Asymmetric spiders: Supplier heterogeneity and the organization of firms

We consider a property rights model of a firm with two heterogeneous suppliers and analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the asymmetric inputs. If components are close substitutes, the firm tends to outsource the technologically more important input while keeping the less important one inside its boundaries. This pattern can be reversed, however, if the two inputs are strongly complementary. The firm also tends to outsource low‐cost inputs and components with low sophistication. These theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms.     

Urban inoculation and the decline of smallpox mortality in eighteenth‐century cities—a reply to Razzell

Smallpox was probably the single most lethal disease in eighteenth‐century Britain but was reduced to a minor cause of death by the mid‐nineteenth century due to vaccination programmes post‐1798. While the success of vaccination is unquestionable, it remains disputed to what extent the prophylactic precursor of vaccination, inoculation, reduced smallpox mortality in the eighteenth century. Smallpox was most lethal in urban populations, but most researchers have judged inoculation to have been unpopular in large towns. Recently, however, Razzell argued that inoculation significantly reduced smallpox mortality of adults and older children in London in the last third of the eighteenth century. This article uses demographic evidence from London and Manchester to confirm previous findings of a sudden fall in adult smallpox mortality and a rise in the importance of smallpox in early childhood c. 1770. The nature of these changes is consistent with an increase in smallpox transmission in London and Manchester after 1770 and indicates that smallpox inoculation was insufficient to reduce smallpox mortality in large towns. It remains unclear whether inoculation could have operated to enhance smallpox transmission or whether changes in the properties of the smallpox virus drove the intensification of smallpox mortality among young children post‐1770.     

A Theory of Brinkmanship, Conflicts, and Commitments

Many conflicts and negotiations can be viewed as dynamic gamesin which parties have no commitment power. In our model, a potentialaggressor demands concessions from a weaker party by threateningwar. The absence of commitment makes a continuous stream oftransfers a more effective appeasement strategy than a lump-sumtransfer. As long as both sides have constant marginal utilityof consumption, it is possible to construct a self-enforcingpeace agreement even if transfers shift the balance of power.When marginal utility of consumption is decreasing, a self-enforcingpeace agreement may not be feasible. The bargaining power ofthe potential aggressor increases dramatically if she is ableto make probabilistic threats, for example, by taking an observableaction that leads to war with a positive probability. This "brinkmanshipstrategy" allows a blackmailer to extract a positive streamof payments from the victim, even if carrying out the threatis harmful to both parties. Our results are applicable to environmentsranging from diplomacy to negotiations within or among firmsand are aimed to bring together "parallel" investigations inthe nature of commitment in economics and political science.     

A micro-based non-inflationary rate of capacity utilisation as a measure of inflationary pressure: evidence for Austria

We derive a non-inflationary rate of capacity utilisation (NIRCU)—as recently proposed by Köberl and Lein (Can J Econ 44:673–694, 2011)—based on a large Austrian firm-level panel dataset ranging from 1996 to 2011. By conditioning the current capacity utilisation of firms on their current and planned price adjustments, a micro-level NIRCU is defined as the level of capacity utilisation at which there is no need for the firm to adjust its prices. In contrast to other measures of inflationary pressure, this measure (1) is timely available without revisions and (2) does not imply any need for rather arbitrary methods or concepts such as statistical filtering or potential output. In accordance with the results in Köberl and Lein (Can J Econ 44:673–694, 2011), we find that the NIRCU performs well as a driving variable of Austrian inflation in various Phillips Curve estimations. Compared to other inflation driving variables, such as real unit labor cost, the output gap and the unemployment gap, it delivers reasonable parameter estimates which are in line with existing Phillips Curve estimations in the literature.     

Deficits and Divided Governments: The Case of the German ‘Bundesrat’

The hypothesis of divided government is applied to the development of deficits in Germany. Since the party system is relatively stable, divided governments emerge not from coalitional governments, but rather from the bicameral structure of the country. Different majorities in the two chambers promote deficits, especially in the case of central government deficits. The results suggest that under different majorities in the two chambers deficits are more than 0.5%-Point higher. Further, it is indicated, that only ideological polarization, but not unstable majorities per se induces higher deficits.

Trading costs and price discovery across stock index futures and cash markets

The focus of this article is to test the trading cost hypothesis of price leadership, which predicts that the market with the lowest overall trading costs will react most quickly to new information. In an attempt to hold market microstructure effects constant and in contrast to previous studies, we examine intraday price leadership across the S&P 500, NYSE Composite, and MMI futures, and across the respective cash indexes—rather than between each futures and its associated cash index. We find that, among the futures, the S&P 500 exhibits price leadership over the other index futures, whereas among the cash indexes the MMI leads. Both findings are consistent with the trading cost hypothesis. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 475–498, 1999     

Emerging needs of social innovators and social innovation ecosystems

International Entrepreneurship and Management Journal - Social innovations (SIs) contribute to solving or at least mitigating many of the most pressing grand challenges. Similar to profit-oriented...