Manufacturer collusion: Strategic implications of the channel structure

We investigate how the structure of the distribution channel affects tacit collusion between manufacturers. When selling through a common retailer, we find—in contrast to the conventional understanding of tacit collusion that firms act to maximize industry profits—that colluding manufacturers strategically induce double marginalization so that retail prices are above the monopoly level. This lowers industry profits but increases the profit share that manufacturers appropriate from the retailer. Comparing common distribution with independent (exclusive) distribution, we show that the latter facilitates collusion. Despite this result, common retailing leads to lower welfare because a common retailer monopolizes the downstream market. For the case of independent retailing, we also demonstrate that contract offers that are observable to the rival retailer are not necessarily beneficial for collusive purposes.     

How CEOs protect themselves against dismissal: A social status perspective

In this study, we address the question of why some CEOs stay in office during a performance downturn while others don't. Taking a social status perspective, we argue that an individual's board network embeddedness—as reflected in the number of outside directorships—plays an important role in dismissal decisions. We predict that a high status of the CEO relative to the chairman of the board protects an underperforming CEO against dismissal, while the relative salience of board network outsiders can counter this effect. Using longitudinal data of large German corporations, we find support for our predictions. Ltd. Copyright © 2015 John Wiley & Sons, Ltd.     

Patent pools,vertical integration,and downstream competition

Patent pools are commonly used to license technologies to manufacturers. Whereas previous studies focused on manufacturers active in independent markets, we analyze pools licensing to competing manufacturers, allowing for multiple licensors and nonlinear tariffs. We find that the impact of pools on welfare depends on the industry structure: whereas they are procompetitive when no manufacturer is integrated with a licensor, the presence of vertically integrated manufacturers triggers a novel trade‐off between horizontal and vertical price coordination. Specifically, pools are anticompetitive if the share of integrated firms is large, procompetitive otherwise. We then formulate information‐free policies to screen anticompetitive pools.     

The Illiquidity Discount of Life Insurance Investments

We incorporate an illiquid life insurance investment in the multi-period investment strategy of an investor with constant relative risk aversion and independent and identically distributed returns. In our setup, the liquid and the illiquid assets are risky and correlated and the illiquid investment cannot be rebalanced. We calculate the illiquidity discount as the difference in certainty equivalent rates of return between the optimal strategy with all assets being rebalanced in each period and the strategy with the illiquid investment. Calibrating our model to data of the German market we find a negative relationship between the level of risk aversion and the illiquidity discount when the investor does not rebalance at all. However, when the investor rebalances his liquid assets in each period to hedge against the illiquid investment the illiquidity discount becomes economically negligible.     

Adaptation and inertia in dynamic environments

Research summary : We address conflicting claims and mixed empirical findings about adaptation as a response to increased environmental dynamism. We disentangle distinct dimensions of environmental dynamism—the direction, magnitude, and frequency of change—and identify how selection shapes adaptive responses to these dimensions. Our results show how frequent directional changes undermine the value of exploration and decisively shift performance advantages to inert organizations that restrict exploration. In contrast, increased environmental variance rewards exploration. Our results also show that, in dynamic environments, the best‐performing organizations are generally more inert than less successful organizations. Managerial summary : Our research helps managers to understand under what business conditions investments into exploration and strategic flexibility are more likely to pay off. Dynamic business environments characterized by persistent trends and by large, infrequently occurring structural shocks reward strategic pursuit of temporary advantage. Thus, exploration and strategic flexibility are preferred strategies. In contrast, the challenge in frequently changing environments with fleeting opportunities is to identify and to focus on strategic actions whose payoffs on average are high, independent of environmental volatility. Low levels of exploration and long‐term strategic focus are preferred strategies in these circumstances. Copyright © 2015 John Wiley & Sons, Ltd.     

Actor and Institutional Dynamics in the Development of Multi-stakeholder Initiatives

As forms of private self-regulation, multi-stakeholder initiatives (MSIs) have emerged as an important empirical phenomenon in global governance processes. At the same time, MSIs are also theoretically intriguing because of their inherent double nature. On the one hand, MSIs spell out CSR standards that define norms for corporate behavior. On the other hand, MSIs are also the resultof corporate and stakeholder behavior. We combine the perspectives of institutional theory and club theory to conceptualize this double nature of MSIs. Based on a stage model that looks at the interplay of actor and institutional dynamics, we generate insights into why actors join a voluntary MSI, how the various motivations and intentions of the actors influence the standard development, and how these as well as the MSI design are subsequently influenced by both external (institutional) and internal (club) dynamics.     

UNDERSTANDING MEMBER CHARACTERISTICS AND COOPERATIVE PRICE EFFECTS: THE CASE OF THE ARGENTINEAN DAIRY SECTOR

Since the 1990s, Argentinean dairy‐processing cooperatives have lost considerable amounts of members and market share. We analyse their current role by investigating the characteristics of farmers who continue delivering to them and price differentials between cooperatives and investor‐oriented firms (IOFs). A probit regression model applied to 917 farmers suggests that cooperative farmers are more disadvantaged than farmers delivering to IOFs in terms of education, farm size and productive technology. Moreover, t‐tests applied to data representing 70 per cent of national volume indicate that farmers delivering to cooperatives are between 11 per cent and 29 per cent smaller than those delivering to IOFs, depending on province. A hierarchical multilevel regression model applied to 9,720 transactions among farmers and processors shows that, after controlling for quantity and quality, cooperatives pay lower (3.5%) but more stable prices than IOFs. In a context of rapid structural change, we observe a market in which larger farmers deliver to IOFs and smaller farmers deliver to cooperatives and conclude that, at the expense of paying lower prices, cooperatives may act as buyers of last resort for otherwise disadvantaged farmers.     

Future images of meat consumption in 2030

The issue of meat consumption has been a subject of interest that has been looked at from environmental, animal and human perspectives. This paper contributes to the discussion by clarifying the diversity of views with regard to the future of meat consumption. Two round Delphi expert interviews and a consumer survey were conducted in order to collect information. Five coherent future images were constructed: Traditional Approach, Business as Usual, Humans First, Wellness and Vegetarian Society. The discussion part of the paper presents possible ways of influencing meat consumption according to the holders of these different images of the future.     

Which past returns affect trading volume?

Anecdotal evidence suggests and recent theoretical models argue that past stock returns affect subsequent stock trading volume. We study 3,000 individual investors over a 51 month period to test this apparent link between past returns and volume using several different panel regression models (linear panel regressions, negative binomial panel regressions, Tobit panel regressions). We find that both past market returns as well as past portfolio returns affect trading activity of individual investors (as measured by stock portfolio turnover, the number of stock transactions, and the propensity to trade stocks in a given month). After high portfolio returns, investors buy high risk stocks and reduce the number of stocks in their portfolio. High past market returns do not lead to higher risk taking or underdiversification. We argue that the only explanations for our findings are overconfidence theories based on biased self-attribution and differences of opinion explanations for high levels of trading activity.     

Trading the forward bias: Are there limits to speculation?

In this paper we investigate whether trading the forward bias allows for economically significant excess returns. We find that bias-trading strategies can be viewed as attractive investment opportunities per se, useful diversification devices, and promising portfolio extensions for active fund managers trying to beat their benchmarks. The empirical results, which also mirror the problems arising in attempts to explain the puzzle by risk-premia, are consistent with market evidence that the bias is traded in practice. Overall, our findings suggest that limits to speculation are unlikely to provide a (stand-alone) explanation for the persistence of the forward bias.