Stackelberg Beats Cournot — On Collusion and Efficiency in Experimental Markets

We report on an experiment designed to compare Stackelberg and Cournot duopoly markets with quantity competition. We implement both a random matching and a fixed-pairs version for each market. Stackelberg markets yield, regardless of the matching scheme, higher outputs than Cournot markets and, thus, higher efficiency. For Cournot markets, we replicate a pattern known from previous experiments. There is stable equilibrium play under random matching and partial collusion under fixed pairs. We also find, for Stackelberg markets, that competition becomes less intense when firms remain in pairs but we find considerable deviations from the subgame perfect equilibrium prediction which can be attributed to an aversion to disadvantageous inequality.     

Pension plan accounting estimates and the freezing of defined benefit pension plans

This study provides evidence that, when “hard” freezing their defined benefit pension plans, employers select downward biased accounting assumptions to exaggerate the economic burden of their benefit plans. Downward biased expected rates of return and discount rates allow managers to increase reported pension expenses and, for discount rates, allow managers to increase reported pension liabilities. We find that prior to the Sarbanes-Oxley Act, both rates are downward biased when firms freeze their plans, whereas after SOX the bias is lower. This finding is consistent with managers opportunistically biasing pension estimates to obtain labor concessions during periods of reduced regulatory scrutiny.     

Sudden crash or long torture: The timing of market reactions to operational loss events

An emerging literature investigating market responses to operational loss announcements concludes that financial markets tend usually to overreact to loss events. This overreaction is commonly interpreted as reputational damage. We revisit this issue by focusing on the timing of markets’ reactions and highlight two variables: the start and the speed of stock markets’ responses. It appears that when operational losses are caused by internal fraud the negative market reaction materializes earlier and faster. Industry sectors and prevailing market conditions influence the timing of market reactions as well. Our empirical findings reveal moreover that a higher initial grading of the company is associated with a later stock market reaction to the announcement. While the relative magnitude and the length of markets’ overreactions is positively correlated to the concomitant downgrading our study shows that overreaction magnitudes are also strongly correlated to our estimate of the total duration of the reaction.     

Adoption patterns over time: a replication

Marketing Letters - Based on new data, we replicate Mahajan et al.’s (1990) paper on adopter categories and Goldenberg et al.’s (2002) paper on saddles and offer explanations and...