Liquidity constraints and the formation of unbalanced contests

We analyze the effects of future liquidity constraints on contestants’ investment in a dynamic contest model. Contestants invest in two consecutive contests to win a prize in each period. The loser of the first-period contest can be liquidity-constrained in the second period due to too little remaining wealth. The winner of the first contest can reinvest the prize in the second contest. We show that future liquidity constraints mainly affect the imbalance of the contest in the future but not today. Surprisingly, larger contest prizes decrease contestants’ future investments and amplify the imbalance of future contests. However, the contest organizer can reduce this imbalance by increasing the share of the prize money in the second contest.     

The optimal allocation of prizes in contests with costly entry

Contestants often need to incur an opportunity cost to participate in the competition. In this paper, we accommodate costly entry and study the effort-maximizing prize allocation rule in a contest environment of all-pay auction with incomplete information as in Moldovanu and Sela (2001). As equilibrium entry can be stochastic, our analysis allows prize allocation rule to be contingent on the number of entrants. With free entry, Moldovanu and Sela establish the optimality of winner-take-all when effort cost function is linear or concave. Costly entry introduces a new trade-off between eliciting effort from entrants and encouraging entry of contestants, which might demand a more lenient optimal prize allocation rule. Surprisingly, we find that the optimality of winner-take-all is robust to costly entry when cost function is linear or concave. On the other hand, we provide examples to show that the new trade-off due to costly entry does make a difference to the optimal design when effort cost function is convex.     

Optimal prize-rationing strategy in all-pay contests with incomplete information

A contest organizer (e.g., a government regulatory agency) is endowed with the capacity to provide unlimited homogeneous prizes (e.g., medals) that he can use to incentivize contestants to exert productive effort in an all-pay auction with incomplete information. Each agent, at most, wins one prize. We study the optimal number of prizes the organizer should grant in order to induce maximal expected total effort or expected highest effort from agents. Both are single peaked under mild regularity conditions. When players’ abilities follow a family of beta distributions, expected highest effort maximization requires a smaller set of prizes to be awarded; for both goals, the optimal number of prizes weakly increases when the pool of contestants expands or contestant quality improves.     

Optimal dynamic volume-based price regulation

We consider a model of optimal price regulation in markets where demand is sluggish and asymmetric providers compete on quality. Using a spatial model, which is suitable to investigate the health care and education sector, we analyse within a dynamic set-up the scope for price premiums or penalties on volume. Under the assumption of symmetric cost information, we show that the socially optimal time path of quality provision off the steady state can be replicated by a simple dynamic pricing rule where the dynamic part of the rule is ex-ante non-discriminatory in the sense that the price premium or penalty on volume is common across providers, despite their differing production costs. Whether the price schedule involves a penalty or a premium on volume relates to two concerns regarding production costs and consumer benefits, which go in opposite directions. Price adjustments over time occur only through the price penalty or premium, not time directly, which highlights the simplicity and thus applicability of this regulation scheme.     

Scheduling with processing set restrictions: PTAS results for several variants

We consider multiprocessor scheduling to minimize makespan. Each job has a given processing time and in addition, a subset of machines associated with it, also called its processing set. Each job has to be assigned to one machine in its set, thus contributing to the load of this machine. We study two variants of this problem on identical machines, the case of nested processing sets, and the case of tree-hierarchical processing sets. In addition, we consider uniformly related machines with a special case of inclusive processing sets, which has a clear motivation. We design polynomial time approximation schemes for these three variants. The first case resolves one of the open problems stated in the survey by Leung and Li (2008).     

Organization governance form in franchising: efficient contracting or organizational momentum?

We examine firms' choice of organizational governance form. Using longitudinal data on a sample of business format franchisors operating in North America, we show that the cross‐sectional evidence commonly used to demonstrate support for efficient contracting explanations for organizational governance form is not robust to the year of investigation, firm effects, or selection effects. We theorize that this outcome may result from dynamic processes through which a firm's organizational governance form evolves. We develop and test two hypotheses for the effects of organizational momentum on organizational governance form, and find that organizational momentum is a robust predictor. Our results suggest that researchers consider the dynamics of momentum in explaining the form of firm governance. Copyright © 2008 John Wiley & Sons, Ltd.     

资源型产业集群转型过程中的风险研究

文章在阐述资源型产业集群转型背景的基础上,结合文献资料对资源型产业 集群转型过程中面临的风险进行了分类,并详细分析了各种风险的影响因素。构 建了资源型产业集群转型过程中风险评价指标体系和评价模型,并选取陕西省榆 林市能源化工产业集群进行实证研究,对文章提出的风险评价指标体系和模型进 行了校验。最后,提出了防范资源型产业集群转型过程中风险的建议。     

Cross-shareholdings and competition in a rent-seeking contest

We consider a Tullock rent-seeking contest with two firms and two investors. Each investor owns a majority share in one firm and a silent minority cross-shareholding in the other firm. We measure competition by either firms’ aggregate efforts or rent dissipation. We show that aggregate efforts are smaller in our contest than in the benchmark case without cross-shareholdings. Next, we provide the necessary and sufficient conditions such that equilibrium rent dissipation in our contest is larger than in the benchmark case. Rent dissipation is larger under cross-shareholdings if and only if one firm is much more efficient than the other firm, and the cross-shareholding in the more efficient firm is sufficiently smaller than the cross-shareholding in the less efficient firm.     

Relative Performance Prizes and Dynamic Incentives in Best-of-N Contests

This paper introduces a relative performance prize scheme to best-of-N contests. I develop a theoretical model of the best-of-N contest with intermediate prizes that are distributed based on the players’ relative performance. The model predicts that a relative performance prize scheme both increases the players’ level of effort in certain conditions and decreases the performance differential between the winner and the loser in the contest. Empirically, I investigate these theoretical predictions by employing a natural experiment in the group-stage matches of the FIVB (Fédération Internationale de Volleyball) World League and the FIVB World Grand Prix. The results indicate that the introduction of a relative performance prize scheme induces contest participants to intensify their efforts in certain conditions. However, this prize scheme may ultimately result in teams playing fewer sets in matches.     

Competition in Two-Sided Markets with Common Network Externalities

We study competition in two-sided markets with a common network externality rather those than with the standard inter-group effects. This type of externality occurs when both groups benefit, possibly with different intensities, from an increase in the size of one group and from a decrease in the size of the other. We explain why common externality is relevant for the health and education sectors. We focus on symmetric equilibrium and show that when the externality itself satisfies a homogeneity condition then platforms’ profits and price structures have some specific properties. Our results reveal how the rents coming from network externalities are shifted by platforms from one side to the other, according to the homogeneity degree. Prices are affected but in such a way that platforms only transfer rents from consumers to providers. In the specific but realistic case where the common network externality is homogeneous of degree zero, platforms’ profits do not depend on the intensity of the (common) network externality. This result differs from those of the two-sided models, which deal with standard positive inter-group network externality.     

The Cross Section of Expected REIT Returns

In this study, we examine the cross-sectional determinants of expected REIT returns. We examine both the pre- and post-1990 periods, since the structure of the REIT market changed substantially around 1990. The determinants of expected returns differ between the two subperiods. In the pre-1990 subperiod, momentum, size, turnover and analyst coverage predict REIT returns. In the post-1990 period, momentum is the dominant predictor of REIT returns. Given the strength of the momentum effect in the post-1990 period, we examine it in great detail. For the whole period, and for the post-1990 period where the momentum profit is strongest, our evidence is generally consistent with the studies on common stocks other than REITs. The only striking exception is that we find that momentum is stronger for the larger REITs rather than for the smaller REITs. In our multiple regressions that include the characteristics as well as interactions between past returns and firm characteristics, the turnover–momentum interaction effect provides the most significant results. More specifically, momentum effects are stronger for more liquid REITs.     

Forming cognitions by investing in a form: Frequent Flyer Programs in US air travel post-deregulation (1981–1991)

This paper addresses the link between action and cognition in markets. Increasing reliance on markets to co-ordinate economic activity across diverse contexts underscores the need to better understand how such coordination is achieved and how it can be changed. Our starting point is sense-making in formal organizations and markets. We argue that, whereas focusing on intersubjective agreements supported by frequent communication provides useful insights on coordination in formal organizations, coordination in markets cannot rely on these mechanisms alone. We borrow Thévenot's (1984) notions of form and investments in form to show how cognition and action are interrelated, and coordination achieved, in market settings. A form is characterized by its capacity to generate temporal and spatial equivalencies, allowing us to move from the particular (e.g., one exchange episode) to the generic (e.g., recurrent exchanges with particular types of customers). The development of a form helps construct common contexts of action which become the basis for coordinated actions.Our empirical case describes how the introduction of Frequent Flyer Programs created a new market form following the US Airline Deregulation Act (1978). Under the previous regulatory regime, the US Civil Aeronautics Board controlled routes and prices and airlines were limited to competing on frequency and quality of service. We show how successive rounds of investments by a variety of market actors helped articulate and consolidate the new market form over a 10-year period. Whereas action preceded cognition in the early stages, the gradual consolidation of the new form provided opportunities for market participants to gain reflexive distance and conjure up further ways to engage with the form.     

Product selection for newsboy-type products with normal demands and unequal costs

In this paper, we consider two newsboy-type products with unequal prices and costs. Both demands are independent and follow normal distributions with unknown parameters μ and σ. We study the product selection problem which deals with comparing two products and selecting the one that has a significantly higher profitability, in which the profitability is defined to the probability of achieving a target profit under the optimal ordering policy. The statistical hypothesis testing methodology is performed to tackle this selection problem. Critical value of the test is calculated to determine the selection decision. Sample size required for a designated power and confidence level is also investigated. An application example on comparing English-teaching magazines is presented to illustrate the practicality of our approach.     

Integrating climate change,food prices and population health

The inter-related nature of food, health and climate change requires a better understanding of the linkages and a greater alignment of policy across these issues to be able to adequately meet the pressing social and health challenges arising from climate change. Food price is one way through which climate change may affect health. The aim of this study of the global and Australian food systems is to provide a whole-of-system analysis of food price vulnerabilities, highlighting the key pressure points across the food system through which climate change could potentially have the greatest impact on consumer food prices and the implications for population health. We outline areas where there are particular vulnerabilities for food systems and food prices arising from climate change, particularly global commodity prices; agricultural productivity; short term supply shocks; and less direct factors such as input costs and government policies. We use Australia as a high-income country case study to consider these issues in more detail. The complex and dynamic nature of pricing mechanisms makes it difficult to predict precisely how prices will be impacted. Should prices rise disproportionately among healthy foodstuffs compared to less healthy foods there may be adverse health outcomes if less expensive and less healthy foods are substituted. Higher prices will also have equity implications with lower socio-economic groups most impacted given these households currently spend proportionately more of their weekly income on food. The ultimate objective of this research is to identify the pathways through the food system via which climate change may affect food prices and ultimately population health, thereby providing evidence for food policy which takes into account environmental and health considerations.     

Disaggregation and consolidation of imperfect quality shipments in an extended EPQ model

We consider a standard economic production quantity (EPQ) model. Due to manufacturing variability, a fraction P of the produced inventory will have imperfect quality, where P is a random variable with a known distribution. We consider a 100% inspection policy and further assume that the inspection rate is larger than that of production. Thus, all imperfect quality items will be detected by the end of the production cycle. For such an augmented EPQ model, we first derive the new optimal production quantity assuming that the imperfect quality items are salvaged once at the end of every production cycle. Then, we extend this base model to allow for disaggregating the shipments of imperfect quality items during a single production run. Finally, we consider aggregating (or consolidating) the shipments of imperfect items over multiple production runs. Under both scenarios we derive closed-form expressions for both the economic production quantity and the batching policy, and show that our desegregation/consolidation schemes can lead to significant cost savings over the base model.     

U.S. House Prices over the Last 30 Years: Bubbles,Regime Shifts and Market (In)Efficiency

This paper studies U.S. house prices across 45 metropolitan areas from 1980 to 2012. It applies a version of the Gordon dividend discount model for long‐run “fundamentals” and uses Mean Group and Pooled Mean Group estimation to estimate long‐run and short‐run determinants of house prices. We find great similarity across cities in that the long‐run house prices are largely explained by the same fundamentals; the long‐run rent to price ratio is approximately 5% plus 0.75 times the real interest rate (which is on the order of 2%). However, adjustments to deviations from the fundamentals are slow, in the long‐run, closing the gap at a rate of around 10% per year. We find sharp differences in short‐run adjustments (momentum) away from the fundamentals across cities, and the differences are correlated with local supply elasticities (more momentum with lower elasticity). Analysis of residuals suggests strong cyclical deviations, which are mean‐reverting.     

Upward pricing pressure in two-sided markets: Incorporating rebalancing effects

In two-sided markets it is important to consider rebalancing effects following a merger, i.e. the impact of a change in margin on one side of the market, either due to a price change or to efficiency gains, on the pricing incentives on the other side. We propose modified versions for the indices of pricing pressure (UPP and GUPPI) that take this into account. We show that in two-sided markets where the cross-group externalities are positive the upward pricing pressure will typically be overstated if the rebalancing effect is ignored. Our approach explains why competition agencies should look at both sides of the market when assessing platform mergers.     

Experts,Information, Reviews,and Coordination: Evidence on How Prizes Affect Sales*

Exploiting the award process, we implement a regression discontinuity design to estimate the effect of winning France's main literary prize, the Goncourt. It increases sales, especially for books that sold fewer copies before the announcement, the number of reviews on Amazon, and the probability of them being negative. The effect is partly driven by an increase in word of mouth. Those findings are consistent with a model where the prize provides information on the existence of a book and acts as a quality signal and a coordination device but prompts consumers to read books that are far from their tastes.     

Inventory performance under pack size constraints and spatially-correlated demand

Motivated by a problem facing a large retailer, we consider the impact of pack size on the performance of a periodic review inventory system in the presence of spatial (i.e., between retailers) correlation of demand—which we model using an equicorrelated multivariate Poisson distribution. Employing simulation, we utilise a full factorial experiment to provide support for decisions on product and supplier selection, and whether or not packs should be split during distribution. We consider variables such as pack size, correlation, and the number of branches, and discuss how they and their interactions impact performance metrics such as inventory and shortage levels and the bullwhip effect.     

Product innovation with vertical differentiation: Is a monopolist's incentive weaker?

This paper compares the incentives for product innovation across different market structures when the new product is vertically differentiated and of lower quality, a common case empirically. We show that innovation incentive rankings across market structures can differ substantially when the new product is of lower rather than higher quality. In particular, the incentive to add the new product can be greater for a monopolist over the old product than for a firm that would face any degree of competition from the old product. This incentive ranking cannot occur when, instead, the new product is of higher quality as has been analyzed in previous work. Moreover, in that case, the incentive ranking is the same whether the market is covered or not covered, whereas in our setting the ranking can differ. With the market covered, our setting provides another environment where the monopolist can have the greatest incentive to innovate, as previously shown when the new product is horizontally differentiated. Together, both settings show that Arrow's famous result—a secure monopolist gains less from a nondrastic process innovation than would a competitive firm—does not always extend to nondrastic product innovations. However, in all the cases analyzed here, consumer welfare (though not total welfare) is always lower under monopoly, even when only the monopolist would add the new product.