Stackelberg leadership and transfers in private provision of public goods

We consider transfers in a Stackelberg game of private provision of a public good. It turns out that the agent who is the follower in the process of making voluntary contributions to a public good may have an incentive to make monetary transfers to the Stackelberg leader even in a situation where neither has a comparative advantage in making contributions to the public good. The Stackelberg leader is willing to accept such transfers if the actual contribution game is fully non-cooperative because the transfer generates a Pareto superior outcome. If the contributions in the Stackelberg equilibrium is the threat point of a possible cooperative Nash bargaining game, the Stackelberg leader will refuse to accept the transfer if she can. Received: 30 June 1995 / Accepted: 18 February 1997     

On the possibility of welfare-enhancing hard core cartels

The conventional wisdom is that cartels which merely lead to lower production levels and higher prices are detrimental to social welfare. This paper explores the extent to which this is generally valid. We derive necessary and sufficient conditions for the existence of a hard core cartel that is beneficial for firms and society at large. Considering both strong (with side payments) and weak (without side payments) hard core cartel contracts, we find that (i) both strong and weak welfare-enhancing cartels exist when at least one firm makes a loss on part of its sales in competition, (ii) a welfare-enhancing strong cartel exists whenever there is a difference in unit cost at competitive production levels, and (iii) a welfare-enhancing weak cartel exists when the profit margin on all sales is positive and the cost difference is sufficiently large.     

An experimental study of prosocial motivation among criminals

The fact that criminal behavior typically has negative consequences for others provides a compelling reason to think that criminals lack prosocial motivation. This paper reports the results from two dictator game experiments designed to study the prosocial motivation of criminals. In a lab experiment involving prisoners, we find a striking similarity in the prosocial behavior of criminals and non-criminals, both when they interact with criminals and when they interact with non-criminals. Similarly, in an Internet experiment on a large sample from the general population, we find no difference in the prosocial behavior of individuals with and without a criminal record. We argue that our findings provide evidence of criminals being as prosocially motivated as non-criminals in an important type of distributive situations.     

The Incidence of Social Security Contributions: An Empirical Analysis

We estimate the effect of social security contributions on wagecosts with sectoral panel data from Eurostat. More than half of the burden of thesecontributions is borne by the employees. Shifting of the burden towards theemployees is more pronounced if the reciprocity between contributions and benefits is stronger. These findings are in line with the predictions derived from anefficient bargaining model.     

The bargaining family revisited

We suggest a family bargaining model where human capital investment decisions are made non-cooperatively in a first stage, while day-to-day allocation of time is determined later through Nash bargaining, but with non-cooperative behaviour as the fall-back. One finding is that overinvestment in education may be even more of a problem in such a semi-cooperative model than in a fully non-cooperative one. Even though both the semi-cooperative model and the fully non-cooperative model predict overinvestment in education, policy conclusions that follow from the two models are distinctly different. JEL Classification: D13, J24
Les auteurs suggèrent un modèle de famille qui marchande où les décisions d'investissement en capital humain sont prises de manière non-coopérative dans un premier temps, alors que l'allocation du temps au jour le jour est déterminée plus tard par un marchandage à la Nash, mais avec un comportement noncoopératif comme choix de second ordre. On découvre que le surinvestissement dans l'éducation peut être encore plus problématique dans un tel modèle de semi-coopération que dans un modèle de non coopération. Même si les deux modèles prévoient un surinves;chtissement dans l'éducation, les conclusions au plan de la politique publique qui découlent de ces deux modèles sont fort différentes.     

Stock prices and inflation hedged firms

As the Federal Reserve continues its near-zero rate policy, the threat of inflation remains a concern among both policymakers and businesses. This article uses over 30 years of accounting data and stock returns to examine how publicly traded firms respond to increasing inflation expectations. We first examine whether firms make balance sheet adjustments in response to expected inflation. We then examine whether these activities have a positive effect on stock prices. We find that firms increase inventory, increase capital expenditures and reduce long-term debt when there is an increased expectation of inflation. We then find that firms that increase inventory in this economic regime are rewarded in the market. Markets also reward firms that increase their cash positions and reduce long-term debt possibly suggesting investor flight to safety.     

The politics of Europe 2002: flexibility and adjustment

The European Union entered a new phase of integration in 2002. The single currency, the European Convention, and enlargement signalled progress. The conflict over the Stability and Growth Pact, the tensions between the member states, and the political turmoil in a number of core countries suggested retreat. This paper examines the resulting pattern of integration. It argues that the European Union is becoming more legalistic than leader‐oriented, and that it rests on common principles rather than accepting the imposition of some grand design. Such a European Union cannot challenge the United States for global leadership. But it is likely to prove stable nonetheless.     

Launch decisions and competitive reactions: an exploratory market signaling study

When firms launch a new product into the marketplace they often aim to find a balance between building scale and provoking extensive and quick competitive reactions. Competitors react to new products when they perceive the product introduction as hostile, committed or when they feel that the product entry will have a large impact on their profitability. The present study develops a framework that shows how strong and fast incumbents react to perceived market signals resulting from a new product's launch decisions (broad targeting, penetration pricing, advertising intensity and product advantage). The strength of the relationships between the launch decisions and the perceived market signals was expected to depend on one industry characteristic (i.e., market growth) and on one entrant characteristic (i.e., aggressive reputation). We distinguished three market signals in our framework: hostility, commitment and consequences. Signal hostility refers to the extent to which the approach used by an acting firm to introduce the new product is perceived hostile whereas the commitment signal refers to the extent to which incumbents perceive the entrant firm to be committed to the new product introduction. The consequence signal is defined as the incumbents' perception of the impact of a new product entry on their profitability. We tested our framework using cross‐sectional data provided by 73 managers in The Netherlands who recently reacted to a new product entry. The results clearly reveal which launch decisions create which market signals. For example, incumbents consider high advantage new products hostile and consequential. Penetration pricing and an intense advertising campaign are also considered hostile, especially in fast growing markets. Broad targeting is not perceived hostile, especially not when used by entrants with an aggressive reputation. In addition, this study explored the impact of three perceived market signals on the strength and speed of competitive reaction. The results reveal that perceived signals of hostility and commitment positively impact the strength of reaction, whereas the perceived consequence signal positively impacts the speed of reaction. The article concludes with the implications of our study for managers and academics. The relevance to managers was assessed from both the perspective of the incumbent firm that must defend, and that of the rival firm that is introducing the new product.     

Innovation Roadmapping: Building Concepts from Practitioners’ Insights

Cartographic roadmaps used for navigating from A to B provide a strong metaphor for innovation roadmaps used at firms for navigating from the present to the future. Now ready to move beyond this metaphor—the pace and proliferation of knowledge on innovation roadmapping have reached a point at which it would be useful to lay out some groundwork for extended theorizing and research in this area. This paper contributes here by reporting on a qualitative inductive research based on documented practitioners’ insights. To better understand the phenomenon of innovation roadmapping (what it is and what it is not) and its impact on innovation performance, this study builds concepts in the context of strategic innovation management theory. Through a systematic analysis of the qualitative data extracted from 12 cases selected from the extant literature, this research found five concepts with common ground in these cases and built a framework in which innovation roadmapping is established by (1) a strategy of time pacing, (2) synchronizing dialogues, and (3) mapping innovation elements to a timeline. Furthermore, the systematic analysis of the documented practitioners’ insights indicates that roadmapping affects either the innovation performance of (4) competitive timing or (5) industry synergy. Overall, this leads to an initial formulation of theory with this conceptual framework and six related propositions. The key insights for innovation managers in industrial firms are that, in striving for competitive timing or industry synergy, roadmapping provides a means to achieve these objectives and, in deploying roadmapping in the organization, dialogue and pacing are critically important.     

Tax Reform and the Demand for Debt

This article examines the impact on household borrowing from a tax reform that implied a change from progressive to constant marginal tax rates on interest deductions. We use three alternative empirical methods to address the problem of endogenous explanatory variables, which arises when the marginal tax rate itself is a function of the amount of debt: The first approach uses instrumental variables to examine the significance of the marginal tax rate directly and produces mixed results. In the second approach we use tobit regressions based on repeated cross-sectional data to examine the correspondence between debt and income and find that the households' amount of debt were strongly and positively related to income before the tax reform and significantly more income-dependent under progressive tax rates than under the constant tax rate. Finally, using panel data covering the last year prior to the reform and the first year after, we find that the change in a household's marginal tax rate had a significant impact on the change in its amount of debt.