Passive vertical integration and strategic delegation

With backward acquisitions in their efficient supplier, downstream firms profitably internalize the effects of their actions on their rivals' sales, while upstream competition is also relaxed. Downstream prices increase with passive, yet decrease with controlling acquisition. Passive acquisition is profitable when controlling acquisition is not. Downstream acquirers strategically abstain from vertical control, thus delegating commitment to the supplier, and with it high input prices, allowing them to charge high downstream prices. The effects of passive backward acquisition are reinforced with the acquisition by several downstream firms in the efficient supplier. The results are sustained when suppliers charge two‐part tariffs.     

The Limits of Shrinkage: Conceptual Pitfalls and Alternatives in the Discussion of Urban Population Loss

This essay reflects on the conceptual underpinnings of research on ‘shrinking cities' over the last decade. It criticizes the definition of shrinkage in terms of urban population losses and argues that the state‐of‐the art research on ‘shrinking cities' suffers from a misleading conceptualization of shrinkage which forces essentially different urban constellations into a universal model of ‘shrinkage'. Four problems of this procrustean bed are discussed in detail: methodological pitfalls of threshold definitions of urban shrinkage; empirical contradictions; an absence of attention to scalar interrelations; and insufficient understanding of cities as historical processes. The essay ends with suggestions for a widened conceptualization of shrinkage and a new research agenda.     

How Will the Court Decide? – Tax Experts’ versus Laymen's Predictions

We conduct a survey of German tax professionals (tax advisors and revenue agents) and laymen to examine whether tax experts more accurately forecast the outcomes of five real cases from the German Federal Fiscal Court. With an average of 2.39 correct predictions among experts and an average of 2.49 correct predictions among laymen, our results reveal no significant difference in forecasting accuracy between the two groups. Additionally, neither general nor task-specific tax expertise increases the experts’ forecasting accuracy. This unpredictability of tax court decisions indicates that accounting rules and taxpayer penalties that rely on accurate predictions of tax court decisions may need to be re-evaluated. Moreover, our results indicate the existence of two types of ‘advisor bias’. First, tax advisors exhibit a significantly higher level of overconfidence in comparison to other experts (i.e. revenue agents) and laymen. In particular, they believe that they correctly predict, on average, 1.52 more cases than they actually do. Second, we find some evidence indicating that tax advisors acting as client advocates form stronger appeal recommendations than revenue agents.     

Standardization of intermediate goods and international trade

Abstract.  This paper analyzes the relationship between standardization of intermediate inputs and international trade. We employ a two-country, general equilibrium model with differentiated manufacturing goods. Production of manufacturing goods requires specific intermediate inputs, which can be either specialized or standardized. Standardization and the pattern of trade are determined endogenously in our model. In this framework we derive the effects of trade integration, that is, a decline in trading costs for intermediate goods, on the equilibrium outcome.     

If Nothing is Achieved: Who Pays for the Brexit?

The United Kingdom will depart from the European Union in March 2019. Numerous open questions remain about details and conditions especially with regard to post-Brexit EU-UK trade relations. In case of a negotiation failure, a “hard Brexit” could cause considerably high costs on both sides of the Channel. In the short run, companies will be charged more than 15 billion euro as tariffs. In the long run, UK-EU trade could be reduced up to 50 percent.     

It’s a match! Simulating compatibility-based learning in a network of networks

In this article, we develop a new way to capture knowledge diffusion and assimilation in innovation networks by means of an agent-based simulation model. The model incorporates three essential characteristics of knowledge that have not been covered entirely by previous diffusion models: the network character of knowledge, compatibility of new knowledge with already existing knowledge, and the fact that transmission of knowledge requires some form of attention. We employ a network-of- networks approach, where agents are located within an innovation network and each agent itself contains another network composed of knowledge units (KUs). Since social learning is a path-dependent process, in our model, KUs are exchanged among agents and integrated into their respective knowledge networks depending on the received KUs’ compatibility with the currently focused ones. Thereby, we are also able to endogenize attributes such as absorptive capacity that have been treated as an exogenous parameter in some of the previous diffusion models. We use our model to simulate and analyze various scenarios, including cases for different degrees of knowledge diversity and cognitive distance among agents as well as knowledge exploitation vs. exploration strategies. Here, the model is able to distinguish between two levels of knowledge diversity: heterogeneity within and between agents. Additionally, our simulation results give fresh impetus to debates about the interplay of innovation network structure and knowledge diffusion. In summary, our article proposes a novel way of modeling knowledge diffusion, thereby contributing to an advancement of the economics of innovation and knowledge.     

Is there a life cycle in all industries? First evidence from industry size dynamics in West Germany

We propose a novel nonlinear regression approach to test whether the size of industries develops over time along the stylized pattern assumed by the industry life cycle theory. We apply our model on data covering the full spectrum of 205 NACE industries including services in West Germany between 1976 and 2009 and four indicators describing industry size (employment, establishments, entries and exits). The results of our large scale analysis show that in most industries indeed size develops along a cyclical path, albeit this development is not universal. Furthermore, we provide first empirical evidence on service industries where we show that the number of establishments and employees frequently develop in line with what is found for most (product) industries.     

On the simultaneity bias in the relationship between risk attitudes,entry into entrepreneurship and entrepreneurial survival

We consider the simultaneity bias when examining the effect of individual risk attitudes on entrepreneurship. We demonstrate that entry into self-employment is related to changes in risk attitudes. We further show that these changes are correlated with the probability to remain in entrepreneurship.     

Casting light on energy efficiency: evidence on consumer inattention and imperfect information

We investigate consumer inattention and imperfect information regarding the financial benefits of energy-efficient lighting using a randomized controlled trial with 1084 observations. Results suggest that subjects generally know about cost savings of light-emitting diode (LED) bulbs – the central lighting technology of the future – but largely underestimate the magnitude of these savings. As a result, stated willingness-to-pay for an LED bulb increases on average by 2.53€ through the provision of information on expected lifetime costs. Additional evidence hints at further consumer confusion about attribute differences between lighting technologies.     

Die optimale Organisationsform für das Auslandsgeschäft

Internationalisierung ist für fast alle Unternehmen ein Thema. Eine zentrale Frage dabei: Wie soll das Auslandsgesch?ft organisatorisch verankert werden? Ein Modell strukturiert die wesentlichen Faktoren für die Auswahl der Organisationsform. Das Beispiel der finnischen W?rtsil? Corporation illustriert die Anwendung in der Praxis.