Entry threat,entry delay,and Internet speed: The timing of the U.S. broadband rollout

In a rapidly growing industry, potential entrants strategically choose which local markets to enter. Facing the threat of additional entrants, a potential entrant may lower its expectation of future profits and delay entry into a local market, or it may accelerate entry due to preemptive motives. Using the evolution of local market structures of broadband Internet service providers from 1999 to 2007, we find that the former effect dominates the latter after allowing for spatial correlation across markets and accounting for endogenous market structure. On average, it takes 2 years longer for threatened markets to receive their first broadband entrant. Moreover, this entry delay has long‐run negative implications for the divergence of the U.S. broadband infrastructure: 1 year of entry delay translates into an 11% decrease on average present‐day download speeds.     

Strategic Pricing Behavior under Asset Value Maximization

In this paper, we empirically evaluate strategic pricing behavior and shareholder delegation of financial market objectives in the U.S. butter and margarine market. Shareholders are assumed to maximize the value of firm assets according to a certainty equivalent capital asset pricing model (CAPM). The delegation setup instructs managers to maximize a linear combination of firm profits and shareholder equity values. A key result from the analysis is that a test of financial market influences cannot be rejected in the product market for butter and margarine. Product market competition is best described using a conjectural variation model of industrial organization. Estimates of Lerner Indexes suggest significant market power and counterfactual simulations point toward significant biases in estimated Lerner Indexes when capital market dimensions are ignored or if the wrong market structure is assumed. Dans le présent article, nous avons effectué l'évaluation empirique de comportements stratégiques dans la détermination des prix et la délégation d'objectifs financiers de la part d'actionnaires sur le marchéétatsunien du beurre et de la margarine. Nous avons supposé que les actionnaires maximisent la valeur de l'actif d'une firme selon l'équivalent certain du modèle d'évaluation des actifs financiers (MEDAF). La structure de la délégation amène les gestionnaires à maximiser une combinaison linéaire des profits de la firme et de la valeur nette des actions. L'un des principaux résultats de l'analyse est qu'un test des influences du marché des capitaux sur le marché des produits ne peut être rejeté pour le cas du beurre et de la margarine. La concurrence sur le marché des produits est plus adéquatement caractérisée par un modèle d'organisation industrielle à variations conjecturales. Les estimations de l'indice de Lerner ont indiqué la présence de pouvoir de marché, et les simulations contrefactuelles ont montré des biais significatifs dans les valeurs estimées des indices de Lerner lorsque l'on ne tient pas compte du marché des capitaux ou que l'on suppose une structure de marché erronée.     

Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO

Trade negotiations occur through time and between the governments of many countries. An important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party. We identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation. Our main finding is that the two central principles of GATT/WTO—nondiscrimination (MFN) and reciprocity—preserve the welfare of nonparticipating governments and therefore offer a “first-line of defense” against bilateral opportunism.     

Personalization without Interrogation: Towards more Effective Interactions between Consumers and Feature-Based Recommendation Agents

Software agents that provide consumers with personalized product recommendations based on individual-level feature-based preference models have been shown to facilitate better consumption choices while dramatically reducing the effort required to make these choices. This article examines why, despite their usefulness, such tools have not yet been widely adopted in the marketplace. We argue that the primary reason for this is that the usability of recommendation systems has been largely neglected – both in academic research and in practice – and we outline a roadmap for future research that might lead to recommendation agents that are more readily adopted by consumers.     

Signalling and entry deterrence: a multidimensional analysis

I consider whether a privately informed incumbent can use limit pricing and upward distortions in advertising to deter profitable entry. Profitable entry is not deterred when the incumbent is privately informed only about its cost type. Profitable entry may be deterred, however, if the incumbent is privately informed about its cost type and its patience level. An equilibrium foundation is thus provided for the traditional hypothesis that limit pricing and aggressive advertising by an incumbent may deter profitable entry. At a methodological level, the article contributes by characterizing the refined equilibria of a signalling model with multiple dimensions of private information and multiple signals.     

Agriculture and climate change in global scenarios: why don't the models agree

Agriculture is unique among economic sectors in the nature of impacts from climate change. The production activity that transforms inputs into agricultural outputs involves direct use of weather inputs (temperature, solar radiation available to the plant, and precipitation). Previous studies of the impacts of climate change on agriculture have reported substantial differences in outcomes such as prices, production, and trade arising from differences in model inputs and model specification. This article presents climate change results and underlying determinants from a model comparison exercise with 10 of the leading global economic models that include significant representation of agriculture. By harmonizing key drivers that include climate change effects, differences in model outcomes were reduced. The particular choice of climate change drivers for this comparison activity results in large and negative productivity effects. All models respond with higher prices. Producer behavior differs by model with some emphasizing area response and others yield response. Demand response is least important. The differences reflect both differences in model specification and perspectives on the future. The results from this study highlight the need to more fully compare the deep model parameters, to generate a call for a combination of econometric and validation studies to narrow the degree of uncertainty and variability in these parameters and to move to Monte Carlo type simulations to better map the contours of economic uncertainty.     

State Trading Enterprises in a Differentiated Product Environment: The Case of Global Malting Barley Markets

This study tested if the exclusive procuring and pricing policies of two state trading enterprises (STEs) in international malting barley markets could be used in a strategic trade context. The research provided four key findings. First, the global malting barley market operated in a quantity-setting oligopolistic structure during the study years. Second, both STEs and other exporting countries were in Cournot competition and thus made available strategic trade possibilities. Third, initial commodity payments were too high to generate a rent-shifting outcome. Fourth, product differentiation was confirmed, which may have dampened the desire/ability of STEs to pursue a rent-shifting objective.     

Productive play time: the effect of practice on consumer demand for hedonic experiences

In this paper we explain how practice, prior knowledge and task difficulty interact to affect demand for hedonic experiences. As predicted by the human capital model, we propose that the key determinant of demand for hedonic experiences is the increase in performance efficiency that can be gained through practice. In addition, we argue that the nature of the effect of practice is distinctly different in hedonic consumption, compared to utilitarian consumption. Specifically, for hedonic experiences, practice allows consumers to extract greater value within a given period of time, rather than reduce the amount of time spent on a (utilitarian) task. Finally, we argue that if changes in performance efficiency across repeated hedonic experiences adhere to the power law of practice, then both prior knowledge and task difficulty will be important moderators of the main effect of practice on demand. These predictions are tested in two experiments that use an online panel to examine consumer demand for videogames.