Commercial software,adware, and consumer privacy

I study the choice between selling new software commercially and bundling it with ads and distributing it for free as adware. Adware allows advertisers to send targeted information to consumers which improves their purchasing decisions, but also entails a loss of privacy. I show that adware is more profitable when the perceived quality of the software is relatively low, when tracking technology improves, when consumers benefit more from information on consumer products and are less likely to receive it from external sources. I also show that improvements in the technology of display ads will lead to less violation of privacy and will benefit consumers, that depending on the software's quality, there are either too many or too few display ads in equilibrium, and that from a social perspective, adware dominates commercial software.     

Auctions with costly information acquisition

We characterize optimal selling mechanisms in auction environments where bidders must incur a cost to learn their valuations. These mechanisms specify for each period, as a function of the bids in previous periods, which new potential buyers should be asked to bid. In addition, these mechanisms must induce the bidders to acquire information about their valuations and to reveal this information truthfully. Using a generalized Groves principle, we prove a very general “full extraction of the surplus” result: the seller can obtain the same profit as if he had full control over the bidders’ acquisition of information and could have observed directly their valuations once they are informed. We also present appealing implementations of the optimal mechanism in special cases. For helpful comments we thank George Deltas, David Martimort, an anonymous referee, and seminar participants in Mannheim, Rutgers, Tel Aviv, Toulouse, the Society for Economic Design 2002 conference in New York, and the 2003 North American Summer Meetings of the Econometric Society in Evanston, IL. Yossi Spiegel thanks the IIBR for financial assistance and Charles Zheng thanks the NSF for grant SES-0214471.     

Highway robbery: complementary monopoly and the hold-up problem

We analyze the hold-up problem in the context of the Cournot–Ellet theory of complementary monopoly. The strategic interaction among travelers and two distinct owners of successive segments of a segment road is used as a metaphor for complementary goods that are traded sequentially. It is shown that when trade occurs double marginalization is eliminated. Furthermore, allowing for strategic placement of the tollbooths (simultaneous trade) avoids the hold-up problem but not double marginalization. Thus, this analysis suggests the endogenous creation of institutions among complementary monopolistic suppliers that assure their customers of not being held up whenever it is strategically possible.     

Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?

We study the effect of ownership structure and regulatory independence on the interaction between capital structure and regulated prices using a comprehensive panel data of publicly traded European utilities. We find that firms in our sample tend to have a higher leverage if they are privately controlled and regulated by an independent regulatory agency. Moreover, the leverage of these firms has a positive and significant effect on their regulated prices, but not vice versa. Our results are consistent with the theory that privately controlled regulated firms use leverage strategically to obtain better regulatory outcomes.     

Partial cross ownership and tacit collusion

We examine the effects that passive investments in rival firms have on the incentives of firms to engage in tacit collusion. In general, these incentives depend in a complex way on the entire partial cross ownership (PCO) structure in the industry. We establish necessary and sufficient conditions for PCO arrangements to facilitate tacit collusion and also examine how tacit collusion is affected when firms' controllers make direct passive investments in rival firms.     

Consumers' activism: the cottage cheese boycott

We study a consumer boycott on cottage cheese, organized in Israel on Facebook in the summer of 2011 following a steep price increase since 2006. The boycott led to an immediate decline in prices, which remain low even six years later. We find that (i) demand at the start of the boycott would have been 30% higher but for the boycott, (ii) own‐ and especially cross‐price elasticities increased substantially after the boycott, and (iii) post‐boycott prices are substantially below the levels implied by the post‐boycott demand elasticities, suggesting that firms were concerned with public backlash due to high prices.     

Managerial overload and organization design

This paper considers a firm's choice between a “divisional structure” and a “functional structure.” It shows that an increase in the number of projects which the firm can adopt creates a managerial overload, which favors the divisional structure.     

OPTIMIZATION‐BASED PROCUREMENT FOR TRANSPORTATION SERVICES

This paper presents the concept of optimization‐based procurement for transportation services. The approach allows both the shipper and carriers to benefit through the use of a collaborative approach to securing and managing a strategic relationship. Because the shipper's assignment problem involves a combinatorial number of choices and cannot be easily executed manually, the procurement process benefits strongly from the use of optimization. The authors introduce the optimization‐based procurement process, briefly analyze the theoretical issues, and discuss lessons learned from its application in practice over the last several years.     

Effect of scenario planning on field experts' judgment of long‐range investment decisions

We present the results of three field experiments demonstrating the effect of scenario planning on field experts' judgment of several long‐range investment decisions. Our results show, contrary to past findings, that the use of multiple scenarios does not cause an aggregate increase or decrease in experts' confidence in their judgment. Rather, expert judgment changes in accordance with how an investment fares in a given scenario: it becomes more favorable if the investment is found to be useful for a particular scenario used by the expert, and vice versa. This scenario‐induced change is moderated by the expert's confidence in his/her judgment before using the scenario. Finally, our results show that field experts prefer more flexible options to make specific long‐range investments after using multiple scenarios. Copyright © 2014 John Wiley & Sons, Ltd.     

Pre-defined and optional staging for the deployment of enterprise systems: a case study and a framework

The effective deployment of enterprise systems has been a major challenge for many organisations. Customising the new system, changing business processes, and integrating multiple information sources are all difficult tasks. As such, they are typically done in carefully planned stages in a process known as phased implementation. Using ideas from Option Theory, this article critiques aspects of phased implementation. One customer relationship management (CRM) project and its phased implementation are described in detail and ten other enterprise system deployments are summarised as a basis for the observation that almost all deployment stages are pre-defined operational steps rather than decision points. However, Option Theory suggests that optional stages, to be used only when risk materialises, should be integral parts of project plans. Although such optional stages are often more valuable than pre-defined stages, the evidence presented in this article shows that they are only rarely utilised. Therefore, a simple framework is presented; it first identifies risks related to the deployment of enterprise systems, then identifies optional stages that can mitigate these risks, and finally compares the costs and benefits of both pre-defined and optional stages.