Time will tell: interaction effects of franchising percentages and age on franchisor mortality rates

Drawing from franchising and organizational ecology literatures, we hypothesize that franchising provides benefits to franchisors by addressing issues of adverse selection, moral hazard, holdup, obsolescence, and senescence. We assert that, over time, these benefits increase such that the more a franchise chain utilizes franchisees rather than company-owned outlets, the greater the franchising benefits accrue to the franchisor. We test our propositions by studying the mortality rates of 393 franchise organizations in the U.S. automotive products and services sector over the 21-year time period 1985–2005, using proportional hazard analysis. We find that older franchise chains with higher percentages of franchised units have lower mortality rates than older franchise chains with lower percentages of franchised units. We also find that younger franchise chains with higher percentages of franchised units have higher mortality rates than younger franchise chains with lower percentages of franchised units.     

The Interaction between a Most-Favored-Customer Clause and Price Dispersion: An Empirical Examination of the Medicaid Rebate Rules of 1990

This paper examines the effect of the MFC rules adopted by Medicaid on both price dispersion and price levels in the wholesale pharmaceutical market. Theory suggests that the regulations should reduce price dispersion and increase the average price for those products with a high initial level of price dispersion. Using data which can only measure some dimensions of price discrimination, I find that discrimination falls for products sold to hospitals, but not drugstores. Branded drugs facing generic competition have the most dispersion ex ante . Prices of these brands rise with dispersion at the implementation of the new rules. The last two results are consistent with Scott Morton (1997), where I look only at price changes due to the law. The results of this paper confirm that part of the mechanism of action for the price increase is the high level of price dispersion for some products combined with the MFC.     

Price competition in the spatial real estate market: allies or rivals?

This paper examines whether real estate firms can avoid price competition when properties in the vicinity are priced by allies. An oligopoly model with differentiated products generally suggests that real estate firms engage in price competition with their spatially closest rivals. Yet, they can raise property prices when the market share of their allies increases. To test this prediction, a spatial autoregressive model with spatial autoregressive disturbances, including a share of allies in the vicinity, is estimated using data on the prices of residential condos in central Tokyo, Japan. The model prediction is supported by the empirical results. In the data set, the magnitude of the market share on property prices increases with the expansion of the size of the spatial market.     

Privatisation and vertical integration under a mixed duopoly

This paper analyses the privatisation of public firms when private firms may be vertically integrated with their suppliers. We consider a mixed duopoly with a vertically integrated public firm. The private firm bargains the price of the input with its supplier if they are not vertically integrated. We find that for a given bargaining power of the private firm, it vertically integrates with its supplier if goods are weak substitutes. We also find that there is less vertical integration in the mixed duopoly than in the private duopoly. Finally, in general, the public firm is privatised when goods are close substitutes and the bargaining power of the private firm is low enough.     

The spatial impact of employment centres on housing markets

The spatial impact of employment centres on housing markets. Spatial Economic Analysis. Local economic growth tends to affect neighbourhood house prices unevenly. It has been observed that prime locations experience price hikes far in excess of the surrounding local area. Yet, this phenomenon is not well captured by existing economic models. This research provides a model of spatial and temporal interactions between housing and employment markets. The results show that rapid growth of employment centres increases house prices in neighbouring locations even after adjusting for fundamentals. It is concluded that spatial clustering of companies creates an option value for existing and potential employees that goes beyond ease of access for commuting purposes.     

The Substitution Theorem in Urban Consumer Theory

This paper presents two nonparametric approaches to urban household location theory. For each model two sets of own price substitution theorems are presented, one for goods whose prices vary spatially and one for goods whose prices do not vary spatially in the market area. The usual substitution theorem derived in nonspatial demand theory is seen to hold for goods whose prices do not vary spatially. Goods whose prices vary spatially, however, reveal a significant departure from standard demand theory in that the substitution theorem is shown to hold unambiguously only for "parallel" shifts in spatial price surfaces. Further, the results are robust, extending to consumers in nonmonocentric urban areas, regardless of consumer tastes for travel distance or labor/leisure choice complications.     

First price package auction with many traders

This paper studies a first price package auction in which multiple sellers participate in addition to multiple buyers. We generalize the notion of the profit-target strategy which is first introduced as a truthful strategy in a first price package auction with a single seller by Bernheim and Whinston (1986b). We then show that the set of equilibrium payoffs in profit-target strategies is equal to the bidder-optimal core, and is also equal to the set of coalition-proof Nash equilibria. Using this result, we find that any equilibrium payoff vector is weakly Pareto-dominated by the VCG payoff vector for buyers, and that the Walrasian competitive equilibrium payoff vector is weakly Pareto-dominated by some equilibrium payoff vector for buyers, even if goods are substitutes. This contrasts with the first price package auction with a single seller, in which it is shown that if goods are substitutes, then those three outcomes are payoff-equivalent.     

Land use dynamics and the environment

This paper builds a benchmark framework to study optimal land use, encompassing land use activities and environmental degradation. We focus on the spatial externalities of land use as drivers of spatial patterns: land is immobile by nature, but local actions affect the whole space since pollution flows across locations resulting in both local and global damages. We prove that the decision maker problem has a solution, and characterize the corresponding social optimum trajectories by means of the Pontryagin conditions. We also show that the existence and uniqueness of time-invariant solutions are not in general guaranteed. Finally, a global dynamic algorithm is proposed in order to illustrate the spatial-dynamic richness of the model. We find that our simple set-up already reproduces a great variety of spatial patterns related to the interaction between land use activities and the environment. In particular, abatement technology turns out to play a central role as pollution stabilizer, allowing the economy to reach a time-invariant equilibrium that can be spatially heterogeneous.     

Choosing the Quality of the Fit between Complementary Products

In this paper, I examine how firms should position their complementary products. I assume that there are two competing firms, each producing two complementary products. Each firm decides whether to employ strategies that enhance the quality of the fit (the degree of complementarity) between its pair of complementary products before competing in prices. The consumers have heterogeneous tastes for the four possible bundles. They are willing to pay a price premium in order to purchase a bundle from the same firm if this firm chose to make such bundle more attractive. I find that increasing the degree of complementarity between a firm's complementary products intensifies price competition and often leads to smaller profits. Only when complementarity‐enhancing strategies significantly increase the demand for a firm's matching bundle, does the firm benefit from employing them. The highest profits for both firms are obtained when both firms do not employ complementarity‐enhancing strategies. Deteriorating the quality of the fit between one's own and a rival's complementary products is never profitable.     

Time-sensitive supply chain disruption recovery and resource sharing incentive strategy

Market demand is becoming increasingly time-sensitive in competitive environments. Hence, supply disruptions will have a more serious impact on the profits of supply chains. This study applies a Stackelberg competition between a single supplier and a single manufacturer in a time-sensitive supply chain in a cloud manufacturing environment. We aim to address the supplier’s production capacity recovery issues and the manufacturer’s incentive decision issues after supply disruption. We find that the supplier is in a weak position when the information is symmetrical. The manufacturer can encourage the supplier to shorten the recovery time by raising the unit wholesale price. When the supplier’s unit production cost remains unchanged but the unit wholesale price increases, the profit of the supplier first increases and then decreases. In addition, under the centralized decision-making setting, the optimal recovery time of the supplier is shorter and the optimal unit market price of the product is lower than that under decentralized decision-making. We further find that resource sharing can shorten the optimal recovery time, but it does not necessarily play an incentivizing role.     

Vertical Foreclosure Using Exclusivity Clauses: Evidence from Shopping Malls

Exclusive contracts are one of the most controversial topics in the economic analysis of antitrust. Yet, very few empirical papers analyze the determinants and the consequences of exclusive contracts. In this paper, I study exclusive contracts between hamburger restaurants and Israeli shopping malls, in which mall owners commit to prohibiting additional hamburger restaurants from entering their malls. I investigate the determinants of these exclusive contracts and examine how such contracts affect the number of hamburger restaurants and their sales. I show that exclusive contracts are less likely to be adopted in larger malls, in malls that face more competition from other malls, and in malls that opened before 1993, when McDonald's and Burger King entered the Israeli market. I then use the mall's opening year—before or after 1993—as an instrumental variable to estimate a negative effect of exclusive contracts on the number of restaurants and on total mall hamburger sales. My findings are generally consistent with anti‐competitive vertical foreclosure models.     

How product representation influences the understanding of supply chain process models

ABSTRACT

Process models are increasingly being used to analyse business processes within supply chains. Although products are an essential part of supply chain semantics, product representation in supply chain process models is insufficient. This research proposes a novel product representation, namely, ‘labelled flows,’ which directly assigns product names to flows instead of implicitly representing products through other visual constructs. Using a laboratory experiment, we find that labelled flows improve domain understanding with respect to product comprehension and product modelling performance. Our contribution to modelling research is a novel product representation within supply chain process models, which enhances domain understanding.     

An Empirical Analysis of Planned Obsolescence

This paper examines the decision to introduce new products by durable goods producers. Conventional wisdom suggests that durable goods producers introduce new products to kill off used products. However, used units may not compete with new units if initial price can capture the present value of all future transactions. Using new data from the textbook market, I find that publishers revise editions more frequently when competition from used textbooks increases. This suggests the presence of planned obsolescence. However, the time since the previous revision also significantly affects revision decisions, indicating that publishers' frequent revision cannot be attributed to planned obsolescence alone .     

Multi-store competition: Market segmentation or interlacing?

This paper develops a model for multi-store competition between firms. Using the fact that different firms have different outlets and produce horizontally differentiated goods, we obtain a pure strategy equilibrium where firms choose a different location for each outlet and firms' locations are interlaced. The location decisions of multi-store firms are completely independent of each other. Firms choose locations that minimize transportation costs of consumers. Moreover, generically, the subgame perfect equilibrium is unique and when the firms have an equal number of outlets, prices are independent of the number of outlets.     

A Generalized Method of Moments Estimator for a Spatial Panel Model with an Endogenous Spatial Lag and Spatial Moving Average Errors

Abstract

This paper proposes a new generalized method of moments (GMM) estimator for spatial panel models with spatial moving average errors combined with a spatially autoregressive dependent variable. Monte Carlo results are given suggesting that the GMM estimator is consistent. The estimator is applied to English real estate price data.     

Strategic Delegation and Vertical Integration

This paper proposes a game‐theoretic model to analyze owners' vertical integration choices if they delegate pricing decisions to their managers. We find that all three vertical structures are possible Nash equilibrium outcomes. If the products are weak substitutes, then the outcome is that both owners adopt vertical integration. When the products are close substitutes, both owners adopt vertical separation in equilibrium. When substitution between the products is medium, the coexistence of vertical integration and vertical separation is the equilibrium outcome, and the owner corresponding to vertical separation offers exactly a profit‐maximization contract to his or her manager under this situation. Copyright © 2014 John Wiley & Sons, Ltd.     

考虑产品替代和环保水平的供应链优化与协调

针对由单个制造商和单个零售商构成的供应链,考虑制造商生产两种碳足迹不同的可替代的产品,建立供应链优化决策模型,确定最优的产品环保水平与销售价格,提出供应链系统的协调机制.分析了产品之间不同的替代程度对均衡解和各成员利润的影响,并进一步讨论了收益共享契约对于提高供应链环境的作用.研究表明,产品环保水平竞争强度的增加会带来供应链成员利润的增加而价格竞争强度的增加会带来供应链成员利润的减少.集中式决策不仅有利于供应链利润的提高,而且有利于供应链环境的改善.当消费者对产品之间环保水平的敏感程度较高时,收益共享契约的协调效果较好.     

Wal-Mart and the geography of grocery retailing

This paper empirically examines the impact of entry by Wal-Mart on competition in the supermarket industry. Using a detailed panel dataset spanning 1994–2006, we estimate the impact of Wal-Mart on firm outcomes and market structure, controlling for persistent local trends and systematic differences across markets by exploiting the detailed spatial structure of our store-level census. We find that Wal-Mart’s impact is highly localized, affecting firms only within a tight, two-mile radius of its location. Within this radius, the bulk of the impact falls on declining firms and mostly on the intensive margin. Entry of new firms is essentially unaffected. Moreover, the stores most damaged by Wal-Mart’s entry are the outlets of larger chains. This suggests that Wal-Mart’s expansion into groceries is quite distinct from its earlier experience in the discount industry, where the primary casualties were small chains and sole proprietorships that were forced to exit the market. This contrast sheds light on the role density economies play in shaping both equilibrium market structure and economic geography. In the case of grocery competition, high travel costs and the perishable nature of groceries appear to impart horizontal differentiation between firms. This differentiation in demand appears to reduce impact of scale economies advantages that Wal-Mart exploited to the detriment of far-flung competitors in the discount store industry.     

Product Rivalry with multiple Strategic weapons: an Analysis of price and advertising Competition

A dynamic model of product rivalry is developed for a market in which firms choose price and advertising intensity. The model, a state-space game, is implemented using data that consist of weekly price, sales, and promotional activity for four brands of saltine crackers sold by four chains of grocery stores in a small town. A number of questions can be asked of this data. First, is advertising predatory (merely changing market shares) or cooperative (shifting out market demand)? Second, are price and advertising own and cross-strategic complements or substitutes? And finally, do investments in stocks of goodwill and in price reductions make firms tough and aggressive or soft and accommodating?     

Chain indices of the cost-of-living and the path-dependence problem: An empirical solution

This paper proposes a new method for estimating true cost-of-living (Konüs) indices, for large numbers of commodities, using data only on prices, aggregate budget shares and aggregate expenditure. Conventional chain indices are path-dependent unless income elasticities are (implausibly) all equal to 1. The method allows this difficulty to be overcome. I show that to estimate a Konüs index, only income and not price elasticities are required. The method is applied to estimate a Konüs price index for 70 products covering nearly all the UK's Retail Prices Index over 1974–2004, using the Quadratic Almost Ideal Demand System. The choice of base year for utility has a significant effect on the index.