multiple equilibria and deterrence in airline markets we use data from the us airline industry to estimate a model of entry deterrence we model the interaction among airlines as a repeated static game where we allow for a very general form of heterogeneity we consider a menu of three alternative games that describe the strategic interaction among airlines simultaneous and sequential move games and a sequential move game with deterrence investments following bernheim 1984 deterrence investments include all investment that raises barriers to entry and for which the incumbent must incur some investment costs we show that the profits that incumbents can make in the sequential game both with and without deterrence investments are larger than those that they can make if the game is played simultaneously thus we find that on average it is profitable for all firms to deter new entrants with the exception of united airlines remarkably united airlines was under bankruptcy protection during the period of analysis suggesting that its deterrence investments were not credible overall we find that the data is explained better by a model where firms make deterrence investments thus we cannot reject the hypothesis that incumbents deter entrants in the airline industry

frictionless commerce a comparison of internet and conventional retailers there have been many claims that the internet represents a new nearly frictionless market our research empirically analyzes the characteristics of the internet as a channel for two categories of homogeneous products books and cds using a data set of over 8 500 price observations collected over a period of 15 months we compare pricing behavior at 41 internet and conventional retail outlets we find that prices on the internet are 9 16 lower than prices in conventional outlets depending on whether taxes shipping and shopping costs are included in the price additionally we find that internet retailers price adjustments over time are up to 100 times smaller than conventional retailers price adjustments presumably reflecting lower menu costs in internet channels we also find that levels of price dispersion depend importantly on the measures employed when we compare the prices posted by different internet retailers we find substantial dispersion internet retailer prices differ by an average of 33 for books and 25 for cds however when we weight these prices by proxies for market share we find dispersion is lower in internet channels than in conventional channels reflecting the dominance of certain heavily branded retailers we conclude that while there is lower friction in many dimensions of internet competition branding awareness and trust remain important sources of heterogeneity among internet retailers

buyer initiated vs seller initiated information revelation sales presentations are the core of the selling process where salespeople provide information to prospects one challenge is that the amount of information available to be potentially communicated may exceed salespeople s ability to communicate or customers ability to process there is limited bandwidth between the firm and customers one important decision then is which information should customers see what the firm chooses to tell customers may be informative in itself when constrained to a seller initiated information revelation format where the firm chooses which feature to show the firm never finds it optimal to offer more features than it is able to inform customers about consequently customers never find credible a claim that the product has all features the important implication is that price alone cannot serve as a signal of quality in this setting in contrast a buyer initiated information revelation format where customers decide which information to receive increases the probability of a sale and also results in the production of higher quality products in a competitive setting by adopting buyer initiated information revelation firms are able to attain positive profits this is due to the fact that customers infer the product s quality from the price along with the information revelation format customers know that at some prices firms find it profitable to produce high quality products and at other lower prices this is not the case thus customer empowerment leads to higher profits

does trade liberalization narrow the gender wage gap the role of sectoral mobility abstract this paper analyzes the impact of import competition and dynamic labor adjustment on gender outcomes in wages and welfare in the u s i consider a dynamic model of sectoral choice and structurally estimate mobility costs using data from the current population survey and o net a measure of intersectoral distance in task characteristics facilitates the structural estimation of switching costs that vary by gender and across sectors in a set of trade shock simulations an import competition shock in the manufacturing sector disproportionately affects male employment and wages since manufacturing is male labor intensive and men face higher exit costs from manufacturing wage and welfare gains from trade are higher for women than men

observable reputation trading is the reputation of a firm tradable when the change in ownership is observable we consider a competitive market in which a share of owners must retire in each period new owners bid for the firms that are for sale customers learn the owner s type which reflects the quality of the good or service provided through experience after observing an ownership change they may want to switch firm however in equilibrium good new owners buy from good old owners and retain high value customers hence reputation is a tradable intangible asset although ownership change is observable

umbrella branding with imperfect observability and moral hazard abstract in a framework of repeated purchase experience goods with seller s moral hazard and imperfect monitoring umbrella branding may improve the terms of the implicit contract between seller and buyers whereby the seller invests in quality and buyers pay a high price in some cases umbrella branding leads to a softer punishment of product failure which increases the seller s value in other cases umbrella branding leads to a harsher punishment of product failure which allows for a reputational equilibrium that would otherwise be impossible on the negative side under umbrella branding one bad signal may kill two revenue streams not one combining costs and benefits i determine the set of parameter values such that umbrella branding is an optimal strategy

the gender gap fertility and growth changes in fertility have long been recognized as important correlates of economic growth with the relationship between the level of fertility and the level of income per capita being one of the strongest observable correlations in cross country data this paper examines the linkages between fertility and growth theory the structure of the model is presented in sections on production couples decision making system dynamics and steady state equilibria the first component of the model is that increases in capital per worker raise womens relative wages since capital is more complementary to womens labor input than to mens the second component is that increasing womens relative wages reduces fertility by raising the cost of children more than household income finally lower fertility raises the level of capital per worker a positive feedback loop generates demographic transition a rapid decline in fertility accompanied by accelerated output growth

ambiguity aversion and the preference for established brands we propose that ambiguity aversion as introduced in the literature on decision making under uncertainty drives a preference for established brands in multiattribute choices among branded alternatives established brands are those for which belief in quality is held with greater confidence even if specific attributes might be inferior to those of competing less established brands in five experiments we examine the role of ambiguity aversion in the preference for dominated established brands we first show a correlation between ambiguity aversion revealed through choices among monetary lotteries and the preference for established brands we then show that the preference for established brands is enhanced when ambiguity aversion is made more salient in unrelated preceding lottery choices thus ambiguity aversion carries across choices in addition ambiguity aversion and the preference for established brands are both enhanced when subjects anticipate that others will evaluate their lottery choices finally ambiguous information about brand attributes tends to increase the preference for established brands

credible spatial preemption it is often argued that incumbent firms may deter entry by preemptive investment in new goods we show that these conclusions are reversed when multiproduct incumbentfirms may exit in response to entry once entrants are in an industry an incumbent will often want to withdraw some goods to prevent competition with the entrant from reducing profits on other goods such a reaction makes entry more attractive to a potential entrant the equilibrium industry structure is less likely to be monopolistic as the goods are better substitutes as exit costs are low and as the competition between producers of the same good is more intense

signaling quality with a money back guarantee the role of transaction costs direct marketing is witnessing explosive growth as consumers increasingly purchase products from their homes their ability to judge the quality of products they buy is significantly reduced in this paper we study how money back guarantees can signal product quality in such environments we interpret product quality broadly to mean both the level of attributes promised as well as the firm s consistency in delivering on those promises key aspects of our formulation are the explicit consideration of transaction costs and alternative signals of product quality transaction costs are the costs the seller or buyer faces when redeeming a money back guarantee we show that money back guarantees signal quality by exploiting the higher probability of returns for a lower quality product and the attendant higher transaction costs however if the seller s transaction costs are very large then there are less costly ways to signal namely charging a high price we compare the signaling performance of 1 price 2 price with uninformative advertising and 3 price with a money back guarantee whereas uninformative advertising does not work at all in our model under certain conditions a money back guarantee is necessary to signal and under other conditions a money back guarantee is a useful supplement to price

middlemen as guarantors of quality abstract we analyze an experience good model with producer moral hazard which is based on shapiro quarterly journal of economics 1983 98 659 679 we develop conditions under which a good will be sold through a middleman instead of being sold directly by the producer when selling costs may even be increased by the presence of middlemen middlemen help to alleviate the producer moral hazard problem by dropping a producer s good and lowering her future sales if the good is not of its claimed quality the middleman engages in this policing activity in order to maintain his own reputation as a seller of high quality goods

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

on the interplay of informational spillovers and payoff externalities this thesis consists of four independent essays which consider different topics in information economics and political economy the first two papers are variants of the same idea an uninformed principal e g a government will make a decision in order to gain more information it may consult two experts however these experts have a private interest in certain policies being implemented the question is to gain as much information as possible should the principal consult experts who are biased in the same direction or experts who prefer different decisions the main result is that as long as collusion between experts can be prevented homogeneous panels are superior to heterogeneous ones and this advantage increases with the experts informational precision in the third paper two firms consider entry in a new product market and must decide when to enter the market and how to design their product firms do not know for certain what the best design is so both firms want to outwait the other s decision in order to gain more information the focus of the paper is on which firm will make the first decision the main result is that if products are strong strategic substitutes the worst informed firm makes the first decision in equilibrium the analysis should apply to a range of other contexts such as investors trading decisions or the policy choices of political candidates the final paper asks the following question could it be that parties in a two party system may benefit from using several candidates in the same election to promote the use of multiple candidates i assume that a party never runs the risk of having its votes split up among its candidates despite this it turns out that parties have a strong incentive to restrict their number of nominees paradoxically it seems that the more uncertain parties are about voter opinion the fewer candidates they want to use in particular with a uniform voter distribution the optimal number of candidates is one

umbrella branding and external certification abstract in a market environment with random detection of product quality a firm can employ umbrella branding as a strategy to convince consumers of the high quality of its products alternatively a firm can rely on external certification of the quality of one or both of its products we characterize equilibria in which umbrella branding fully or partially substitutes for external certification we also show that the potential to signal quality is improved if consumers condition their beliefs on the source of information namely whether information comes from external certification or from random detection

brand capital and incumbent firms positions in evolving markets in many advertising intensive industries one observes market share persistence i e firms maintaining lead market shares over long periods of time the author hypothesizes that firms that have the largest stock of well established brands a stock that he terms brand capital are most likely to introduce new products in response to new market information about consumer preferences firms with less brand capital delay their introductions until the uncertainty concerning the market size is reduced the author presents empirical support in a study of new product introductions in the u s beverage industry copyright 1995 by mit press

the making of a hot product a signaling explanation of marketers scarcity strategy every marketer s dream is to create a hot product that customers would absolutely want to have thus generating considerable profit to the marketer according to one school of thought marketers should make products hard to get in order to create really hot products in this paper using a game theoretic model we investigate if such scarcity strategies can indeed be optimal while a scarcity strategy may appear to be a viable approach for making a firm s product successful further analysis raises some puzzling issues in particular it is not clear why a firm would not increase its price to get demand and supply in sync and increase its profit in the process we therefore offer a signaling explanation for the optimality of such strategies and show that a high quality seller may optimally choose to make the product scarce in order to credibly signal the quality of its product to uninformed customers our analysis indicates that a high quality seller optimally employs scarcity as a signaling device in product markets that are characterized ceteris paribus by a small difference in marginal cost between high and low quality products a low reservation price for a low quality product a greater heterogeneity in reservation prices for a high quality product and a moderate number of informed consumers our results provide a rationale for the fact that scarcity strategies are usually observed for discretionary or specialty products but not for commodity products staple products or new to the world products

firm reputation and incentives to milk pending patents abstract in this paper we develop a theory of patenting in which a firm preserves its reputation by only applying for a patent whenever a truly patentable idea has been generated firms have a short run incentive to deviate and receive additional rents from unworthy pending patents as well as potential rents from pto mistakes in granting patents we provide conditions for reputation to be preserved in equilibrium and analyze which market environments are favorable for such an equilibrium to exist in particular we analyze the merits of different patent systems

technical efficiency unions and decentralized labor contracts abstract this paper explores the link between the presence of unions in the workplace the adoption of decentralized labor agreements and technical efficiency using a large sample of italian manufacturing firms we apply the data envelopment analysis and its robust version based on bootstrap theory to get reliable estimates of technical efficiency at the firm level in a standard first stage we devote particular attention to the specific technology adopted by distinguishing 20 different sector frontiers as well as to the presence of outliers the obtained efficiency scores are analyzed in a second stage applying a truncated regression model estimated via maximum likelihood following the simar and wilson 2007 2011 methodology our results highlight that the presence of workplace unionization decreases the level of technical efficiency while aspects limiting the unions power such as a strong exposure to international markets high debt levels or the prevalence of flexible assets partially reduce the negative effect however when firms adopt decentralized labor contracts agreements the effect on efficiency is positive and partially compensates the negative unions effect

pioneering plus a broad product line strategy higher profits or deeper losses previous research suggests firms can build a market share advantage by preempting later entrants with a broad product line and expanding rapidly into related markets whether such a strategy leads to a pioneering profit advantage relative to followers also depends on its cost effects in this paper we examine when the market share advantage of a pioneering firm with a broad product line strategy translates into a profit advantage by examining the cost effects of this strategy using the profit impact of marketing strategies data and an estimation method that controls for various unobserved factors we find significant differences between different industry settings from these contrasting findings we generate an emerging theoretical framework that we subject to empirical testing we conjecture and empirically verify that creating a broad product line with a versioning strategy creating variety from a standard product in anticipating customer demand does not increase the pioneering cost disadvantage and thus results in a pioneering profit advantage on the other hand with a tailoring strategy creating variety by customizing a product to actual customer demand a broad product line substantially increases the pioneering cost disadvantage thereby making a preemption strategy counterproductive

information and the skewness of music sales this paper studies the role of product discovery in the demand for recorded music we show that releasing a new album causes a substantial and permanent increase in sales of the artist s old albums especially if the new release is a hit patterns in these backward spillovers suggest that they result from consumers discovering the artist upon hearing the new release to explore the implications of consumers incomplete information we estimate a simple learning based model of market demand our results imply that the distribution of sales is substantially more skewed than it would be if consumers were more fully informed

wage dispersion and search behavior the importance of non wage job values we use a rich new body of data on the experiences of unemployed job seekers to determine the sources of wage dispersion and to create a search model consistent with the acceptance decisions the job

aggregate impact of different brand development strategies current branding literature investigates the spillover effects and extension effects due to the introduction of product extensions however no study so far has evaluated the aggregate market impact of these effects across different brand development strategies or accounted for the strategic decision to introduce the extension it is important to examine the above given the significant investments and the high failure rates associated with the introduction of new product extensions in this study we develop an analytical framework that derives revenue outcome due to an extension introduction as a function of spillover and extension effects we empirically estimate the above effects through a bayesian endogenous switching model that jointly models market shares of the extension and its parent brand along with the strategic decision to introduce the extension and the endogeneity in prices by using a data set that covers 155 extensions introduced across 20 u s geographic markets we obtain several new gen

consumer learning in a turbulent market environment modeling consumer choice dynamics after a product harm crisis abstract the authors empirically study consumer choice behavior in the wake of a product harm crisis which creates consumer uncertainty about product quality they develop a model that explicitly incorporates the impact of such uncertainty on consumer behavior assuming that consumers are uncertain about the mean product quality level and learn about product quality through the signals contained in use experience and the product harm crisis and also that consumers are uncertain about the precision of the signals in conveying product quality and update their perception of this precision over time they estimate this model using a scanner panel data set that includes consumer purchase history before during and after a product harm crisis that affected kraft foods australia s peanut butter division in june 1996 the proposed model fits the data better than the standard consumer learning model which assumes consumers are uncertain about product quality level but the precision of information in conveying p

brand credibility and marketplace globalization the role of perceived brand globalness and localness consumers in western markets are increasingly critical towards globalization and re embrace local values companies thus must decide whether to continue to pursue global branding strategies and or rejuvenate local branding strategies to explore the implications of market globalization for consumer preferences we use signaling theory to investigate the role of perceived brand globalness pbg and brand localness pbl as signals of brand credibility related downstream effects and boundary conditions across two countries with differing levels of globalization in globalized markets pbg is a weaker signal of brand credibility than pbl whereas in globalizing markets the two signals are of equal importance

efficient patent pools the paper builds a tractable model of patent pools agreements among patent owners to license sets of their patents it provides a necessary and sufficient condition for patent pools to enhance welfare and shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing the paper allows patents to differ in importance asymmetric blocking patterns and licensors to also be licensees we undertake some initial exploration of the impact of pools on innovation the analysis has broader applicability than pools being relevant to a number of co marketing arrangements

location costs product quality and implicit franchise contracts abstract in the literature on international trade only little attention has been given to informational asymmetries between firms and consumers with respect to product quality the few economic models that analyze the question of how asymmetric information about product quality might affect trade flows treat product quality as exogeneous in contrast our model takes product quality as an endogeneous variable i e firms can choose the quality they wish to produce in this case location costs can signal product quality under certain conditions and thereby affect international trade flows more specifically intra industry trade in vertically differentiated experience goods can be determined by information asymmetries about product quality

causes and consequences of price premiums existing literature that argues for the prevalence of price premiums is examined an evaluation of an extant model identifies several possible boundary conditions that limit the applicability of the model a set of propositions is developed based on these boundary conditions linking buyer seller and market factors to the magnitude of price premiums that should be available alternative means for empirical testing of the propositions are offered and some implications and applications of this line of thinking for pricing and brand management are described copyright 1996 by university of chicago press

extending internalization theory a new perspective on international technology transfer and its generalization internalization theory suggests that multinational enterprises set up subsidiaries to exploit technology advantages abroad when licensing is too difficult to arrange with indigenous firms this direct investment vs licensing trade off which is built on a business to business transaction does not recognize the linkages with the final products market as a component of transaction cost analysis by adopting a unilateral perspective on international technology transfer neither does it consider the possible role of complementary assets e g manufacturing capabilities held by potential business partners in foreign countries after taking into account the presence of such assets in indigenous firms this article extends internalization theory by positioning the technology transfer transaction in the broader context of the entire value chain including especially the manufacturing marketing linkages with the final products market more specifically it demonstrates that conventional internalization theory neglects various alternative market governance mechanisms not captured by a licensing agreement the analysis shows that the choice of an optimal governance structure is determined by the complementarity of strategic assets controlled by the economic actors involved and by the linkages among the technology manufacture interaction in two intermediate input markets and the subsequent sales function in the final products market

unequal pay or unequal employment a cross country analysis of gender gaps we analyze gender wage gaps correcting for sample selection induced by nonemployment we recover wages for the nonemployed using alternative imputation techniques simply requiring assumptions on the position of imputed wages with respect to the median we obtain higher median wage gaps on imputed rather than actual wage distributions for several oecd countries however this difference is small in the united states the united kingdom and most central and northern eu countries and becomes sizable in southern eu countries where gender employment gaps are high selection correction explains nearly half of the observed negative correlation between wage and employment gaps

choosing the competition and patent licensing this article examines licensing as a means of choosing the competitors which a patentee monopolist will face in the period after the patent expires the queue of entrants consists of two firms which differ in their relative strengths as competitors for example by size or level of marginal cost by structuring the industry to be composed of weak competitors the incumbent is able to prolong its dominant position in the industry after the patent expires examples are presented in which the evidence suggests that choosing the competition was an important motivation of the licensor s behavior

asymmetry of customer loss and recovery under endogenous partnerships theory and evidence this article is inspired by real world phenomena that firms lose customers based on imprecise information and take a long time to recover if consumers are playing an ordinary repeated game with fixed partners there is no clear reason why recovery happens slowly however if consumers are playing an endogenously repeated game a class of simple efficient equilibria exhibits the asymmetry of fast loss and slow recovery of customers after a bad signal exit is systematic but formation of a new partnership is random we also give empirical evidence of our equilibria at an individual firm level

to brand or not to brand a theoretical and empirical question a firm s brand name is a valuable asset that can greatly enhance the demand for its products this fact is widely recognized in both the economics and marketing literatures surprisingly though little rigorous analysis has been devoted by either of these literatures to the question of when a firm will identify one of its new products with an established brand name it is on this question that our research is focused the economics literature in this general area has focused on issues that are related to but quite distinct from the issue we examine the traditional industrial organization literature discusses and attempts to capture empirically the relationships among advertising brand names and market power for some representative work we develop and test a model that predicts 1 whether a multiproduct firm will brand a new product with the established company name and 2 where the new product will be located in relation to the reputation estabished by the firm in other markets hotelling s 1929 model of spatial location serves as the basis for our theoretical investigation however we extend hotelling s model to the case of experience goods whose qualities can only be known with certainty after the product is purchased and consumed the logic that underlies our model is tested on a sample of firms from the u s liquor industry we employ a mixed logit approach to capture the simultaneous decisions that are made by the firms in our sample the views expressed in this paper are our own and not necessarily those of the bell system we are grateful to 0 gur arie the michigan liquor control commission peter ochshorn and srinivasan balakrishnan for valuable assistance with data collection and programming and to the national science foundation for support through grant ist 8315690 the helpful comments of roger klein pablo spiller and an anonymous referee are also gratefully acknowledged any errors are of course our responsibility

understanding the wage patterns of canadian less skilled workers the role of implicit contracts understanding the wage patterns of canadian less skilled workers we examine the wage patterns of canadian less skilled male workers over the last quarter century by organizing workers into job entry cohorts we find entry wages for successive cohorts declined until 1997 and then began to recover wage profiles steepened for cohorts entering after 1997 but not for cohorts entering in the 1980s a period when startwageswere relatively high we argue that these patterns are consistent with a model of implicit contracts with recontracting inwhich aworker s currentwage is determined by the best labour market conditions experienced during the current job spell comprendre les patterns de salaires des travailleurs canadiens moins qualifi es le r ole des contrats implicites on examine les patterns de salaires des travailleurs masculins moins qualifi es au cours du dernier quart de si ecle en d epartageant les travailleurs en cohortes diff erentes selon le moment d entr ee dans le monde du travail on d ecouvre que les salaires a l entr ee des cohortes successives ont d eclin e jusqu en 1997 et qu ensuite ils ont commenc e a cro itre les profils de salaires se sont raffermis pour les cohortes entrant dans le monde du travail apr es 1997 mais pas pour les cohortes qui sont entr ees dans le monde du travail dans les ann ees 1980 une p eriode o u les salaires de d epart etaient relativement elev es on sugg ere que ces patterns sont consistants avec un mod ele de contrats implicites de ren egociation qui implique que le salaire courant des travailleurs est d etermin e par les meilleures conditions du march e du travail dont on a fait l exp erience dans la p eriode r ecente de travail

the effect of unionization on productivity evidence from a long panel of coal mines the author measures the effect of unionization on productivity based on a panel of west virginia coal mines from 1897 to 1928 output and inputs are measured in physical terms and most of the mine

voluntary quality disclosure and market interaction marketers disclose quality information directly to potential consumers using a variety of communication channels this study investigates how competition may influence duopoly firms incentive to voluntarily reveal quality information we show that firms in competitive markets reveal less information than a monopoly firm in addition sequential disclosure leads to asymmetric equilibrium disclosure behavior the disclosure leader reveals unambiguously less information than in the simultaneous disclosure case whereas the follower ex ante reveals less more private information than that released by the leader or by the firms in the simultaneous case when the disclosure cost is sufficiently low high we also examine the equilibrium firm profits and social welfare we demonstrate that there may be a u shaped relationship between equilibrium monopoly profits or social welfare under both monopoly and duopoly and the disclosure cost moreover in comparison to the simultaneous disclosure case sequential disclosure can lead to increasingly softened competition improving both firm profitability and social welfare

valuing the influence of underlying attitudes and the demand for organic milk in japan subjective perceptions about a product affect consumer choice accordingly acquiring the underlying demand characteristics that consumers find desirable is vital for firms planning future marketing strategies however the extent to which product specific perceptions affect consumer choice is poorly understood new agricultural standards for organic livestock were introduced in japan in november 2005 and are expected to influence the market significantly choice modeling cm is used to explore how consumers evaluate the latent demands and conventional attributes or tangible values of organic milk the results suggest that latent demands along with socioeconomic characteristics and conventional attributes provide strong incentives for consumers to move from the purchase of conventional milk to organic milk the analysis indicates that latent demands reflecting the safeness of organic milk the better taste of organic milk the image of environmental friendliness in the production process and the image of the health and comfort of the cows are important factors that influence consumers purchasing decisions however each specific factor has a corresponding conventional tangible attribute that needs to be targeted in marketing strategy

immigrants and the dynamics of high wage jobs the authors exploit immigrant identifiers in the canadian labour force survey lfs and the longitudinal dimension of these data to compare the labor force and job dynamics of immigrants and native born workers they examine the role of job as opposed to worker heterogeneity in driving immigrant wage disparities and investigate how the paths into and out of jobs of varying quality compare between immigrant and native born workers they find that the disparity in immigrant job quality which does not appear to diminish with years since arrival reflects a combination of relatively low transitions into high wage jobs and high transitions out of these jobs the former result appears to be due equally to difficulties obtaining high wage jobs directly out of unemployment and to using low wage jobs as stepping stones the authors find little or no evidence however that immigrant job seekers face barriers to low wage jobs

product quality reputation and market structure in a repeated game in which firms simultaneously choose price and product quality but quality is observed only after consumption takes place equilibria exhibiting high quality may exist in oligopoly markets even when the low quality one is a unique equilibrium outcome in monopoly and competitive markets oligopolists can sustain high quality through the threat of both a loss of reputation and a breakdown in tacit collusion while we abstract from other reasons that market structure might affect product quality we show that the inverted u shaped relationship between feasible quality and market structure is robust to several generalizations of the model the relationship between market structure and product quality is an important and widely studied part of the theoretical industrial organization literature going back to schumpeter s 1942 work on the relationship between innovation and market structure and including the seminal work of swan 1972 on market power and product durability we contribute a small but important insight to this debate by asking how market structure influences the incentives to provide high quality product when quality is unobservable that is when the products sold are experience goods and when firms can tacitly collude theoretically higher margins give stronger incentives to sustain a reputation for high quality and they encourage firms to increase product quality in order to steal business from rivals this is also true empirically in the airline industry deregulation led to lower prices and a reduction in service quality 2 on the other hand competition encourages firms to protect their market share by competing in product quality in general monopolists have higher margins but face less of a threat from competition whereas firms in competitive markets have lower margins and face a greater threat from competition in between are the oligopoly markets firms in oligopoly markets may enjoy high margins because of tacit collusion and face a strong threat from competition which suggests product quality might be highest in imperfectly competitive markets this article considers a repeated gamemodelofpricingandproductqualitychoiceinwhichmarketstructurehasanonmonotone impact on firms ability to maintain reputation for high quality high quality is more likely to be an equilibrium in oligopoly markets than in either monopoly or competitive markets empirical evidence on the relationship between market structure and quality is mixed mazzeo 2003 finds that on time performance increases dramatically when a second nonstop carrier serves a route domberger and sherr 1989 find that the british government s liberalization of the conveyancing monopoly in 1984 led to improvement in quality of conveyancing services in england and wales these article are consistent with our model in that

brand effects on choice and choice set formation under uncertainty this paper examines the effects of brand credibility a central concept in information economics based approaches to brand effects and brand equity on consumer choice and choice set formation we investigate the mechanisms through which credibility effects materialize namely through perceived quality perceived risk and information costs saved the credibility of a brand as a signal is defined as the believability of the product position information contained in a brand which depends on consumer perceptions of the willingness and ability of firms to deliver what they have promised the choice set is defined as the collection of brands that have a nonzero probability of being chosen among those actually available for choice in a given context furthermore we study the impact of brand credibility on the variance of the stochastic component of utility not only do choice model parameters capture the impact of systematic utility differences on choice probabilities but also the magnitude of this systematic impact is moderated by the relative importance of the stochastic utility component in preference we term this moderation phenomenon preference discrimination which we conceptualize as the decision makers capacity to effectively discriminate between products utilities in choice situations we estimate a discrete choice model of brand choice set formation and preference discrimination on experimental data in two categories juice and personal computers and find strong evidence for brand credibility effects and differential mechanisms through which brand credibility s impact materializes on brand choice conditional on choice set choice set formation and preference discrimination

unions and the economy what we know what we should know the wages and working conditions of about one in three canadian workers are determined by collective bargaining in this paper current knowledge about the economic effects of collective bargaining is surveyed unions raise wages by about 15 percent on average and reduce wage dispersion for their members while also reducing profits unions do not seem to reduce employment levels in affected firms or cause nonunion wages to fall efficiency losses due to sectoral misallocation of labor and to strikes are small but some evidence suggests lowered investment in unionized firms union effects on total factor productivity need more careful study using firm level data

moral hazard as an entry barrier in an experience goods industry an entrant who could make positive profits by providing a better deal to buyers than do incumbents may cheat buyers by providing goods of low quality to make even greater profits if buyers foresee this possibility they will be unwilling to buy from an entrant as a result moral hazard in a seller s choice of the quality of an experience good can lead to a barrier to entry in particular since hit and run entry is likely to lead to low quality choice the threat of such entry may not discipline the pricing of incumbents we also show that the temptation to dishonest entry the moral hazard problem is stronger if buyers are already receiving some consumer surplus as a result there is a first entrant advantage because the first entrant faces less temptation to provide inefficiently low quality than do subsequent entrants and with rational buyers this works to his advantage the scale of entry may affect quality incentives and therefore introductory offers may assure buyers of an entrant s quality but this cannot happen under a suitable definition of constant returns

union effects in low wage services evidence from canadian childcare empirical evidence presented in this paper based on survey data for canadian childcare workers in 1991 contradicts most stereotypes of the childcare labor market although childcare labor was low wage the authors find that the union impact on wages 15 and fringe benefits was in line with union effects found in other better compensated work and they find substantial returns to education occupational level and firm specific experience the returns to the skill related attributes were blunted somewhat in the union sector except where such returns stood to benefit the median union voter the findings suggest that monetary incentives can be used to encourage improvements in the education experience and skill acquisition of childcare workers unions can improve wages and benefits for childcare workers just as they can for most other workers suggesting the viability of union organizing in this sector despite the traditional barriers to organizing low wage service sector workers in small firms u nion organizing in the growing lowwage female dominated service sector is often regarded as key to offsetting the decline in union membership that is occurring in the areas of traditional union strength the recent success of the service

the dynamics of names a model of reputation the article studies reputation of names and its dynamics first the article shows that names backed by nothing intrinsic can bear reputation although the context is purely of adverse selection a mechanism in the spirit of kreps 1990 helps to sustain reputation second it examines how the dynamics of the reputation affects the extent of sorting and the level of social efficiency and derives the dynamics in the equilibria with the highest efficiency finally it empirically predicts that brand names can be fully established sooner in an industry where high end products have larger profit margins

airline network rivalry in this paper the effects of the strategic interaction between deregulated airlines on their network choice are analyzed the authors examine whether switching from a linear to a hub spoke network confers a strategic advantage because it saves costs and improves service quality they find that if hubbing lowers total cost which includes both airline and passenger inconvenience costs the pursuit of strategic advantages usually intensifies the extent of hubbing even if hubbing raises total cost it might be pursued by the airline either because hubbing is a dominant strategy in an oligopolistic setting or because hubbing will be useful in deterring entry

sequential entry industry structure and welfare in this paper we reexamine the relationship between potential competition industry structure and welfare in a market subject to a sequential entry threat where firms can make quantity commitments and have access to a constant returns technology it is shown that provided entry is not blockaded the incumbent s will either prevent entry or allow all the potential entrants in furthermore actual entry may decrease but social welfare never goes down with more potential entrants nevertheless with a finite number of potential entrants policies which lower the cost of entry need not be beneficial in welfare terms

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

understanding the wage patterns of canadian less skilled workers the role of implicit contracts we examine the wage patterns of canadian less skilled male workers over the last quarter century by organizing workers into job entry cohorts we find entry wages for successive cohorts declined until 1997 and then began to recover wage profiles steepened for cohorts entering after 1997 but not for cohorts entering in the 1980s a period when start wages were relatively high we argue that these patterns are consistent with a model of implicit contracts with recontracting in which a worker s current wage is determined by the best labour market conditions experienced during the current job spell on examine les patterns de salaires des travailleurs masculins moins qualifies au cours du dernier quart de siecle en departageant les travailleurs en cohortes differentes selon le moment d entree dans le monde du travail on decouvre que les salaires a l entree des cohortes successives ont decline jusqu en 1997 et qu ensuite ils ont commencea croitre les profils de salaires se sont raffermis pour les cohortes entrant dans le monde du travail apres 1997 mais pas pour les cohortes qui sont entrees dans le monde du travail dans les annees 1980 une periode ou les salaires de depart etaient relativement eleves on suggere que ces patterns sont consistants avec un modele de contrats implicites de renegociation qui implique que le salaire courant des travailleurs est determine par les meilleures conditions du marche du travail dont on a fait l experience dans la periode recente de travail

breaking free of a stereotype should a domestic brand pretend to be a foreign one consumers in many emerging markets exhibit a pronounced preference for western and global brands while domestic brands are often associated with a cheap but low quality image frustrated with the negative country of origin coo stereotype imposed on them many domestic brands from emerging markets follow a variety of approaches to disguise their coo and pretend to be foreign this paper studies the strategic aspects of this phenomenon we consider an experience good market where consumers learn about each brand s quality using its coo as a prior each firm can invest in product quality or coo dissociation the former generates better quality signals while the latter simply masks the firm s coo identity the analysis reveals a few main insights sharing a reputation leads to a common good problem where firms free ride on each other s quality investments as a high quality firm dissociates itself from the stereotype it ceases to contribute to the coo image but also prevents its low quality peers from free riding on it this incurs a negative direct effect but a positive strategic effect on the group image consequently a country s coo image may actually improve when more high quality brands shun their identities and pretend to be foreign in equilibrium coo image improves monotonically as firms become more efficient in providing quality however the prevalence of coo dissociation may first increase then decrease we discuss the implications of these results for emerging market brands as well as policy makers

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

unionization and plant closure in canada this paper examines for the first time the role of unionization as a determinant of plant closings in canada using the 1999 to 2001 canadian workplace and employee survey the paper contributes to the north american evidence by showing that the share of a plant s workers covered by collective bargaining has a robust positive partial correlation with the probability of larger plants closing for smaller plants the extent of unionization tends to be much lower and its variation plays no role in plant closure the study highlights the theoretical and statistical importance of examining closure separately for large and small plants ce memoire examine pour la premiere fois le role de la syndicalisation en tant que determinant de la fermeture d usines au canada a l aide des resultats de l enquete sur le milieu de travail et les employes de 1999 et de 2001 emte le texte contribue a enrichir le dossier qui montre qu il y a correlation positive partielle robuste entre la portion des travailleurs d usines couverts par une convention collective et la probabilite de fermeture des grandes usines pour les plus petites usines le degre de syndicalisation tend aetre plus faible et sa variation ne joue pas de role dans le processus de fermeture d usines cette etude montre l importance theorique et pratique qu il y a aetudier separement les fermetures des grandes et des petites usines

a consumer perspective on price matching refund policies effect on price perceptions and search behavior although price matching refund policies are common in many retail environments the impact of such policies on consumers has largely been ignored this article reports the results of three studies that examine price matching policies from a consumer perspective study 1 shows that consumers perceive price matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search contrary to the predictions based on signaling theory in information economics studies 2 and 3 show that when search costs are low the number of stores searched increases in the presence versus absence of a price matching policy when search costs are high consumers appear to accept the price matching signal at face value and search less in the presence of a refund the article concludes by discussing the theoretical implications of the findings and suggesting directions for future research

globalization and the gender wage gap there are several theoretical reasons why globalization will have a narrowing as well as widening effect on the gender wage gap but little is known about the actual impact except for a number of country studies the author provides a cross country study of the impact of globalization on the occupational gender wage gap based on the rarely used but most far ranging survey of wages around the world the international labour organization s october inquiry this annual survey was started in 1924 and contains a wealth of information on wages and the gender wage gap for the period 1983 99 there is information on the gender wage gap in 161 narrowly defined occupations in more than 80 countries around the world the author finds the following i the occupational gender wage gap appears to be narrowing with increases in gdp per capita ii there is a significantly narrowing impact of trade and foreign direct investment fdi net inflows on the occupational gender wage gap for low skill occupations both in poorer and richer countries and for high skill occupations in richer countries iii there is no evidence of a narrowing impact of trade but there is evidence of a widening impact of fdi net inflows on the high skill occupational gender wage gap in poorer countries iv wage setting institutions have a strong impact on the occupational gender wage gap in richer countries

response to competitive entry a rationale for delayed defensive reaction empirical studies examining responses to new product entries come to the puzzling conclusion that in general an incumbent reacts to a new entrant after a significant delay even easy to implement price cuts are observed after significant lag following entry these findings seem to contradict the existing literature that either implicitly assumes or strongly advocates immediate defensive responses to limit competitive encroachment when a competing firm enters the market consumers may be uncertain about the entering firm s product quality the incumbent firm through rigorous tests may fully know the entrant s quality suppose the incumbent aggressively lowers price this may cause the consumers to wonder if indeed the entrant s quality is high in other words an incumbent s reaction may cause the consumers to make inferences about the entrant s quality such strategic implications of the incumbent s reactions have to be carefully analyzed before determining the optimal response by the incumbent in this paper we propose a conceptual framework for understanding differences in the magnitude and timing of incumbents responses to competitive entries we consider a model in which a monopolist incumbent firm faces competitive entry the incumbent firm knows the true quality of the entrant with certainty although consumers are aware of the incumbent s product quality through their prior experience they are initially uncertain of the entrant s product quality in such a situation a high quality entrant has the incentive to signal her true quality through her strategic price choice however the uncertainty about the entrant s quality is favorable to the incumbent in the sense that consumers believe with a high probability that the entrant s quality is low as a result the strategic incentives facing the incumbent and the entrant oppose each other while the entrant wants to signal her high quality the incumbent wants to prevent her from doing so we demonstrate that one way the incumbent can prevent the quality signaling is to select a higher than his optimal competitive duopoly price in other words the incumbent can prevent or jam the entrant s quality signaling by choosing a price higher than his optimal competitive price when consumers are fully informed about the entrant s true quality though the signal jamming price is lower than the monopoly price the price is substantially higher than the competitive price this marginal reduction in the incumbent s price from the pre entry monopolistic price represents a muted or lack of response by the incumbent to the competitive entry however once the entrant s quality gets revealed in subsequent periods through consumer usage and word of mouth the entrant has no incentive to engage in quality signaling and the incumbent has no incentive to jam it therefore the market reverts to the complete information competitive prices and the incumbent lowers his price considerably this temporal pattern of muted price reduction in the first period followed by a sharp price reduction in the second period corresponds to a delayed defensive reaction in our model although the empirical studies suggest that the delayed reaction may arise due to factors such as managerial inertia or indecision we demonstrate that such a behavior is indeed an optimal strategy for a profit maximizing firm thus our model reconciles empirical results with the equilibrium outcome of a strategic analytical framework furthermore in an experimental setting we test the predictive power of our framework and establish that consumers indeed form conjectures about the entrant s quality based on the incumbent s reactions in the first experimental study we find strong support for the notion that the incumbent s price reaction may indicate entrant s quality in a follow up study we observe that whenever the incumbent lowers prices respondents judge the quality of the entrant to be higher as compared to the case when prices are the same or increased the managerial implication of this paper is that well established incumbent firms should be cautious in the implementation of their defensive responses to product introductions of uncertain quality by competitors of particular concern are situations where the reactions are easily observable by consumers a strong reaction may suggest that the incumbent takes the competitive threat seriously leading consumers to believe in the quality of the competitor s product

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

demand signalling under unobservable effort in franchising linear and nonlinear price contracts we study the signalling strategy of a principal who is privately informed about its high demand potential to an uninformed risk neutral agent we analyze the model in the context of a contract between a franchisor and a franchisee we examine the distortions of a two part pricing scheme necessary to credibly inform the franchisee agent we also study whether the inability of the franchisor principal to observe the agent s effort moderates or exaggerates the distortions from the first best two part pricing scheme a surprising outcome is that even though the principal incurs greater signalling cost the magnitude of distortion in the two part scheme is smaller when service is unobservable than when it is not thus a signalling strategy employing the fixed and variable fees is harder to detect under moral hazard empirical studies failing to control for moral hazard may incorrectly conclude that signalling strategy does not occur we later consider a three part scheme to verify whether or not the schem

brand extension as informational leverage the marketing literature refers to the concept of brand capital and provides empirical evidence that firms with a large stock of well established brands have an advantage in introducing new products this paper develops a theory of brand extension as a mechanism for informational leverage in which a firm leverages off a good s reputation in one market to alleviate the problem of informational asymmetry encountered in other markets it is shown that brand extension helps a multi product monopolist introduce a new experience good with less price distortion thus the paper provides a theoretical foundation for the concept of brand capital

products with branded components an approach for premium pricing and partner selection an increasing number of products are being sold with components that themselves are brand names examples are personal computers with intel microprocessors and diet soft drinks that use the nutrasweet formulation branded components may alter consumers valuation of the bundle necessitating changes in the ways firms identify and price such bundled products surprisingly the existing marketing literature is silent on this issue the purpose of our paper is to propose an analytical approach that helps marketers of products with branded components make optimal pricing and partner selection decisions our managerial objectives are twofold a to the seller of the bundled product we suggest the optimal bundled product offering optimal selling prices of alternative products revenues and profits and b to the branded component manufacturers we indicate the most favorable alliance partners and payoff gains losses of aligning with other branded components instead of unbranded alternatives our analytical approach is also likely to be helpful to academics researching bundling and ingredient branding issues the specific problem modeled assumes the bundled product has two components that are consumed jointly furthermore each component can be either a brand name or unbranded in this model the consumer has no control over the choice of the components in the bundle the seller decides what form of bundle components i e branded or unbranded to offer we assume that the product that is marketed eventually enjoys a monopoly drawing from research in signaling and brand alliance we posit each branded component may either enrich or suppress the value of the partnering component in the bundle as perceived by the consumers our approach has three methodological stages first we build an individual level model to assess the valuation of alternative products and their principal components at the level of a randomly drawn consumer to do so we rely primarily on the theory of reservation prices and weber s theory on price value changes second we aggregate such valuation across consumers to assess the market s overall valuation for this purpose we invoke parametric distributions based on integral transform theory third we develop payoff functions based on market valuation of alternative products and supply side costs the managerial objectives are met based on results from this stage our approach was successfully applied to the context of a university bookstore that intends to sell windows based laptop computers the two principal components of the laptop computer bundle are the microprocessor chip and the personal computer platform on which the chip is implanted the seller may choose either compaq with intel inside or a simpler bundle featuring one of these with an unbranded complementary component or an entirely unbranded bundle we used data collected from 192 potential consumers via a survey included in the survey were measures of consumers perceptions of functional aspects of the components and their reservation prices for alternative bundled products the approach identified the most profitable bundle for the seller and its optimal price it also provided estimates of the revenue impact of the gain or loss for each branded component by partnering the other branded component instead of the unbranded alternative as such the model facilitates the determination of the optimal price price premium and profits for products with branded components as well as the identification of the ideal partner for each branded component manufacturer it is apt to caution that products with branded components need not always lead to price premiums or lead to win win outcomes reasons such as incongruity between the branded components or domination of one of the components over the other may drive potential consumers away thus hurting profits implications of the results to negotiate component prices are discussed in the paper the study limitations and directions for future research are also presented

credible spatial preemption through reputation extension abstract judd 1985 rand journal of economics 16 153 166 shows that the results of previous models of brand proliferation and spatial preemption are substantially weakened if the incumbent does not have high exit costs this paper illustrates how an incumbent firm can make spatial preemption credible by extending reputation this is the case with product extensions which are new products but are linked to the successful reputation of another product already on the market it is proved that a product extension can make spatial entry preemption credible because its withdrawal in response to a competitor s new brand can have a negative reputational effect on the incumbent s original product

multiple market entry cost signalling and entry deterrence a low cost incumbent may limit price to informatively signal her cost to an uncertain potential entrant and therefore deter entry we enrich this model by investigating the strategic pricing behavior of the incumbent when she operates in multiple markets we demonstrate that the low cost incumbent s ability to separate from a ghost high cost type is enhanced when she combines her signalling effort across markets instead of independent signalling in each market we show that in the combined least cost signalling the low cost incumbent limit prices in each market in an attempt to minimize dissipative but informative signalling costs the low cost incumbent may enter unprofitable markets but exit after credible separation

multi product bargaining bundling and buyer power abstract we re consider the bilateral bargaining problem of a multi product manufacturer retailer trading relationship o brien and shaffer 2005 have shown that the unbundling of contracts leads to downward distorted production levels if seller power is strong while otherwise the joint profit maximizing quantities are contracted which is also always the case when bundling contracts are feasible we show that the unbundling of contracts also leads to downward distorted output levels when the buyer firm has sufficient nash bargaining power i e buyer power our result is driven by cost substitutability diseconomies of scope

conflicts of interest information provision and competition in the financial services industry abstract in some markets sellers have better information than buyers over which products best serve a buyer s needs depending on the market structure this may lead to conflicts of interest in the provision of information by sellers this paper studies this issue in the market for financial services the analysis presents a new model of competition between banks where price competition influences the ensuing incentives for truthful information revelation we also compare conflicts of interest in two different firm structures specialized banking and one stop banking

do highly unionized companies compensate their ceos less in periods of financial distress evidence from canada in this article the author studies the strategic interaction between employee stakeholders in particular labor unions and top management and he evaluates the effect of the two parties inherent competitive rent seeking behavior on ceo pay using a panel of firms listed on the s p tsx composite index the author shows that ceo compensation withstood the financial crisis 2008 2011 despite lower and even negative corporate performance further highly unionized companies were associated with higher ceo pay in terms of non equity elements such as salary and pension allocations the presence of unions had no observed effect in reducing bonuses stock options and restricted stock units these findings have implications for the debate on income inequality and the power of unions to bring about change

can brand extension signal product quality this paper asks whether brand extension can serve as a signal of product quality given that it costs less than a new brand existing literature has assumed either that brand extension is cost neutral or that it costs more i show that it can as a perfect bayesian equilibrium but the argument is unconvincing for one thing the separating equilibrium is not unique a pooling equilibrium also exists in which brand extension signals nothing for another the separating equilibrium relies on off equilibrium beliefs that are poorly motivated in the model i propose a refinement of the perfect bayesian equilibrium that resolves both issues empirical off equilibrium beliefs require that consumers off equilibrium beliefs be justifiable on the basis of their prior beliefs and product performance observations with empirical off equilibrium beliefs two necessary conditions for brand extension to signal product quality are identified i consumers must perceive old and new products of the firm to be positively correlated in quality and ii at least some consumers must identify with brands and not the firm behind the brands even with these conditions in place the signaling argument is fragile firm observability of past performance diminishes brand extension s signaling capability an arbitrarily small probability of failure for good products eliminates it my results suggest that going forward the case for brand extension must rest on foundations other than signaling product quality

umbrella branding as a signal of new product quality an example of signalling by posting a bond i present a signalling model in which a multiproduct firm can use its reputation as a bond for quality by using a brand name for an established product when it introduces a new experience good as out of equilibrium beliefs are specified a false signal may be taken to imply that both the established and the new product are of low quality in contrast the absence of a signal leaves open the possibility that one of the two products is of high quality hence the signal can be credible without excessive sunk costs as long as the bond posted is sufficiently large

the price and profit effects of horizontal mergers in two dimensional spatial competition abstract consider a horizontal merger between two adjacent stores in a two dimensional model the price and profit increases of merging and neighboring stores are small compared to those that occur in a one dimensional model

perception spillovers across competing brands a disaggregate model of how and when abstract drawing on the accessibility diagnosticity framework and previous literature on branding and order of entry the authors hypothesize that perception spillovers can also occur across directly competing products that do not share a common brand name the authors suggest two mechanisms prior perception spillover and dynamic perception spillover and one moderating variable product brand similarity to test for spillovers across competing brands the authors develop a structural bayesian learning model and estimate it using prescription choice and marketing communication data from a panel of physicians from their model results the authors find evidence of prior and dynamic perception spillovers across competing brands only when brands are sufficiently similar in contrast they find no evidence of spillover effects across brands that are highly dissimilar finally several policy experiments illustrate the strength and significance of competitive spillovers for product diffusion and from the re

the costs of occupational mobility an aggregate analysis we estimate the costs of occupational mobility using a novel approach that relies on aggregate flows of workers across occupations rather than on wage data the theoretical underpinnings for this approach are derived from a model of occupation choice that delivers a gravity equation linking worker flows to occupation characteristics and to transition costs which we proxy using task data from the dictionary of occupational titles dot occupation flow data are constructed from the matched monthly current population survey cps between 1994 and 2012 we find that transition costs vary widely across occupations are increasing in task distance the dissimilarity in the mix of tasks performed in the two occupations and are higher for transitions across broad task categories however most of the transition costs are accounted for by general task independent entry costs specific to each destination occupation

bundling new products with old to signal quality with application to the sequencing of new products abstract this paper provides a new rationale for bundling based on informational leverage bundling a product of established quality to one of unknown quality can mitigate the problem of asymmetric information encountered in the latter market leveraging reputation in one market into another has implications for the timing of new product introductions bundling motivated by informational leverage enhances efficiency by increasing consumer s access to costly information when the possibility of endogenous timing of product introduction is considered however the welfare consequences of bundling are ambiguous the positive effect of market creation must be weighed against the negative effect of market delay

monotone equilibria in signaling games abstract we examine the monotonicity of the sender s equilibrium strategy with respect to her type in signaling games we show that when the sender s return from the receiver s action depends on her type the spence mirrlees condition cannot rule out equilibria in which a higher type sender chooses a strictly lower action than a lower type we provide sufficient conditions under which all equilibria are monotone which require that the sender s payoff is decreasing in her action is increasing in the receiver s action and has strictly increasing differences between her type and the action profile we apply our sufficient conditions to education signaling advertising and warranty provision

divisionalization and entry deterrence this paper assumes that incumbent firms can create new independent divisions more cheaply than potential entrants who must incur the additional overhead costs of new entry the main theoretical result is that such divisionalization ability leads perfectly informed incumbents to preempt all rational entry into their industries in contrast existing models of entry deterrence imply that informed incumbents even those with steadily decreasing average costs will often allow rational entry our result may explain why successful large scale entry by firms with no informational advantage is extremely rare the use of divisions to preempt entry may also explain why large firms in high profit oligopolies often divisionalize allowing their divisions to compete freely despite the negative pecuniary externality that each division imposes on others

first mover advantage through distribution a decomposition approach whereas the extant literature on entry order effects establishes that first entrants often earn higher market shares market share advantage the literature on distribution suggests that increased distribution has a positive effect on sales can distribution help us better understand entry order effects on market shares this paper examines how the first entrant in a geographical market achieves a market share advantage through distribution for this purpose i propose a simple method of decomposing sales into physical distribution and sales performance the data come from a manually collected panel on six major japanese convenience store chains from 47 geographical markets between 1991 and 2007 using an instrumental variable approach to address the potential endogeneity of entry order i find first entrants have a positive market share advantage over later entrants specifically the physical distribution measured by the number of outlets in a market drives most of the advantage meanwhile the pos

reputational spillovers innovation licensing and entry abstract adoption of a new product by a multiproduct finn may affect all its sales by altering its reputation as an innovator if adopting a success has a halo effect that enhances the adopter s reputation then an inventor s licensing profit exceeds monopoly profit from the new product if adopting a failure has a black eye effect that damages the adopter s reputation then an inventor s licensing profit is maximized by a fixed fee not an auction when both effects are present an inventor licenses new products that are likely to succeed but enters with those that are likely to fail