informational externalities and emergence of consensus we study a general model of dynamic games with purely informational externalities we prove that eventually all motives for experimentation disappear and provide the exact rate at which experimentation decays we also provide tight conditions under which players eventually reach a consensus these results imply extensions of many known results in the literature of social learning and getting to agreement

strategic labour contracts labor contracts affect a firm s cost function and for this reason they can be used as a recommitment device to gain a strategic advantage against other firms in a model that is otherwise neutral it is found that if firms compete in prices then strategic considerations alone yield results similar to those obtained by c azariadis 1983 workers are underemployed and worse off in more adverse states of nature on the other hand if firms compete in quantities then the equilibrium contracts resemble those of j green and c kahn 1983 workers are overemployed and better off in more adverse states

pricing variation within dual distribution chains the different implications of externalities and signaling for high and low quality brands within many of the multioutlet branded chains that dominate the retail and services landscape the organizational form e g company management franchising used to manage an outlet varies from site to site as do the prices charged at those sites i propose that organizational form and prices may be systematically related as a result of brand externalities in particular i develop logic that the relevant form of externality should differ for upper quality tier brands and lower tier brands using panel data on price and organizational form from more than 6 700 branded u s hotels affiliated with 40 dual distribution brands those brands that simultaneously company manage and franchise individual outlets i find that consistent with the brand externality arguments company managed locations have higher prices within high quality chains whereas franchisees price higher in the lower tiers this paper was accepted by bruno cassiman business strategy

executive compensation strategic competition and relative performance evaluation theory and evidence we examine compensation contracts for managers in imperfectly competitive product markets we show that strategic interactions among firms can explain the lack of relative performance based incentives in which compensation decreases with rival firm performance the need to soften product market competition generates an optimal compensation contract that places a positive weight on both own and rival performance firms in more competitive industries place greater weight on rival firm performance relative to own firm performance we find empirical evidence of a positive sensitivity of compensation to rival firm performance that is increasing in the degree of competition in the industry

employability adaptability and flexibility changing labour market prospects 2000 employability adaptability and flexibility changing labour market prospects regional studies vol 34 no 7 pp 599 600

strategic delegation by unobservable incentive contracts many strategic interactions in the real world take place among delegates empowered to act on behalf of others managers make strategic decisions that affect profits sales persons have power over setting prices and lawyers and sports agents represent their clients in bargaining processes one of the central messages of game theory is that this could be at least partly due to the strategic advantage delegation may provide to the delegating party the idea that signing binding and publicly observable contracts with a third party may serve as a beneficial commitment device goes back at least to schelling 1960 and has been put into use in many areas of economics 1 however the observability of contracts appears to be a precondition for them to play a commitment role and for this reason almost all applications of strategic delegation theory are couched in terms of observable contracts the formalization of this intuition is given by katz 1991 who showed that if contracts are unobservable then the nash equilibrium outcomes of a game with and without delegation coincide in particular delegation through unobservable contracts does not change the predicted outcome of games with a unique nash equilibrium these observations in turn call the empirical relevance of the applied delegation studies into serious question since in most real world transactions the signed contracts are unobservable to the outside parties however there are important strategic environments that fall outside the confines of katz s analysis first katz s model does not include the scenarios in which the outcome of the decision of delegating or not delegating is observable to the outside party in contrast in some models it is natural that the outside party observes the outcome of this decision simply because s he

optimal collusion with internal contracting abstract in this paper two firms play an infinitely repeated bertrand game and each firm has an agent who produces the firm s output and holds private information about production costs the colluding firms fix prices and allocate market shares based on their agents information we develop a model of collusion in which firms use the presence of agents as a strategic opportunity to restrict their incentives to distort private information we show that such firm behavior may expand the scope of optimal collusion whether market allocation schemes are asymmetric or symmetric

grim down south the determinants of unemployment increases in british cities in the 2008 2009 recession lee n grim down south the determinants of unemployment increases in british cities in the 2008 2009 recession regional studies this paper investigates the impact of the 2008 2009 recession on unemployment in the sixty largest cities in great britain the key determinant of changes in unemployment was the skills of the population with highly skilled cities experiencing smaller increases cities with employment in financial services or manufacturing sectors experienced larger increases in unemployment whether a city has a specialized or a diverse economy appears less important than the industries in which the city is specialized the results highlight a problem as the largest unemployment increases were in cities seen as having least potential for future growth

the effects of different contractual arrangements the case of retail gasoline markets the change in the contractual arrangement at a gasoline station from a refiner controlled to a franchise operation implies different incentives for the individual who sets prices and determines hours but reflects no change in the product nor the market environment the outcome can lead to higher prices and reduced hours at the station affected the divorcement experience in maryland illustrates how change can be imposed by the legal system average self service and full serve prices rose and hours of operation fell relative to those of competitors even though refiner operations that were forced to franchise had previously had prices below the competition the evidence of an effect on the prices and hours of competitors is less convincing 16 references 2 tables

antecedents of early terminations in franchising franchisor versus franchisee cancelations franchisors capitalize on franchisee entrepreneurial capacity to grow however enabling franchisees to develop their ventures may damage system consistency this dilemma makes conflict particularly prevalent in the field of franchising nevertheless prior research has reported an incomplete picture of factors leading to serious disagreement and premature termination in franchise partnerships we address this gap first by adding the entrepreneurial autonomy of franchisees as a relevant but underexplored source of conflict and second by providing a more fine grained analysis of franchisors versus franchisees drivers of termination specifically we focus on the controversial issues of pricing and local advertising policies and analyze how expanding franchisees entrepreneurial autonomy in these decision areas is related to contract terminations depending on who ended the relationship the franchisor or a franchisee the study also highlights less controversial requirements and conditions e g upfront investments franchisor experience that may reduce early terminations our empirical objectives are met by using survey data from a sample of franchisor companies the results show how the performance outcomes of entrepreneurial autonomy differ depending on the decision area in which it is exercised results also throw light on the consequences of various critical franchise policies that may be masked if both types of termination franchisors vs franchisees are considered together

a model of anonymous influence with anti conformist agents we study a stochastic model of anonymous influence with conformist and anti conformist individuals each agent with a yes or no initial opinion on a certain issue can change his opinion due to social influence we consider anonymous influence which depends on the number of agents having a certain opinion but not on their identity an individual is conformist anti conformist if his probability of saying yes increases decreases with the number of yes agents in order to consider a society in which both conformists and anti conformists co exist we investigate a generalized aggregation mechanism based on ordered weighted averages additionally every agent has a coefficient of conformism which is a real number in 1 1 with negative positive values corresponding to anti conformists conformists the two extreme values 1 and 1 represent a pure anti conformist and a pure conformist respectively and the remaining values so called mixed agents we consider two kinds of a society without mixed agents and with mixed agents who play randomly either as conformists or anti conformists for both cases of the model we deliver a qualitative analysis of convergence i e find all absorbing classes and conditions for their occurence

influencing the influencers a theory of strategic diffusion the growth of the internet and assorted technologies has made it possible to collect and process detailed information on social networks this article investigates how firms and governments can harness the power of social networks to promote their goals we show that the optimal use of social networks leads to higher sales and greater profits however an increase in the level and dispersion of social interaction can increase or decrease the optimal influence strategy and profits of the player depending on the content of the interaction optimal influence strategies will target individuals with low or high connections depending on the content of interaction finally the returns to investing in market research on social networks are greater in more unequal networks

competing vertical structures precommitment and renegotiation we consider a model where two agents privately informed about their own characteristics play a normal form game on behalf of two uninformed principals we analyze the existence of precommitment effects through public announcements of contracts in a model where agency contracts designed ex ante can always be secretly renegotiated at the ex ante and interim stages we show that the existence of precommitment effects depends both on the strategic complementarity of the agents actions and on the direct effect of the opponents actions on each principal s welfare in our model the possibility of renegotiation is crucial for the existence of precommitment effects the results are introduced through an example of cournot and bertrand competition between firms viewed as vertical structures

subsidy and tuition policies in public higher education i introduction the much discussed and widely debated recent conditions in public higher education include expanding enrollments flat if not declining public appropriations per resident student and rapid increases in tuition rates 1 to many observers tuition policy in public higher education appears be explained as an attempt to set tuition at whatever level is necessary to compensate for shortfalls between public appropriations and instructional expenditures ehrenberg 2006 asserts that public higher education has been buffeted by a perfect storm in which state appropriations to public higher education institutions have failed to keep pace with per student expenditures in private higher education because of economic recession the priorities placed on alternative uses of state tax revenues such as elementary and secondary education medicaid welfare and criminal justice and efforts to reduce income and sales tax rates a considerable empirical literature examines the relationship between tuition in public higher education and state appropriations koshal and koshal 2000 identify a negative relationship between tuition and state appropriation a study of college costs and prices which is conducted by cunningham et al 2001 identifies an inverse association between tuition rates and annual budget appropriations but finds little evidence of a link between tuition and expenditures on instruction lowry 2001 treats state appropriations as exogenous in a resident tuition equation and discovers a significant negative relationship between state funding and tuition rizzo 2005 finds that increases in tuition are linked to declines in future levels of state funding which hints at a dynamic association rizzo and ehrenberg 2004 in one of the more extensive examination of the topic treat real state appropriations per student as an exogenous variable in their resident tuition equation and find that schools that receive higher state appropriations per student charge lower tuition though the elasticity is far from unity acknowledging the economic and demographic conditions of public higher education and the empirical literature linking appropriations and tuition raises a number of questions what activities are legislatures supporting when they allocate public funds to higher education what are the implied responsibilities for subsidizing residents versus nonresidents how are resident and nonresident tuition rates determined and what are the relationships among tuition rates resident and nonresident enrollments and state appropriations to higher education in particular there appears to be the need to develop a better understanding of the decision processes that determine both the public subsidy and the setting of tuition rates a goal of this article is to develop a conceptual framework for that process there is a widely held notion that residents should pay a lower tuition than nonresidents and as a result of a resident subsidy they do so in nearly all public universities one rationale for favorable treatment is that residents and their parents pay state taxes another claim which receives some support by groen 2004 is that residents are likely to remain in the state after graduation and thus contribute future tax revenues although the public subsidy to higher education is justified for these and many other economic development reasons some argue that the higher education subsidy is simply a payoff to special interest groups who influence legislatures and governors friedman 1968 and goldin and katz 1998 provide a general discussion of the objectives of subsidized higher education for whatever reasons resident students continue to receive a substantial publicfinanced subsidy while nonresidents pay close to full cost there are two basic arrangements for determining tuition rates in higher education 1 institutions determine tuition rates under the direction of an independent governing board and 2 state legislatures who are governed by statues and budget policies make tuition decisions

redundancy in an expanding labour market a case study of displaced workers from two manufacturing plants in southampton previous studies of redundancy have been derived from a restricted geographical base they have been predominantly concerned with workers made redundant by manufacturing firms in older industrial regions and have largely ignored redundancies in more buoyant labour market areas this paper examines the post redundancy experience of workers made redundant by two large manufacturing firms in southampton in the mid 1980s comparison with previous studies of redundancy in less prosperous labour markets in northern regions of the uk highlights contrasts in the proportions of workers finding alternative employment and in rates of pay working conditions and levels of job satisfaction the study also highlights the importance of gender in post redundancy experience another factor that has been neglected in previous studies

endogenous timing in contests with delegation i introduction contests with delegation where each player hires a delegate to expend effort or resources on the player s behalf to win a prize are common 1 an example is litigation between a plaintiff and a defendant in which each litigant hires an attorney who expends his effort to win the lawsuit on behalf of his client another example is a rent seeking contest in which each firm hires a lobbyist who expends his effort to acquire a monopoly or a procurement contract from the government on behalf of his client yet another example is a patent contest in which each firm hires a group of independent researchers or university professors who conduct research to obtain a patent on behalf of their employer delegation is attractive to players because they each can use superior ability by hiring a delegate with more ability than herself and achieve strategic commitments through delegation in such contests with delegation we believe delegates decide endogenously when to expend their effort after signing delegation contracts indeed pursuing their self interest the delegates may well endogenize the order of their moves and communicate it with each other before they expend their effort we believe also that players take it into account when designing their contracts for the delegates that the delegates will endogenize the order of their moves it is these ideas that motivate this paper accordingly the purpose of this paper is to systematically study contests with delegation in which delegates decide endogenously when to expend their effort after signing delegation contracts and before they expend their effort we study two player contests with delegation focusing on not only the equilibrium delegation contracts between players and their delegates but also the equilibrium orders of the delegates moves specifically we set up and analyze the following three stage game in the first stage two players each hire a delegate and they simultaneously announce their contracts written with their delegates each player s contract specifies how much her delegate will be paid if he wins the contest and how much if he loses it in the second stage each delegate decides when to expend his effort and the delegates announce their decisions simultaneously in the third stage the delegates expend their effort according to their decisions in the second stage to win the prize on behalf of their employers we show that in equilibrium the delegate hired by the higher valuation player chooses his effort level after observing his counterpart s and his expected payoff is greater than that of his counterpart this advantage of the delegate of the higher valuation player can be explained by the fact that his employer the higher valuation player offers better contingent compensation as it will be defined in section ii to him than the lower valuation player does to her delegate we compare the outcomes of the endogenous timing framework the three stage game presented above with those of the simultaneous move framework the game which is the same as the three stage game with the exception that the delegates choose their effort levels simultaneously and this order of their moves is given exogenously an interesting result is that each player offers her delegate a better contract in the endogenous timing framework than in the simultaneous move framework another interesting result is that unless the valuation for the prize of the higher valuation player is significantly greater than that of the lower valuation player then each delegate s expected payoff is greater in the endogenous timing framework than in the simultaneous move framework whereas each player s expected payoff is less in the endogenous timing framework than in the simultaneous move framework in summary pursuing their self interest the delegates decide endogenously when to expend their effort given contracts between the players and the delegates

coexistence of strategic vertical separation and integration abstract this paper gives conditions under which vertical separation is chosen by some upstream firms while vertical integration is chosen by others in the equilibrium of a symmetric model a vertically separating firm trades off fixed contracting costs against the strategic benefit of writing a two part tariff exclusive dealing contract with its retailer coexistence emerges when more than two vertical cournot oligopolists supply close substitutes when vertical integration and separation coexist welfare could be improved by reducing the number of vertically separating firms the scope for coexistence diminishes when assumptions on contract observability and commitment are relaxed

embedding the multinationals institutions and the development of overseas manufacturing affiliates in wales and north east england phelps n a mackinnon d stone i and braidford p 2003 embedding the multinationals institutions and the development of overseas manufacturing affiliates in wales and north east england reg studies 37 27 40 the impact of foreign direct investment fdi upon host regions is a topic of perennial interest within the fields of regional economics industrial geography and regional development much of the early literature here draws negative conclusions regarding the wider indirect impacts of fdi on host regions pointing to the branch plant syndrome in light of significant processes of corporate restructuring and the build up of host region institutional capacities however recent literature has claimed that the plants of multinational enterprises mnes are becoming increasingly embedded in regional economies against this backdrop this paper aims to provide a critical assessment of the regional embeddedness of fdi in wales and the north east of england based upon an extensive survey of o

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

beer and the tie did divestiture of brewer owned public houses lead to higher beer prices in 1989 the united kingdom monopolies and mergers commission mmc recommended measures that eventually led brewers to divest themselves of 14 000 public houses the mmc claimed that their recommendations would lower retail prices and increase consumer choice since that time however retail prices have risen this paper contains an econometric analysis of the transition period the analysis is based on a model of the relationship between retail price and retail organisational form that emphasises how exclusive dealing clauses and strategic factors interact in 1989 in an important decision the united kingdom monopolies and mergers commission mmc recommended measures that eventually led brewers to divest themselves of 14 000 public houses the mmc claimed that their recommendations would lower retail prices and increase consumer choice there is considerable doubt however that their objectives were achieved indeed since the time that the recommendations were implemented retail prices have risen it is not clear however if prices would have increased in the absence of divestiture one goal of my research is to provide an answer to this question the mmc s recommendations created an exceptional opportunity to assess the effects that different contractual arrangements have on retail prices indeed one would like to investigate this relationship ceteris paribus unfortunately however the choice of vertical market structure is normally endogenous and it is impossible to condition on all of the factors that affect the contracting decision in the uk beer industry in contrast the government ordered changes in the type and terms of the contracts under which national brewers could operate their licensed premises increased separation between brewer and publican therefore was not due to changes in economic conditions moreover some premises the free houses that were not owned by a brewer were not affected by the beer orders the existence of a control group facilitates the analysis by strengthening the conclusions that one can draw in recent years economists have moved away from simple theories of vertical

entry and managerial incentives abstract this paper presents a two period full information model of entry where owners of incumbent and entrant firms endogenously select the incentive schemes for their managers it is shown that when output decisions are delegated to managers the incumbent s owner chooses to base incentive schemes only partly on profit but if output decisions are reached via nash bargaining between managers the incumbent s owner will base the reward on profit alone the entrant never bases the incentive scheme solely on profit if there is a sufficiently high fixed cost of entry then the incumbent can deter entry by providing management with appropriate incentive schemes

communication and learning we study strategic information transmission in an organization consisting of an infinite sequence of individual decision makers each decision maker chooses an action and receives an informative but imperfect signal of the once and for all realization of an unobserved state the state affects all individuals preferences over present and future decisions decision makers do not directly observe the realized signals or actions of their predecessors instead they must rely on cheap talk messages in order to accumulate information about the state each decision maker is therefore both a receiver of information with respect to his decision and a sender with respect to all future decisions we show that if preferences are not perfectly aligned full learning equilibria ones in which the individuals posterior beliefs eventually place full weight on the true state do not exist this is so both in the case of private communication in which each individual only hears the message of his immediate predecessor and in the case of public communication in which a decision maker hears the message of all his predecessors surprisingly in the latter case full learning may be impossible even in the limit as all members of the organization become perfectly patient we also consider the case where all individuals have access to a mediator who can work across time periods arbitrarily far apart in this case full learning equilibria exist copyright 2012 oxford university press

corporate tax systems multinational enterprises and economic integration abstract multinational firms are known to shift profits and countries are known to compete over shifty profits two major principles for corporate taxation are separate accounting sa and formula apportionment fa these two principles have very different qualities when it comes to preventing profit shifting and preserving national tax autonomy most oecd countries use sa in this paper we show that a reduction in trade barriers lowers equilibrium corporate taxes under sa but leads to higher taxes under fa from a welfare point of view the choice of tax principle is shown to depend on the degree of economic integration

strategic gains from discrimination abstract according to a classical argument an employer handicaps herself if basing hiring decisions on factors unrelated to productivity therefore discrimination is undermined by competition this paper in contrast argues that being discriminatory can be a commitment device that helps an employer and its rivals to partially segment the labor market which leads to lower wages and higher profits discrimination can thus be an endogenous response to competition indeed the relationship between discrimination and competition can be non monotone moreover the logic suggests that a ban on wage discrimination may instead lead to discrimination in hiring

why chains beget chains an ecological model of firm entry and exit and the evolution of market similarity abstract we construct and analyze a dynamic model of chain growth across multiple markets from an ecological perspective using computational and mathematical techniques our model consists of firms that possess intrinsic qualities and hedonic spatial attributes consumers purchase from firms based upon quality and hedonic distance we find that the existence of chains creates an environment favorable to additional chains in other words chains beget chains we also find that even though creating successful new firms becomes harder over time chaining successful new firms becomes easier both phenomena result from the creation of common niches across markets

an empirical investigation of the relative performance evaluation hypothesis the principal agent framework has become a widely used paradigm in accounting and economics for analyzing issues in performance evaluation management control and the design of incentive systems while recent work in experimental economics has begun to examine empirically some of the underlying assumptions and implications of agency theory see baiman and lewis 1989 and kirby forthcoming few precise hypotheses have been tested using real world or naturally occurring data one exception has been the empirical investigation of the relative performance evaluation rpe hypothesis agency theory suggests that there are benefits associated with evaluating agents on the basis of their relative performances when the agents performances are affected by a common shock term e g see diamond and verrecchia 1982 and holmstrom 1979 1982 specifically a relative performance based contract can remove the common shock term from an agent s performance which enables a better evaluation of the agent s actions

environmental policy when consumers value conformity abstract we present a model of consumer behaviour when consumers value conformity and examine the implications for environmental policy the model shares a feature set out in dasgupta et al 2016 of having a structure of preferences for conformity which induces a mass of consumers to adhere exactly to a norm level of consumption clumping however we extend our previous analysis by analysing the conditions for the existence and potential uniqueness of consumption norms in doing so we introduce threshold effects whereby individuals adhere to a norm only if sufficiently many others do so taken together these have striking implications for environmental policy in the case where the norm good generates pollution emissions clumping means many individuals will not change behaviour unless the norm changes while threshold effects plus clumping means that it may be hard to change a norm we show that the use of pigovian taxes to control behaviour may be either ineffective or welfare reducing and that the optimal pigovian tax will work only if it is above some threshold level there are parameter values for which quantity based injunctive policies raise welfare relative to no intervention while optimal pigovian taxes would lower welfare

the failure of training in britain analysis and prescription in the last decade education and training et reform has become a major issue in many of the world s industrial powers one theme which runs throughout these reform initiatives is the need to adapt et systems to the changing economic environment these changes include the increasing integration of world markets the shift in mass manufacturing towards newly developed nations and the rapid development of new technologies most notably information technologies education and training are seen to play a crucial role in restoring or maintaining international competitiveness both on the macro level by easing the transition of the workforce into new industries and at the micro level where firms producing high quality specialized goods and services require a well qualified workforce capable of rapid adjustment in the work process and continual product innovation this paper will highlight the need for policy makers and academics to take account of the two way nature of the relationship between et and the economy

strategic managerial incentives in a two period cournot duopoly abstract this paper examines the nature of optimal managerial incentives in the context of a duopoly marked by competition between the firm s managers in a dynamic production environment if the marginal cost of production falls moderately over time or remains unchanged there exists an equilibrium where one owner requires her manager to maximize profit whereas the rival owner requires her manager to maximize sales revenue the profit maximizing manager turns his firm into a stackelberg leader while the sales revenue maximizing manager turns his firm into a stackelberg follower further the profit maximizing manager may generate a larger firm profit relative to the sales revenue maximizing manager

rules of thumb for social learning this paper studies agents who consider the experiences of their neighbors in deciding which of two technologies to use we analyze two learning environments one in which the same technology is optimal for all players and another in which each technology is better for some of them in both environments players use exogenously specified rules of thumb that ignore historical data but may incorporate a tendency to use the more popular technology in some cases these naive rules can lead to fairly efficient decisions in the long run but adjustment can be slow when a superior technology is first introduced

creating self sustaining high skill ecosystems geographic clusters of high technology companies are an increasingly important source of wealth and job creation in the advanced industrial countries this article provides a framework for understanding the conditions that give rise to these self sustaining high skill ecosystems hses that is based on the cases of the highly successful biomedical and computer hardware and software firms clustered in northern and southern california the framework identifies four requirements that hses share in common with natural ecosystems a catalyst to trigger the start of their development ongoing nourishment a supportive host environment and a high degree of interdependence among the actors in the system the framework is then applied to the uk identifying those policy options that are necessary for gaining greater returns from the uk s strong research base

learning from neighbours when payoffs from different actions are unknown agents use their own past experience as well as the experience of their neighbours to guide their decision making in this paper we develop a general framework to study the relationship between the structure of these neighbourhoods and the process of social learning we show that in a connected society local learning ensures that all agents obtain the same payoffs in the long run thus if actions have different payoffs then all agents choose the same action and social conformism obtains we develop conditions on the distribution of prior beliefs the structure of neighbourhoods and the informativeness of actions under which this action is optimal in particular we identify a property of neighbourhood structures local independencewhich greatly facilitates social learning simulations of the model generate spatial and temporal patterns of adoption that are consistent with empirical work

word of mouth communication and social learning this paper studies the way that word of mouth communication aggregates the information of individual agents we find that the structure of the communication process determines whether all agents end up making identical choices with less communication making this conformity more likely despite the players naive decision rules and the stochastic decision environment word of mouth communication may lead all players to adopt the action that is on average superior these socially efficient outcomes tend to occur when each agent samples only a few others i introduction economic agents must often make decisions without knowing the costs and benefits of the possible choices given the frequency with which such situations arise it is understandable that agents often choose not to perform studies or experiments but instead rely on whatever information they have obtained via casual word of mouth communication reliance on this sort of easily obtained information appears to be common in circumstances ranging from consumers choosing restaurants or auto mechanics to business managers evaluating alternative organizational structures this paper studies two related environments in arguing that individuals reliance on word of mouth communication has interesting implications for their aggregate behavior first motivated by the diffusion of new technologies we consider a choice between two competing products with unequal qualities or payoffs and show that the structure of communication is important in determining whether the population as a whole is likely to learn to use the superior product second we consider a choice between two products or practices that are equally good and ask whether consumers are likely to herd onto a single choice or whether diversity will obtain even in the long run we explore the implications of word of mouth communication in a simple nonstrategic environment there is a large population of identical players each of whom repeatedly chooses between two possible actions each player s payoff is determined by his own

oligopoly profit sharing contracts and the firm s systematic risk abstract this article examines the properties of wage and profit sharing contracts in a model of oligopoly with capital market equilibrium while profit sharing contracts dominate market wage contracts profit sharing also reduces the firm s cost of equity capital under fairly broad conditions of oligopoly by enforcing lower costs in exchange for a pre determined share of cash flows to workers this form of operational leverage both reinforces the classical effect of market power on systematic risk and the impact of profit sharing on the corporate finance of the firm as previously suggested by ichino 1994 european economic review 38 1411 1422

stock options and the strategic use of managerial incentives in cournot based oligopoly models there is an incentive for firms to pursue overly aggressive behavior resulting in prices and profits below those of the cournot equilibrium compensating managers in proportion to a combination of profits and sales provides one mechanism through which aggressive behavior emerges however when the profit component of managerial compensation comes in the form of stock options the aggressive behavior is restrained or even eliminated in equilibrium this result relies only on the nonlinearity of the stock option generalizations to other forms of compensation are discussed copyright 1993 by american economic association

franchising agency problems and the cost of capital explanations for franchising are examined in the context of the us hotel industry the study is distinct from previous research on franchising because it explicitly recognizes the existence of three organizational forms whereas previous research has focused exclusively on two of these three forms the two organizational forms examined in previous work are franchising and company ownership the additional organizational form is company management investor ownership which involves management by the franchisor and ownership by outside investor groups a plausible explanation for the existence of the last organizational form is based on the availability of low cost capital from non chain sources

do fast food chains price discriminate on the race and income characteristics of an area this article reports tests for differences in prices charged by fast food restaurants that serve markets with customers of widely divergent incomes and ethnic backgrounds the data contain detailed prices on items sold at over 400 burger king wendy s kfc and roy rogers restaurants in new jersey and pennsylvania locations i find significant differences in price based on the race and income characteristics of a zip code region when income and cost differences are taken into account meal prices rise approximately 5 for a 50 rise in the black population

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

strategic upfront marketing channel integration as an entry barrier abstract this paper investigates an organizational design problem concerning whether duopolistic firms competing in a product market should vertically integrate or separate their marketing channels in a dynamic noncooperative game setting previous operational research models have shown that the separation of the marketing channel with the adoption of a two part tariff contract is the dominant strategy compared with integration for each firm if the two firms face retail price competition and thereby constitutes the subgame perfect nash equilibrium spne contrary to this previous insight this paper demonstrates that if exogenous parameters that characterize fixed costs product substitutability and a demand function fall into a specific region marketing channel integration dominates the separation strategy when one of the two firms is the incumbent firm while the other is a potential entrant in other words the well known result in the price setting game can be reversed when we take entry threats into consideration specifically we show that upfront vertical integration of the marketing channel enables the incumbent to deter the entry of the potential competitor and to monopolize the market in the spne this result has operational implications for a firm confronting the threat of potential rivals entering the market in that the firm can use this apparently inferior strategy as a commitment device which creates a virtual entry barrier

the strategic value of partial vertical integration we investigate the strategic incentives for partial vertical integration namely partial ownership agreements between manufacturers and retailers when retailers privately know their costs and engage in price competition with differentiated goods the partial misalignment between the profit objectives within a partially integrated manufacturer retailer hierarchy implies a higher retail price than under full integration this information vertical effect translates into a competition horizontal effect the partially integrated hierarchy s commitment to a higher price induces the competitor to increase its price which strategically relaxes competition our analysis provides implications for vertical merger policy and theoretical support for the recently documented empirical evidence on partial vertical acquisitions

strategic communication networks in this paper we consider situations in which individuals want to choose an action close to others actions as well as close to a payoff relevant state of nature with the ideal proximity to the common state varying across the agents before this coordination game with heterogeneous preferences is played a cheap talk communication stage is offered to players who decide to whom they reveal the private information they hold about the state the strategic information transmission taking place in the communication stage is characterized by a strategic communication network we provide a direct link between players preferences and the strategic communication network emerging at equilibrium depending on the strength of the coordination motive and the prior information structure equilibrium strategic communication networks are characterized in a very tractable way and compared in term of efficiency in general a maximal strategic communication network may not exist and communication networks cannot be ordered in the sense of pareto however expected social welfare always increases when the communication network expands strategic information transmission can be improved when group or public communication is allowed and or when information is certifiable

boundedly rational opinion dynamics in social networks does indegree matter abstract this paper investigates opinion dynamics and social influence in directed communication networks we study the theoretical properties of a boundedly rational model of opinion formation in which individuals aggregate the information they receive from their neighbors by using weights that are a function of neighbors indegree we then present the results of a laboratory experiment explicitly designed to test the causal effect of indegree on social influence we find that the social influence of an agent is positively affected by the number of individuals she listens to when forming their opinions agents take into account the structure of their communication network although only to a limited extent

franchising versus corporate ownership abstract this paper uses data on the prices charged at fast food restaurants in the metropolitan pittsburgh and detroit areas to assess the effect of franchising on price dispersion within chains in fairly narrowly defined geographical areas a review of reasons why firms may face more price dispersion under franchising guides the empirical analyses results indicate that 1 franchisors do not aim for fully uniform prices even on the corporate side of their chains 2 the degree of price dispersion is highest for firms with both franchised and company owned units as predicted by models implying a systematic price differential between units operated under these different contracting mechanisms and 3 price dispersion for fully franchised chains is greater than for fully corporate chains these last two results combined with evidence from court cases that franchisors sometimes try to control franchisee prices directly suggest that franchisors indeed lose some amount of control over prices charged to customers when they use franchising as opposed to corporate ownership finally i find a positive effect of the royalty rate on price dispersion this suggests that double marginalization is behind at least some of the higher prices found in franchised units in the existing literature

delegating pricing decisions an outstanding problem in marketing is why some firms in a competitive market delegate pricing decisions to agents and other firms do not this paper analyzes the impact of competition on the delegation decision and in turn the impact of delegation on prices and incentives the theory builds on the simplest framework of competition in two dimensions prices and sales agents effort specifically we are interested in answering the following questions 1 does competition affect the price delegation decision and if yes why 2 how do prices vary under price delegation and no price delegation scenarios 3 do the incentives to the sales representatives vary under the delegation and no delegation scenarios to address these issues we build a game theoretic model that consists of two firms selling through their sales representatives these representatives are company employees sales are a function of prices and selling efforts the risk neutral firms decide whether or not to delegate the pricing decision to risk averse sales representatives the wages to the sales representatives consist of salary plus a commission on gross margins the commission on gross margins can be adjusted either through communicated marginal cost of production which we call virtual marginal cost or directly the firm and the sales representative are assumed to have the same information about the market that is there is no information asymmetry with competition in two dimensions the strategic nature of decision variableprice depends on the relative intensity of competition with unobservable contracts and risk averse sales representatives firms delegate the pricing decision when price competition is intense part of the uncertainty in demand is absorbed by the firm by keeping virtual marginal cost greater than the marginal cost of production the competing firm infers this through the risk aversion of the sales representatives under price delegation the sales representatives wages are higher and they set a price that is higher than what the firms would have set themselves this leads to softening of price competition that is to the advantage of both firms when the effort competition is dominant however the firms prefer to make the pricing decision themselves because this reduces the intensity of effort competition among agents a single instrument commission structure in which the firms adjust the virtual marginal cost is compared to a two instrument commission structure in which the firms can adjust the commission rate as well the virtual marginal cost under no price delegation the two incentive schemes are the same however under price delegation the risk premium with the two instrument scheme is lower however the prices and efforts are higher with the single instrument scheme when price competition is intense the increase in risk premium with the single instrument scheme is more than compensated for by the increase in profits this is the benefit of softening price competition through higher prices

continuity and evolution in an old industrial region the labour market dynamics of the rise and fall of northern rock dawley s marshall n pike a pollard j and tomaney j continuity and evolution in an old industrial region the labour market dynamics of the rise and fall of northern rock regional studies the northern rock mortgage bank was a high profile casualty of the credit crunch in 2007 an evolutionary geographical political economy approach demonstrates that northern rock s growth and decline was shaped by its location in an old industrial region and echoes the historical position of the peripheral region in the spatial division of labour a longitudinal investigation focuses on the labour market dynamics of northern rock s rapid growth and decline on the north east of england the northern rock case highlights the enduring occupational structure of the region s labour market and shows how older industrial regions suffer from a process of occupational disadvantage that restricts their ability to adapt to economic change

strategic union delegation and strike activity we develop a model of wage determination with private information in which the union has the option to delegate the wage bargaining to either surplus maximizing delegates or to wage maximizing delegates such as senior union members we show that the wage outcome in case of surplus maximizing delegates is not necessarily smaller than the wage outcome in case of wage maximizing delegates even when the wage bargaining with private information is close to one with complete information however if it is commonly known that the union is stronger than the firm and the demand is sufficiently elastic then delegating to wage maximizing delegates definitely increases the wage at equilibrium the maximum delay in reaching an agreement is greater whenever the union chooses wage maximizing delegates instead of surplus maximizing delegates and remains finite even when the period length shrinks to zero

competitive behavior and nonfinancial objectives entry exit and pricing decisions in closely held firms because of the predominance of the assumption of profit maximization as the goal of the firm and its decision makers especially in the competitive strategy literature research has yet to investigate how differences in objectives might influence competitive actions such as entry exit and pricing decisions this represents an important gap in the literature given the fundamental role of objectives in decision making and widespread evidence that many firms especially those that are closely held are motivated by nonfinancial objectives in addition to an interest in financial returns to further our understanding of firms competitive strategy decisions we discuss how the presence of nonfinancial objectives in closely held firms leads to a weakening of the relationship between economic indications of profitability and competitive behaviors using a unique data set of nearly 4 000 closely held and non closely held establishments engaged in local competition in the texas hotel industry we find that the e

stackelberg equilibria in managerial delegation games abstract managerial compensation packages do not only influence managers behavior but also have an impact on competing firms in a managerial delegation game investigating the latter aspect it is shown that the inherent prisoner s dilemma situation can be resolved without changing the normally studied setup or timing in the first stage owners choose an incentive function for their managers in the second stage they choose the weights assigned to that function besides profits and in the third stage managers play a cournot game solving this continuous optimization problem with the implicit function theorem shows that choosing an incentive from the set of multiplicative incentives i e any generalized affine transformation of the product of both firms quantities which includes e g relative profit ensures that the stackelberg outcome is among the set of equilibrium outcomes furthermore it is the unique outcome if the rival owner opts for one of the well known incentives like sales revenue or market share the general approach used allows demonstrating that with no other linear incentive a stackelberg outcome results and that incentives like profit to cost ratio should be avoided selecting a multiplicative incentive is a dominant strategy of the game

overconfidence compensation contracts and capital budgeting a risk averse manager s overconfidence makes him less conservative as a result it is cheaper for firms to motivate him to pursue valuable risky projects when compensation endogenously adjusts to reflect outside opportunities moderate levels of overconfidence lead firms to offer the manager flatter compensation contracts that make him better off overconfident managers are also more attractive to firms than their rational counterparts because overconfidence commits them to exert effort to learn about projects still too much overconfidence is detrimental to the manager since it leads him to accept highly convex compensation contracts that expose him to excessive risk

retail contracting theory and practice we summarize a number of regularities that arise in the empirical literature on contractual relationships between manufacturers and their exclusive resellers we do this using studies of traditional and business format franchise relationships as well as studies of salesforce integration decisions some of the patterns that we uncover are consistent with a standard incentive cum insurance theory of organization while others are not we brie y review some theoretical extensions that seem promising in terms of reconciling seeming con icts between theory and practice i introduction manufacturers of retail products must decide whether to sell their products to consumers themselves vertical integration or to sell via independent retailers vertical separation when manufacturers do not perform the sales function internally but want exclusive retailers they usually choose some form of franchising 1 many theories attempt to explain the choice of retail organizational form moreover a considerable body of empirical evidence concerning this choice is accumulating we attempt to evaluate this econometric evidence and relate it to the theories to accomplish this task we assess studies of franchising arrangements as well as studies of sales force organization in industrial settings the paper is organized as follows in the next section we highlight a number of regularities that arise in the empirical literature on retail contracting in particular we nd that i risk is positively related to the use of high powered incentives vertical separation ii the importance of the agent s eiort in production is positively related to the use of high powered incentives

endogenous market structures and contract theory delegation principal agent contracts screening franchising and tying abstract i study the role of unilateral strategic contracts for firms active in markets with price competition and endogenous entry traditional results change substantially when the market structure is endogenous rather than exogenous they concern 1 contracts of managerial delegation to non profit maximizers 2 incentive principal agent contracts in the presence of moral hazard on cost reducing activities 3 screening contracts in case of asymmetric information on the productivity of the managers 4 vertical contracts of franchising in case of hold up problems and 5 tying contracts by monopolists competing also in secondary markets firms use always these contracts to strengthen price competition and manage to obtain positive profits in spite of free entry

the strategic choice of managerial incentives do firms with separate owners and managers maximize profits we address this question for an oligopoly where managers compete in quantities or prices as in the cournot or bertrand models and owners choose their managers incentives we find that there is a strategic aspect in the problem of selecting incentives and that profit maximizing behavior does not result in particular in the oligopoly we study the behavior of firms competing in quantity price more closely resembles perfectly competitive collusive behavior than cournot bertrand behavior

opinion dynamics and wisdom under conformity abstract we study a dynamic model of opinion formation in social networks in our model boundedly rational agents update opinions by averaging over their neighbors expressed opinions but may misrepresent their own opinion by conforming or counter conforming with their neighbors we show that an agent s social influence on the long run group opinion is increasing in network centrality and decreasing in conformity concerning efficiency of information aggregation or wisdom of the society it turns out that misrepresentation of opinions need not undermine wisdom but may even enhance it given the network we provide the optimal distribution of conformity levels in the society and show which agents should be more conforming in order to increase wisdom

equilibrium contingent compensation in contests with delegation we consider two player contests in which each player hires a delegate who expends his effort to win a prize on the player s behalf endogenizing delegation contracts we focus on the equilibrium contracts between the players and their delegates we first show that each player s equilibrium contract is a no win no pay contract then we examine the delegates equilibrium compensation spreads effort levels probabilities of winning expected payoffs and the players equilibrium expected payoffs we show that economic rents for the delegates may exist

the commitment value of contracts under dynamic renegotiation we examine why different renegotiation processes can lead to opposite results regarding the commitment value of third party contracts in the presence of asymmetric information our main result is that a contract loses all strategic value if renegotiation is allowed during the production stage rather than only before production begins this result casts serious doubt on the relevance of previous findings which emphasize how contracts can have commitment value even in the presence of renegotiation our analysis can also be used to understand the differences between many of the results in the renegotiation literature

bayesian learning in social networks we study the perfect bayesian equilibrium of a sequential learning model over a general social network each individual receives a signal about the underlying state of the world observes the past actions of a stochastically generated neighbourhood of individuals and chooses one of two possible actions the stochastic process generating the neighbourhoods defines the network topology we characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning convergence in probability to the right action as the social network becomes large we show that when private beliefs are unbounded meaning that the implied likelihood ratios are unbounded there will be asymptotic learning as long as there is some minimal amount of expansion in observations we also characterize conditions under which there will be asymptotic learning when private beliefs are bounded

ownership form managerial incentives and the intensity of rivalry this study investigates how differences in ownership form between franchised and company owned units affect managerial incentives and competitive pricing in different oligopolistic contexts we arg

influential listeners an experiment on persuasion bias in social networks abstract this paper presents an experimental investigation of persuasion bias a form of bounded rationality whereby agents communicating through a social network are unable to account for repetitions in the information they receive we find that after repeated communication within a social network social influence depends not only on being listened to by many others but also on listening to many others we show that persuasion bias can be viewed as an extreme case of a generalized boundedly rational updating rule in which agents receive more or less attention depending on how many other agents they listen to the results indicate that behavior in the experiment is consistent with an updating rule according to which agents social influence is proportional to their indegree

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

monitoring of workers and product market competition the role of works councils i introduction technological advancement allows firms to closely monitor their workers actions more than ever before for instance firms can acquire worker monitoring software to monitor activities on computers or cell phones such software enables firms to assess whether workers play games on their computers or surf the internet instead of working productively and even to track workers exact locations similarly firms scan emails or use video surveillance to monitor their workers behavior unsurprisingly the growing use of monitoring technologies has led to a debate on how closely firms should be allowed to monitor their workers actions and on whether government intervention is needed to protect workers privacy at first sight it appears that this debate centers around two different kinds of arguments economic arguments e g higher worker productivity in favor of extensive worker monitoring against ethical issues according to which workers privacy must be protected schmitz 2005 however demonstrates that this is not necessarily true in a contract theoretical model he finds that firms employ monitoring technologies not to increase efficiency but rather to reduce rents that must be paid to the workers in the case of imperfect monitoring he concludes that monitoring technologies may lead to inefficiencies and thus calls for laws protecting workers privacy whereas worker protection in the united states is rather weak in this respect it is typically stronger within the european union in germany for instance works councils are important institutions that provide workers with power on the firm level particularly with respect to working conditions within the system of co determination works councils have legally guaranteed influence on management decisions concerning working conditions within a firm for instance the law prescribes that worker representatives must consent to any introduction of technologies that monitor the workers effort and output 1 given these rights of works councils it may be puzzling that firm owners do not more strongly oppose this limitation of their control rights in this paper we offer an explanation to resolve this puzzle by analyzing the interaction between internal organization and market conduct we argue that works councils and their right to block monitoring of workers can act as a commitment device of firms to mitigate product market competition as relaxed competition increases profits and because workers receive an information rent from their co determination rights workers and firms have aligned interests in establishing works councils at the expense of consumers we derive these results in a simple model of two competing firms where each firm faces a moral hazard problem with its workforce that could be solved by installing a monitoring technology without monitoring inducing high effort by workers is more costly as a result effort levels will be lower and so will be output this may serve a similar purpose as quantity reduction in a cartel and it may thereby increase firm profits 2 however similar to quantity reduction in a cartel also with respect to monitoring there is a danger that a single firm deviates and installs the monitoring technology consequently the deviator can produce higher output more cheaply and free rides on the lower output of its competitor thus firms would like to ex ante commit not to use a monitoring technology usually no such commitment is possible however works councils may serve this unintended purpose because they must give their consent to monitoring technologies this provides them with a property right on the information rent arising in case of nonmonitoring to receive their consent the firm must offer the workers compensation for the foregone rent this additional cost of monitoring makes deviation from a nonmonitoring situation less attractive implying that works councils may serve as the desired commitment device

profit sharing with workers facilitates collusion among firms we show how profit sharing by firms with workers facilitates collusion among firms in a dynamic oligopoly environment with uncertain demand we first show that firm profits can always be increased by tying wages to market conditions the optimal agreement takes the form of an option and features partial sharing because increased sharing raises the expected price wage differential but reduces price wage variability we then show that given any cartel there exist market conditions such that simply giving some expected profit to workers raises expected firm profits via the transfer s impact on the incentive to cheat on the cartel

herding in delegated portfolio management when is comparative performance information desirable abstract we address the issue of investors asset allocation decisions when portfolio management is delegated to an agent contrary to predictions from traditional financial theory it is shown that investors may not induce their manager to allocate funds to the asset with the highest return instead they may herd in their asset allocation decision and induce trade in a particular asset because another manager is trading in it and despite the presence of a more profitable alternative doing so allows investors to write an efficiency improving relative performance contract on the other hand herding leads investors to design wage contracts strategically resulting in more aggressive and thus less profitable trade in equilibrium we show that herding occurs when the cost of information is high information precision is low and when managers are sufficiently risk averse moreover when investors can decide whether or not to disclose information about their manager s performance they will not do so

how to compete cournot versus bertrand in a vertical structure with an integrated input supplier we study whether a quantity or a price contract is chosen at equilibrium by one integrated firm and its retail competitor in a differentiated duopoly using a similar vertical structure arya et al 2008 show that bertrand competition is more profitable than cournot competition which contrasts with conventional wisdom in this article we first demonstrate that such a result is robust to the endogenous determination of the type of contract second by introducing managerial incentives in the model we find that delegation to managers may lead each firm to choose a quantity contract and as long as products are sufficiently differentiated entails conflicting choices causing nonexistence of equilibrium in pure strategies significantly high product substitutability reconciles firms objectives under delegation leading unique or multiple equilibria with symmetric types of contracts to arise

on intrabrand and interbrand competition the strategic role of fees and royalties abstract we examine oligopolistic markets with both intrabrand and interbrand competition we characterize equilibrium contracts involving a royalty or wholesale price and a fee when each upstream firm contracts with multiple downstream firms royalties control competition between own downstream firms at the expense of making them passive against rivals when the number of downstream firms is endogenous each upstream firm chooses to have only one downstream firm this result is in sharp contrast to previous literature where competitors benefit by having a larger number of independent downstream firms under only fixed fee payments we discuss why allowing upstream firms to charge per unit payments in addition to fixed fees dramatically alters their strategic incentives

strategic interactions in traditional franchise systems are franchisors always better off abstract the effects of price competition and advertising spillover on franchisees decision to cooperate and on franchisor s contractual preferences are investigated we show that the franchisees decision to cooperate or not depends on the type of franchise contracts under exclusive territory contracts any mode of play between franchisees give the same profits to the franchisees and franchisor contracts that allow price competition and well targeted local advertising offer a good ground for horizontal cooperation which may or may not benefit the franchisor depending on whether the prices are strategic substitutes or strategic complements contracts in which price competition is allowed and the burden of advertising decisions is totally transferred to the franchisor lead to cooperation between franchisees at the expense of the franchisor franchisees do not cooperate to the benefit of the franchisor if local advertising is predatory and price competition is not allowed in the contract but franchisees are given the responsibility to undertake local advertising also the franchisor endorses cooperation between franchisees when local advertising has a public good nature but such a cooperation may never occur when the impact of local advertising on demand is significant we finally show that while some contracts always dominate others the choice of a franchise contract may also depend on local competition and or the franchise goodwill

the local low skills equilibrium moving from concept to policy utility it is more than three decades since the publication of finegold and soskice s 1988 influential article the failure of training in britain analysis and prescription this widely cited publicati

returning to work regional determinants of re employment after major redundancies abstractusing matched employer employee data on roughly 429 000 workers made redundant from large plant closures or major downsizing in sweden between 1990 and 2005 this paper analyses the role of the regional industry mix specialization related and unrelated variety in the likelihood of returning to work the results show that a high presence of same or related industries speeds up the re employment process while high concentrations of unrelated activities do not the role of related activities is particularly evident in the short run and in regions with high unemployment consequently the prospect of successful diversification is enhanced in regions with related industries

are labour markets necessarily local spatiality segmentation and scale this paper draws on recent debates about scale to approach the geography of labour markets from a dynamic perspective sensitive to the spatiality and scale of labour market restructuring its explo

the dynamics of continuous cultural traits in social networks abstract we consider an overlapping generations model where continuous cultural traits are transmitted from an adult generation to the children a weighted social network describes how children are influenced not only by their parents but also by other role models within the society parents can invest into the purposeful socialization of their children by strategically displaying a cultural trait which need not coincide with their true cultural trait we observe a cultural substitution effect when parents choose their behavior optimally based on nash equilibrium behavior we then study the dynamics of cultural traits throughout generations these converge if parent s influence on their children is large enough compared to the social environment s influence under convergent dynamics closed subgroups fully assimilate while heterogeneous traits prevail in the other groups speed of convergence is low when parents incentives to socialize their children to the own trait are high

should multiproduct firms provide divisional or corporate incentives abstract this paper points out some of the implications of the internal organization of a multiproduct firm for its market conduct in particular we study the strategic use of organizational forms based on corporate incentives versus forms based on divisional incentives the equilibrium internal organization is determined in a model with full information it is shown that firms provide corporate incentives when goods are substitutes and divisional incentives when goods are complements and the result holds both in the case of quantity setting and price setting

the elementary economics of social dilemmas a social dilemma is in essence a prisoners dilemma in a continuous strategy space i discuss a number of social dilemmas that have caught my attention offer an elementary diagrammatic synthesis of them and discuss some of the economic insights that the diagrams capture including incentives for pre commitment finally i model pre commitment via delegation and link results to the literature on the evolution of preferences l economie elementaire des dilemmes sociaux un dilemme social est essentiellement un dilemme du prisonnier dans un espace continu de strategie l auteur discute d un certain nombre de dilemmes sociaux qui ont retenu son attention il en propose une synthese graphique elementaire et discute certaines des suggestions economiques qui decoulent de ces diagrammes comme par exemple les incitations a se pre engager finalement l auteur construit un modele de pre engagement par delegation et relie ses resultats a la litterature sur l evolution des references

an empirical analysis of territorial encroachment within franchised and company owned branded chains franchisees within large branded chains loudly complain of a form of channel conflict known as encroachment or impact encroachment occurs when franchisors add new units of their brand proximately to their franchisees existing units franchisees claim that their revenues have substantially decreased as a result of encroaching same brand entry the topic of encroachment has not only dominated franchisee association agendas and trade journal headlines but has also become a hot topic for politicians and policymakers yet until now evidence of encroachment has been strictly anecdotal this paper provides the first systematic evidence of encroachment using revenue data from the texas lodging industry in the 1990s i find that when franchisors approve new same brand units in the vicinity of incumbent units these new units cannibalize the incumbents revenues in contrast to the result for franchisors the addition of a new unit by company owned brands in the vicinity of same brand units is associated with an increase in the incumbents revenues this contrast suggests that encroaching behavior is caused by incentives that result from the governance form of franchising and is not simply an outcome that accompanies all expansion this finding informs theory on governance forms and exclusive territories implications for practitioners and policy are also discussed