore firms would decrease its number of stores in suburbs but increase its number in the city center

expanding demand through price advertisement abstract retail stores frequently advertise prices when consumer search is costly advertising low prices expands the number of consumers who visit and buy we show that this demand enhancement may offset a retailer s loss in margins from the low price making advertisement desirable we further show that a multi product monopolist may choose to advertise low prices only for select products even when advertised and non advertised products are substitutes for duopolist retailers at a common location an equilibrium exists in which for some range of advertising costs one store advertises and the other free rides on its competitor

the use of stock based pay for sorting an empirical analysis of compensation for new ceos examining stock based compensation for newly hired ceos this article finds that the sensitivity of stock based pay to performance is higher for new economy young and volatile firms of the components of stock based pay it is option grants that generate such variation across firms it also finds that this cross firm variation in pay performance sensitivity is more pronounced for the ceo s first year in office these findings support the view that firms use stock based pay to new ceos for sorting

do consumers search for the highest price oligopoly equilibrium and monopoly optimum in differentiated products markets we develop a model of search among substitutes for the best combination of commodity variant and price in which the structure of search costs is manipulable by the suppliers of these variants e g by joining an existing market or opening a new one we analyze the subgame perfect equilibria arising in a multistage game involving specialized firms choice of entry variant and price and we compare them to a multiproduct monopolist s optimal choice we show that equilibrium prices increase in the number of substitutes sold in one market and that in the situation considered here monopoly increases welfare

can process conditionality enhance aid effectiveness the role of bureaucratic interest and public pressure can process conditionality enhance poverty reduction in developing countries we address this question in a political economic framework with political distortions on the recipient and the donor side process conditionality is a useful tool only if the international financial institutions hold all necessary information to assess the political situation in recipient countries and to select the true representatives of the poor into a participatory process if they do not hold this information or if bureaucratic interests reduce their incentive to acquire this information process conditionality loses its effectiveness

network effects software provision and standardization in this paper we examine the software provision decision of software firms the provision decision by software firms determines the value and hence the market share of competing hardware technologies we show how the provision decision by software firms determines whether multiple hardware technologies are supported in equilibrium or whether there is de facto standardization with only one hardware technology supplied with software in equilibrium we show that when consumers place a high value on software variety there is a suboptimal amount of standardization by the market

mcdonald s and kfc in china competitors or companions in this paper we study the entry and expansion decisions of mcdonald s and kfc in china using an originally assembled data set on the two chains expansion in the china market from their initial entry up to year 2007 we analyze how the presence of a rival affects each firm s strategies the results indicate that a rival s presence has a net positive effect on a chain s expansion decision we focus on testing two possible explanations for a positive rival impact market learning and demand expansion first we derive a set of theoretical predictions on how a chain s optimal expansion decision would react to its rival s expansion patterns when market learning versus demand expansion is the driving force of the rival s positive influence the empirical analysis based on these predictions consistently suggests that market learning is more likely to explain the positive effect of kfc on mcdonald s and that demand expansion is more plausible with mcdonald s positive spillover on kfc in other words the results are consistent with the presence of kfc signaling market demand potential and growth to mcdonald s and the presence of mcdonald s helping to cultivate consumer taste and generate demand for western fast food which benefits kfc

influence of firm performance and gender on ceo compensation in this article we continue the examination of top executive pay by comparing performance total pay and the influence of ceo gender we analyse compensation differences between male and female ceos using nonparametric analysis we calculate the potential compensation for each executive using two benchmarks first each executive s performance and compensation are evaluated relative to members of the same gender to produce a same gender measure of under compensation each executive s compensation is also benchmarked against the other gender s potential compensation producing an other gender measure of under compensation together both measures allow an analysis of the gender specific potential salaries of each executive while controlling for performance the approach is applied to a sample of male and female executives the results indicate that women are under compensated

retail agglomeration and competition externalities evidence from openings and closings of multiline department stores in the u s from the perspective of an existing retailer the optimal size of a cluster of retail activity represents a trade off between the marginal increases in consumer attraction from another store agains

entry in monopoly market this paper develops new empirical models of market concentration from game theoretic models of entry we construct our models from inequality conditions that describe entrants equilibrium strategies in simultaneous move and sequential move games and use them to study the effects of entry in isolated monopoly markets for new automobiles from estimates of the market size necessary to support one and two dealers we conclude that monopoly dealers do not block the entry of a second dealer we also find that entry does not cause price cost margins to fall by much

to give or to forgive aid versus debt relief is generalized debt relief an effective development strategy or should assistance be tailored to countries characteristics to answer this question the authors build a simple model in which recipient governments reveal their creditworthiness if donors offer them to choose between aid and debt relief since offering such a menu is costly it is preferred by donors only when the cost of assistance is low and the probability that an indebted country is creditworthy is high enough for lower probabilities and higher costs of assistance donors prefer a policy of only debt relief very limited aid is the preferred policy only for high costs of assistance and low probabilities that the government is creditworthy

empirical entry games with complementarities an application to the shopping center industry abstract the author proposes a strategic model of entry that allows for positive and negative spillovers among firms the model is applied to a novel data set containing information about the store configurations of all u s regional shopping centers and is used to quantify the magnitude of interstore spillovers the author addresses the estimation difficulties that arise due to the presence of multiple equilibria by formulating the entry game as a mathematical problem with equilibrium constraints mpec although this study constitutes the first attempt to use this direct optimization approach to address a specific empirical problem the method can be used in a wide range of structural estimation problems the empirical results support the agglomeration and clustering theories that predict that firms may have incentives to colocate despite potential business stealing effects the author shows that the firms negative and positive strategic effects help predict both how many firms can operate profitably i

price reactions to rivals local channel exits in this paper we study the effect of a firm s local channel exits on prices charged by incumbents remaining in the marketplace exits could result in higher prices due to tempered competition or lower prices due to reduced colocation or agglomeration benefits the net effect of these two countervailing forces remains unknown in addition little is known about how this effect could change depending on incumbents geographic locations we address this research gap by examining new car price reactions by incumbent multiproduct automobile dealerships who experience the exit of a chrysler dealership in their local markets we find evidence that the competition effect exceeds the colocation effect prices increase by about 1 318 following an exit relative to the price change in the absence of an exit more important we find that the price increase is lower at dealerships more proximate to the exiting dealership than dealerships farther away for the same set of cars available across these locations this

competition by choice the effect of consumer search on firm location decisions this paper relates firm location choice and consumer search firms that cluster together attract consumers by facilitating price comparison but clustering increases the intensity of local competition the author constructs a simple model which shows that firms may choose head on competition by locating together under reasonable conditions this is the only equilibrium outcome copyright 1990 by american economic association

quality differentiation and conditional spatial price competition among hotels abstract it is generally accepted that location is the dominant product attribute for hotels accordingly studies on price competition have often utilized fixed geographic boundaries when defining competitive sets when travelers are willing to substitute location and quality however the spatial extent of competition can depend on the hotels quality therefore it can be hypothesized that geographic boundary of price competition among hotels is conditional on quality differentiation through an empirical analysis based on two stage least squares modified to test for spatial price competition the present study finds that hotels compete with more distant neighbors of similar quality than those who are quality differentiated in addition the results also suggest possibility of cooperation among neighboring hotels similar in quality implications and suggestions are presented along with the findings of the study which is expected to contribute to the literature by suggesting a new perspective on the relationship between quality differentiation and price competition among hotels

debt relief and governance quality in developing countries summary in this paper we empirically discuss whether or not debt relief has been economically rational in the past 15 years from analyzing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s furthermore even the actual debt burden of highly indebted poor countries was not crucial in deciding whether or not debt forgiveness was granted rather debt relief followed a strong path dependence those countries whose debt had been forgiven in the first half of the 1990s were also granted debt forgiveness in the second half of the decade however this allocation pattern changed at the beginning of the 21st century when path dependence diminished and some dimensions of governance quality were taken into account by donor countries

price induced patterns of competition this research focuses on how price changes influence the observed pattern of brand competition the paper begins with a basic utility model formulation and examines the implications of three major classes of preference distributions on the expected patterns of competition a price tier model is proposed to operationalize the theory and to allow predictive testing the price tier model is estimated on 28 brands across four product categories the results show a specific asymmetric pattern of price competition higher price higher quality brands steal share from other brands in the same price quality tier as well as from brands in the tier below however lower price lower quality brands take sales from their own tier and the tier below brands but do not steal significant share from the tiers above the results are consistent with a bimodal preference distribution with the regular price indifference point being located toward the lower quality end of the preference distribution for the categories analyzed

the political economy of the enhanced hipc initiative only three years after its endorsement bythe world bank and the imf the heavilyindebted poor country hipc initiativewas considerably altered and enhanced thispolicy shift can be explained as a resultof utility maximization behavior bynational and international politicians international bureaucrats and ngo apolitico economic model suggests that theoverall rise of hipc default risk and thesymbolic value of the year 2000 have beenthe two major determinants of changes involume eligibility and conditionalityrequirements

firm expansion size spillovers and market dominance in retail chain dynamics we develop and estimate a dynamic game of strategic firm expansion and contraction decisions to study the role of firm size in future profitability and market dominance modeling firm size is important because retail chain dynamics are more richly driven by expansion and contraction than de novo entry or permanent exit additionally anticipated size spillovers may influence the strategies of forward looking firms making it difficult to analyze the effects of size without explicitly accounting for these in the expectations and hence decisions of firms expansion may also be profitable for some firms while detrimental for others thus we explicitly model and allow for heterogeneity in the dynamic link between firm size and profits as well as potential for persistent brand effects through firm specific unobservable factors as a methodological contribution we surmount the hurdle of estimating the model by extending a two step procedure that circumvents solving the game the first stage combines semipar

the dynamic spillovers of entry an application to the generic drug industry this paper examines whether experience from entry in one market can potentially enhance profitability at a future market opportunity for a related product we formulate and estimate a dynamic game of entry in which forward looking firms make decisions not just based on present benefits of past entry but also anticipating potential future benefits of current entry dynamic spillovers of entry are incorporated through a firm specific unobservable to the researcher cost that depends on past entry decisions the unobserved costs may also be serially persistent thus the model allows for firm specific unobserved heterogeneity that evolves based on firm actions the challenge of estimating a dynamic game with serially correlated unobserved state variables subject to endogenous feedback is overcome by embedding a particle filter based technique in a nested fixed point algorithm using an application to a stylized model of entry in the generic pharmaceutical industry we underscore the motivation for the model specification and the methodology developed our estimates imply positive spillover effects of entry moreover these spillovers suggest heterogeneity not just across firms but also within firms over time based on their history of entry decisions our results illustrate that entry may potentially provide firms with additional strategic advantage in later markets and that entry spillovers may be an important factor to consider in the equilibrium evolution of the generic drug industry the web appendix is available at https doi org 10 1287 mnsc 2016 2648 this paper was accepted by j miguel villas boas marketing

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

ida grants and hipc debt cancellation their effectiveness and impact on ida resources abstract ida is in trouble the world bank s long term plans presume that ida will need all the loan repayments currently scheduled just to keep its program from shrinking in future decades yet the ida grant and hipc debt reduction programs are cutting the flow of repayments foreshadowing major future cuts in ida aid unless the donor countries agree on a plan to offset those costs poor countries will suffer meanwhile the efficiency and effectiveness of the grant and debt cancellation programs have been seriously questioned these programs are evaluated and changes in the bank s future plans for ida are proposed

estimation of a model of entry in the airline industry this paper considers the effect of an airline s scale of operation at an airport on the profitability of routes flown out of that airport the empirical methodology uses the entry decisions of airlines as indicators of underlying profitability the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city pair profitability these estimates imply that city pair profits increase in airport presence and decrease rapidly in the number of entering firms the literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms

an empirical model of firm entry with endogenous product type choices i describe a model of entry with endogenous product type choices these choices are formalized as the outcomes of a game of incomplete information in which rivals differentiated products have nonuniform competitive effects on profits i estimate the model for location choices in the video retail industry using a nested fixed point algorithm solution the results imply significant returns to product differentiation simulations illustrate the tradeoff between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry

imperfect competition and reputational commitment abstract competition can both aid and hinder reputational commitments for quality these are self sustaining depending on future profits after maintaining or deviating from the commitment and on current costs of sustaining it competition can affect these three elements at different rates

keeping your enemies closer when market entry as an alliance with your competitor makes sense we present an analytical framework of multimarket competition and supporting empirical analysis to explain why and when competing firms in an existing market may prefer an alliance entry over independent entry into a new market our findings suggest that an alliance entry is more profitable than an independent entry i when the new market is larger relative to the existing market and ii when the competition in the existing market is stronger relative to the new market we compare these key predictions with archival data from the regional shopping center industry in the united states and find that instances of alliance formation in this industry are consistent with our model based predictions data as supplemental material are available at http dx doi org 10 1287 mksc 2016 0988

total board remuneration and company performance using a hitherto neglected source of data this paper combines executive emoluments with executive options to construct a broader measure of executive pay than has been possible in earlier british studies the result of including the long term share option component of pay along with the more commonly utilized short term component of emoluments is to reveal executive pay as being significantly more sensitive to company performance than has previously been thought to be the case the paper questions the current policy stance of british institutional investors and of the greenbury committee with respect to executive share options copyright 1996 by royal economic society

financing vs forgiving a debt overhang abstract this paper examines the tradeoffs facing creditors of a country whose debt is large enough that the country cannot attract voluntary new lending if the country is unable to meet its debt service requirements out of current income the creditors have two choices they can finance the country lending at an expected loss in the hope that the country will eventually be able to repay its debt after all or they can forgive reducing the debt level to one that the country can repay the post 1983 debt strategy of the imf and the us has relied on financing but many current calls for debt reform call for forgiveness instead the paper shows that the choice between financing and forgiveness represents a tradeoff financing gives the creditors an option value if the country turns out to do relatively well creditors will not have written down their claims unnecessarily however the burden of debt distorts the country s incentives since the benefits of good performance go largely to creditors rather than itself the paper also shows that the tradeoff itself can be improved if both financing and forgiveness are made contingent on states of nature that the country cannot affect such as oil prices world interest rates etc

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

explaining the enhanced hipc initiative a response to michaelowa 2003 michaelowa 2003 2002 proposes a political economy model to explain the re design of the heavily indebted poor country hipc debt reliefinitiative in 1999 the principal assumption justifying the adoption of thisalternative approach is an alleged paucity if not non existence of applied economic research on sustainable debt levels this note challenges that assumption

the impact of walmart supercenter conversion on consumer shopping behavior this paper presents an empirical study of the impact of walmart supercenter conversion on consumer shopping behavior by using a difference in difference estimator we find that walmart gains 41 in weekly revenue from the conversion decomposing the revenue gains into components attributable to store visits and per visit expenditures we find that the majority of these gains were due to larger expenditures with a much smaller impact from store visits by contrast among competing retailers grocery stores experience the most significant loss 20 weekly revenue mostly from fewer store visits with a much smaller impact attributable to per visit expenditure taken together these findings show that consumers may benefit from reduced shopping costs by making fewer overall trips and increasing their walmart basket sizes in addition we find that overall revenue gains for walmart from conversion outweigh the small cannibalization loss at the existing walmart supercenters located farther away finally fro

reward design and ceo succession in the uk previous research has shown that top executives often rise to the peak of their organizations after a long term employment relationship and that internal promotion to the top is reflected in enhanced baseline salaries using data from a representative sample of uk companies the links between the fixed and variable elements of the chief executive officer s compensation package are examined and whether the appointment has been promoted internally or recruited from outside of the company from this analysis it is concluded that the positive impact on basic pay of elevation to the top job from within the company is not present in total compensation or the structure of pay it also emerges that although tenure does not significantly impact on the structure of pay it does alter total reward through its impact on the value of options granted longer company tenure reduces both the award of share options and the total value of the remuneration package job tenure on the other hand raises the executive s rew

entry deterrence by non horizontal merger we study when and how pure non horizontal mergers whether cross product or vertical can deter new entry organizational mergers implicitly commit firms to more aggressive price competition because heightened competition deters entry mergers can occur in equilibrium even when absent entry considerations they do not we show that in order to prevent a flood of entrants mergers arise even when a marginal merger costs incumbent firms more than does a marginal entrant

external recruitment versus internal promotion this article analyzes the choice between internal promotion and external recruitment within the framework of an economic contest opening up the competition for a position to external candidates re

on the effects of consumer search and firm entry in a multiproduct competitive market this paper studies a model in which consumers search among multiple competing firms for products that match their preferences at a reasonable price we focus on how easier search possibly due to the adoption of search facilitating technologies such as the internet influences equilibrium prices assortments firm profits and consumer welfare conventional wisdom suggests that easier search creates a competition intensifying effect that puts pressure on firms to lower their prices and reduce assortments however in our model we demonstrate that search also exhibits a market expansion effect that encourages firms to expand their assortment easier search means that each firm is searched by more consumers because of broader assortments consumers are more likely to find products that better match their ideal preferences improving the efficiency of the market in fact we demonstrate that the market expansion effect can even dominate the competition intensifying effect potentially leading to higher prices broader assortments more profits and expanded welfare

how did highly indebted poor countries become highly indebted reviewing two decades of debt relief how did highly indebted poor countries become highly indebted after two decades of debt relief efforts a set of theoretical models predict that countries with unchanged long run savings preferences will respond to debt relief with a mixture of asset decumulation and new borrowing a model also predicts that a high discount rate government will choose poor policies and impose its inter temporal preferences on the entire economy reviewing the experience of highly indebted poor countries compared with that of other developing countries the author finds direct and indirect evidence of asset decumulation and new borrowing associated with debt relief the ratio of the net present value of debt to exports rose strongly over 1979 97 despite the debt relief efforts average policies in highly indebted poor countries were generally worse than those in other developing countries nor were wars more likely in highly indebted poor countries over time there has been an important shift in financing for highly indebted poor countries away from private and bilateral nonconcessional sources to the international development association and other sources of multilateral concessional financing but this implicit form of debt relief also failed to reduce debt in net present value terms although debt relief is done in the name of the poor the poor are worse off if debt relief creates incentives to delay reforms needed for growth

tenure promotion and executive remuneration commentators frequently remark on the need to pay high levels of chief executive officer remuneration to attract motivate and retain the best executives for britain s leading companies this paper presents the results of an empirical investigation into tenure promotion and executive remuneration the remuneration of the chief executive officers at some of britain s largest businesses is examined in the majority of cases the ceo had not been lured away from rivals but had risen through the internal labour market often after a long term employment relationship moreover long job tenure and internal promotion were associated with higher levels of pay it is concluded that understanding of this controversial issue will be improved if it is recognized that a part of current executive pay may be a reward for previous successful performance