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on Business Economics |
| By: | Vives, Xavier (IESE Business School) |
| Abstract: | The effects of competition on process and product innovation are analyzed, obtaining robust results that hold for a range of market structures. It is found that increasing the number of firms tends to reduce R&D effort, whereas increasing the degree of product substitutability, with or without free entry, increases R&D effort -provided that the total market for product varieties does not shrink. Increasing the total market size increases R&D effort and has ambiguous effects on the number of varieties offered, while decreasing the cost of entry increases the number of entrants and varieties but reduces R&D effort per variety. The framework and results shed light on empirical strategies to assess the impact of competition on innovation. |
| Keywords: | cost reduction; X-inefficiency; market concentration; market size; substitutability; product introduction; corporate governance; globalization; |
| Date: | 2006–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0634&r=bec |
| By: | Caruso, Raul |
| Abstract: | This paper considers a partial equilibrium model of conflict where two asymmetric, rational and risk-neutral opponents clash in order to redistribute a divisible prize in their favour. Differently from common contest models agents have the option of choosing a second instrument to affect the outcome of the conflict. The second instrument is assumed to capture a complex bundle of Conflict Management Procedures (CMPs). Through comparative statics, different scenarios are studied. A Potential Settlement Region (PSR) is presented as the set of all possible settlement points. First, the role of asymmetry in the evaluation of the contested stake has been underlined. The agent with the lower evaluation will expend efforts in conflict management only when the asymmetry is extremely large. When agents are asymmetrical both in evaluation of the stake and in fighting abilities, there is also a smaller PSR. Once the destruction parameter is considered, agents clearly also take into account the opportunity cost of the conflict and enlarge a PSR. Finally, throughout the paper, the concept of entropy has been applied as a tool for the measurement and evaluation of conflict and conflict management. |
| Keywords: | Conflict; Contest; Conflict management; Asymmetry in evaluation; Statistical entropy; Uncertainty. |
| JEL: | D72 D70 D74 D82 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:214&r=bec |
| By: | Adam Ashcraft; Hoyt Bleakley |
| Abstract: | Using plausibly exogenous variation in demand for federal funds created by daily shocks to reserve balances, we identify the supply curve facing a bank borrower in the interbank market and study how access to overnight credit is affected by changes in public and private measures of borrower creditworthiness. Although there is evidence that lenders respond to adverse changes in public information about credit quality by restricting access to the market in a fashion consistent with market discipline, there is also evidence that borrowers respond to adverse changes in private information about credit quality by increasing leverage so as to offset the future impact on earnings. While the responsiveness of investors to public information is comforting, we document evidence that suggests that banks are able to manage the real information content of these disclosures. In particular, public measures of loan portfolio performance have information about future loan charge-offs, but only in quarters when the bank is examined by supervisors. However, the loan supply curve is not any more sensitive to public disclosures about nonperforming loans in an exam quarter, suggesting that investors are unaware of this information management. |
| Keywords: | Federal funds market (United States) ; Bank loans ; Credit |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:257&r=bec |
| By: | Andy Snell; Jonathan Thomas |
| Abstract: | This paper analyses a model in which firms cannot pay discriminate based on year of entry to a firm, and develops an equilibrium model of wage dynamics and unemployment. The model is developed under the assumption of worker mobility, so that workers can costlessly quit jobs at any time. Firms on the other hand are committed to contracts. Thus the model is related to Beaudry and DiNardo (1991). We solve for the dynamics of wages and unemployment, and show that real wages do not necessarily clear the labor market. Using sectoral productivity data from the post-war US economy, we assess the ability of the model to match actual unemployment and wage series. We also show that equal treatment follows in our model from the assumption of at-will employment contracting. |
| JEL: | E32 J41 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmacp:0603&r=bec |
| By: | Nir Jaimovich; Sergio Rebelo |
| Abstract: | We propose a model that generates an economic expansion in response to good news about future total factor productivity (TFP) or investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that exhibit a weak short-run wealth effect on the labor supply. These preferences nest the two classes of utility functions most widely used in the business cycle literature as special cases. Our model can generate recessions that resemble those of the post-war U.S. economy without relying on negative productivity shocks. The recessions are caused not by contemporaneous negative shocks but rather by lackluster news about future TFP or investment-specific technical change. |
| JEL: | E24 E32 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12537&r=bec |
| By: | Richard B. Freeman |
| Abstract: | This paper assesses the claim the the US faces an impending labor shortage due to the impending retirement of baby boomers and slow growth of the US work force, and that the country should orient labor market and educational policies to alleviate this prospective shortage. I find that this analysis is flawed, by making growth of GDP the target of economic policy and by paying inadequate attention to the huge supply of qualified low wage workers in the global economy. My analysis shows that the projections of future demands for skills lack the reliability to guide policies on skill development, and that contrary to the assumption implicit in the shortage analyses, demographic changes have not historically been consistently associated with changes in labor market conditions. I argue that if there is to be a shortage, the country should allow the competitive market to raise labor compensation rather than to adopt policies to keep labor costs low. |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12541&r=bec |
| By: | Gervais, Jean-Philippe; Bonroy, Olivier; Couture, Steve |
| Abstract: | Cost functions for three Canadian manufacturing agri-food sectors (meat, bakery and dairy) are estimated using provincial data from 1990 to 1999. A translog functional form is used and the concavity property is imposed locally. The Morishima substitution elasticities and returns to scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. In particular, the ability of the double bootstrap to provide refinements in inference is investigated. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticity parameters indicate that increasing returns to scale are present in small bakery industries. While point estimates suggest that increasing returns to scale exist at the industry level in the meat sector, statistical inference cannot rule the existence of decreasing returns to scale. To account for supply management in the dairy sector, separability between raw milk and the other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the dairy industries of Alberta and New Brunswick. The scale elasticity for the two largest provinces (Ontario and Quebec) is greater than one, but inference does not reject the null hypothesis of increasing returns to scale. |
| Keywords: | Translog cost function; Canadian food processing industry; returns to scale; double bootstrap |
| JEL: | C30 D24 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64&r=bec |
| By: | Yongsung Chang; Andreas Hornstein; Pierre-Daniel G. Sarte |
| Abstract: | Whether technological progress raises or lowers aggregate employment in the short run has been the subject of much debate in recent years. Using a simple model of industry employment, we show that cross-industry differences of inventory holding costs, demand elasticities, and price rigidities potentially all affect employment decisions in the face of productivity shocks. In particular, the employment response to a permanent productivity shock is more likely to be positive the less costly it is to hold inventories, the more elastic industry demand is, and the more flexible prices are. Using data on 458 4-digit U.S. manufacturing industries over the period 1958-1996, we find statistically significant effects of variations in inventory holdings and demand elasticities on short-run employment responses, but find less evidence pertaining to the effects of measured price stickiness. |
| Keywords: | Employment ; Productivity |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:06-06&r=bec |
| By: | Bouwens,Jan; Lent,Laurens van (Tilburg University, Center for Economic Research) |
| Abstract: | Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and non-financial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and non-financial measures are employed in response to interdependencies. |
| Keywords: | performance measures;business units;managerial performance |
| JEL: | M41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200692&r=bec |
| By: | Antonio Dias da Silva (Vrije Universiteit Amsterdam); Bas van der Klaauw (Vrije Universiteit Amsterdam) |
| Abstract: | We focus on the dynamic relation between wage increases, promotions and job changes. We relate our empirical analyses to the theoretical model of Gibbons and Waldman (1999). In the empirical analyses we use the Portuguese matched employer-employee data Quadros de Pessoal. We conclude from finding significant serial correlation in wage increases and promotion rates that employer learning about the worker's ability might be important. Furthermore, we find that the Portuguese labor market is not competitive. Finally, we argue that employer-reported promotion relate to a large extent to wage increases rather than changes in job tasks and complexity. |
| Keywords: | learning; competition; dynamic panel data models; matched employer-employee data |
| JEL: | M5 J6 L2 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20060084&r=bec |
| By: | Nir Jaimovich; Sergio Rebelo |
| Abstract: | We explore the business cycle implications of expectation shocks and of two well-known psychological biases, optimism and overconfidence. The expectations of optimistic agents are biased toward good outcomes, while overconfident agents overestimate the precision of the signals that they receive. Both expectation shocks and overconfidence can increase business-cycle volatility, while preserving the model's properties in terms of comovement, and relative volatilities. In contrast, optimism is not a useful source of volatility in our model. |
| JEL: | E32 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12570&r=bec |
| By: | Anne Stévenot-Guéry (Université de Nancy 2); Loris Guéry (Université de Bourgogne) |
| Abstract: | Si les enjeux de l’épargne salariale (intéressement, participation légale et plans d’épargne d’entreprise) du point de vue de l’entreprise ont fait l’objet de plusieurs travaux (implication au travail, motivation des salariés, maîtrise de l’évolution de la masse salariale…), les enjeux du point de vue des syndicats sont encore peu étudiés, en particulier en France. C’est pourquoi cette recherche propose d’examiner plus avant les représentations qu’ont les syndicats majoritaires français de l’épargne salariale au travers d’une analyse de leurs discours. Il s’agit de mieux connaître la nature, la mesure et le sens de leur implication réelle dans la négociation, la mise en œuvre, le fonctionnement et la gestion de l’épargne salariale et ainsi de mettre en évidence les stratégies syndicales par rapport à cette question. Toutes les informations et déclarations relatives à l’épargne salariale présentes sur les sites Internet de ces syndicats ont été recueillies et analysées à l’aide du logiciel NUD*IST. Les résultats permettent de dégager des tendances communes à l’ensemble des syndicats mais aussi d’identifier des différences entre eux. D’une manière générale, l’attitude des syndicats français par rapport à l’ES jusqu’à présent est de nature réactive. Il semble toutefois que certaines centrales évoluent dans leurs stratégies et entendent s’impliquer de manière plus active en amont dans le système, notamment au travers du CIES. La plupart des syndicats veulent saisir une opportunité de l’ES en termes de gouvernance et de développement d’une épargne socialement responsable. A l’issue de cette étude, on distingue différents groupes de syndicats en fonction de leur position plus ou moins favorable à l’ES et de leur posture plus ou moins active à ce niveau. Un autre résultat majeur met en évidence l’absence de discours concernant les conséquences de ce mode de rémunération sur les attitudes et les comportements des salariés au travail (satisfaction, motivation, absentéisme, fidélisation…) de la part des syndicats qui privilégient les conséquences économiques et sociales de l’ES. Des pistes d’explications sont proposées. Cette recherche au stade exploratoire s’ouvre en conclusion sur plusieurs perspectives de recherche. |
| Keywords: | épargne salariale;syndicats;participation financière;discours;NUD*IST. |
| JEL: | J50 M12 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1060904&r=bec |
| By: | Michael Lechner; Conny Wunsch |
| Abstract: | We estimate short, medium, and long-run individual labor market effects of training programs for unemployed by following program participation on a monthly basis over a tenyear period. Since analyzing the effectiveness of training over such a long period is impossible with experimental data, we use an administrative database compiled for evaluating German training programs. Based on matching estimation adapted to the various issues that arise in this particular context, we find a clear positive relation between the effectiveness of the programs and the unemployment rate over time. |
| Keywords: | Active labor market policy, long-run effects, matching estimation, causal effects, program evaluation, panel data |
| JEL: | J |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2006:2006-23&r=bec |
| By: | Robert Coulon (Université de Bourgogne) |
| Abstract: | (VF)Dans quelle mesure les entreprises françaises déclinent-elles la notion de Responsabilité Sociale dans leurs pratiques de gestion des Ressources Humaines (GRH) ? Cherchent-elles à développer des pratiques RH qui dépassent l’application des règles de droit ? Pour répondre à ces questions, nous présentons les résultats d’une enquête auprès de 106 professionnels RH appartenant dans leur majorité à des entreprises industrielles de taille importante. Leurs témoignages, recueillis par questionnaires, portent sur un ensemble limité de pratiques RH socialement responsables.Selon nos résultats, les pratiques de GRH intègrent assez peu la notion de Responsabilité Sociale des Entreprises (RSE) ; elles répondent essentiellement à des règles de droit.(VA) As far as human resource management practices (HRM) are concerned, how do French companies respond to corporate social responsibility (CSR)? Are they eager to develop practices beyond the existing legal rules? To answer these questions, we present the results of an inquiry involving 106 HR managers who mainly belong to large manufacturing companies. Their statements, collected by questionnaire, are focused on a few “responsible” HRM practices.According to our results, the HR management practices are still very slightly affected by CSR, they mainly respond to legal rules. |
| Keywords: | Responsabilité Sociales des Entreprises (RSE);Gestion des Ressources Humaines (GRH);Human Resource Management (HRM), Corporate Social Responsibility (CSR). |
| JEL: | M12 M14 M51 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1060902&r=bec |
| By: | Enrico Prinz (Université de Bourgogne) |
| Abstract: | This article deals with interlocking directorates and the increasing attention this topic has been attracting in recent years. Financial theory tends to regard the subject of directorship interlocks generally negative, even if theoretical argumentation also allows speaking favoura-bly of the effects personnel relations have in a firm's perspective. At this point of time, em-pirical findings are contradictory and do not allow making concluding remarks on the impact director ties have on corporate performance. In order to fill this gap, we analyse interlocks between the 30 largest listed German companies from 2001 to 2005 for testing their impact on corporate performance. Our findings indicate that board appointments of executives harm firm performance. However, those interlocks seem to lower managing director compensation of the appointing firm. Interlocks between supervisory board members do not have any influ-ence, neither on financial performance, nor on management payment levels. |
| Keywords: | corporate governance;interlocking directorates;board of directors;firm performance;executive compensation. |
| JEL: | G30 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1061001&r=bec |
| By: | Dennis Dittrich; Martin Kocher |
| Abstract: | We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result, monitoring and pay should be complements. In our experiment, between and within treatment variation is qualitatively in line with the normative predictions of the model under selfishness assumptions. Yet, we also find evidence for reciprocal behavior. The data analysis shows, however, that it does not pay for the employer to rely on the reciprocity of employees. |
| Keywords: | incentive contracts, supervision, efficiency wages, experiment, incomplete contracts, reciprocity |
| JEL: | C91 J31 J41 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:esi:discus:2006-23&r=bec |
| By: | Russell S. Sobel (Department of Economics, West Virginia University) |
| Abstract: | Baumol’s (1990) theory of productive and unproductive entrepreneurship is a significant recent contribution to the economics of entrepreneurship literature. He hypothesizes that entrepreneurial individuals channel their effort in different directions depending on the quality of prevailing economic, political, and legal institutions. This institutional structure determines the relative reward to investing entrepreneurial energies into productive market activities versus unproductive political and legal activities (e.g., lobbying and lawsuits). Good institutions channel effort into productive entrepreneurship, sustaining higher rates of economic growth. I test and confirm Baumol’s theory, and discuss its significance to the literature and policy reform. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:wvu:wpaper:06-06&r=bec |
| By: | Holger Breinlich |
| Abstract: | This paper analyzes mergers and acquisitions (M&A) as a previously neglected channel of industrial restructuring in the face of trade liberalization. Using the Canada-United States Free Trade Agreement of 1989 as a source of exogenous variation in trade barriers, I show that trade liberalization leads to a significant increase in M&A activity. I also provide evidence that resources are transferred from less to more productive firms in the process and that the magnitude of the overall transfer is quantitatively important. Taken together, these results suggest that M&As are an important alternative to the previously studied adjustment channels of firm and establishment closure and contraction. This has strong implications for the design of competition policy in the wake of trade liberalizations since M&As may offer a more efficient way of transferring resources than contraction and closure of low productivity firms combined with internal growth of more efficient firms. |
| Date: | 2006–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:619&r=bec |
| By: | Rajagopal (Tecnológico de Monterrey, Campus Ciudad de México) |
| Abstract: | There are many factors that determine the structure of competition in the environment of growing globalization. Of these, the factors which predominates the nature of competition include not only rivals, but also the economics of particular industries, new entrants, the bargaining power of customers and suppliers, and the threat of substitute services or products. Hence, competition seems to be inevitable. However, collaboration in the business strategy may be considered analogous with the cooperation in the reference to prevailing concerns of the globalization. This paper delineates the driving factors after the ideologies of the strategy formulation through competition and cooperation. The arguments in the paper are woven around sociological, economical and human behavioral paradigms and analytically discuss the strategic fit of competition and cooperation maxims intended towards the growth of business in a firm. The motivation on these juxtaposed issues of competition and cooperation has been derived by reviewing the ideologies debated over the recent past. |
| Keywords: | Competition, business growth, cooperation, human behavior, market leadership |
| JEL: | A13 D63 L22 M14 M20 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:ega:wpaper:200605&r=bec |
| By: | Rajagopal (Tecnológico de Monterrey, Campus Ciudad de México) |
| Abstract: | Latin American corporate executives are faced with a serious problem the low trust and peer confidence. The factors of criticism at workplace, increased corporate controls, and growing expectations for improved performance and accountability have accompanied this decline in trust. Traditional approaches to corporate governance epitomized by organizational behavior theories have focused on short-term profits and organizational systems which fail to achieve desired results. This paper presents the analysis of behavioral dimensions of cross-cultural team performance in corporate environment in Mexico.This study is based on literature review of previous research contributions focused on the managers of multinational companies operating in Latin American countries in a cross-cultural environment. The success of the corporate ventures in Mexico has been evaluated from the perspectives of economic and relational attributes. The discussion in the study revealed that the degree of fit between a corporate parent and venture affects the success of the venture. |
| Keywords: | Low trust, culture and personality traits, team working, gender sensitivity, venture management |
| JEL: | M12 M51 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:ega:wpaper:200609&r=bec |
| By: | Marc Lassagne (ENSAM Lille); Samuel Mercier (Université de Bourgogne) |
| Abstract: | (VF)Cet article prend acte de l’omniprésence du risque dans la prise de décision managériale. Se fondant sur une vision partenariale de l’entreprise, il propose de mieux préciser ce que recouvre la notion de gestion du risque éthique. Après avoir présenté de manière synthétique les différents outils de gestion du risque éthique, il livre quelques réflexions sur le caractère paradoxal d’une telle gestion. (VA) This paper is motivated by the ubiquity of risk in managerial decision-making. It aims at giving a more precise definition of the notion of ethical risk by using a stakeholder-based approach. After a succinct presentation of the various tools used in the management of ethical risks, it highlights the paradoxical nature of this management process. |
| Keywords: | gestion du risque éthique;ethical risk management; stakeholder theory. |
| JEL: | M14 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1061003&r=bec |
| By: | Georg Erber |
| Abstract: | The impact of ICT on the efficiency of different national telecommunication industries of the US, Germany, France, the UK and the Netherlands is analysed by using a stochastic production possibility frontier approach. The relative inefficiencies of these industries measured as distances to the general production possibility frontier are estimated by a multi-country panel maximum-likelihood-estimation. By determining the technology efficiency effect frontiers for each single country one obtains a measure for the evolution of relative inefficiencies over time for each country's industry. Looking at these different patterns a common characteristic shape of stylised J-curves is revealed. This can be interpreted as J-curves of adoption of innovations in different national telecommunication industries. Since the troughs of these J-curves occur in different years for different countries a phase delay in adoption of innovations occurs differing from country to country. The time period covered by the data include a time when the deregulation of the telecommunication industries in these countries took place and the rapid diffusion of two key innovations - the Internet and mobile communications - changed the technological and organisational foundations everywhere. The results show that even if the US telecommunication industry led in this wave of major innovations as a first mover in comparison to the others and diminished by this their relative efficiency disadvantage opposite the European countries the EU countries still maintain a comparative efficiency advantage inherited from the early 1980's. In particular after their delayed adoption of the recent innovations like deregulation and Internet began there during the late 1990's the rapid catch up of the US telecommunication industry relative to the European industries has stalled. However, overall the inefficiency differences between national telecommunication industries have decreased in the long-run. Differences in the capability to establish and maintain a competitive and innovative national industry, however, still prevail between these countries even if they have become less pronounced as before. |
| Keywords: | Benchmarking, Production Possibility Frontiers, Efficiency/Inefficiency Measurement, J-Curve of Adoption of Innovations, Convergence |
| JEL: | L96 O33 O47 O57 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp621&r=bec |
| By: | Raphaël Suire(CREM - CNRS); Jérome Vicente (LEREPS - GRES); Yan Dala Pria (CSO - IEP - CNRS) |
| Abstract: | The aim of this paper is to study the ambivalent properties of stabilities of clusters. We propose to enter the black box of the local knowledge externalities by focusing on the location decision externalities. In particular, we show that the nature of mimetic strategies in the convergence process of locational choices influence the dynamic stability of clusters. Thus, when uncertainty and search for legitimacy prevail on the need for coordination and the associated necessities of compatibility and technological convergence, the clusters are unstable, due to an excess of cognitive proximity and a risk of unintended spillovers. Nevertheless, this search for legitimacy, through the strategy which consists in following the locational choice of companies leader of a sector, can lead to the fast emergence of a cluster. But without relational proximity, its stability is not insured. These results are obtained following the formulation of some theoretical proposals on the links between location decision externalities and the resulting forms of socioeconomic proximities. This set of proposals is validated firstly by a model of simulation which makes it possible to test the properties of stability of aggregate outcomes of locational choices. Secondly, they are illustrated by a comparative empirical analysis of two main French clusters (Silicon Sentier and Sophia-Antipolis).. |
| Keywords: | clusters, proximities, stability, location under decision externalities, Silicon Sentier, Sophia-Antipolis |
| JEL: | C63 D85 R3 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:200619&r=bec |
| By: | James McAndrews; Zhu Wang |
| Abstract: | This paper provides a theory of payment industry dynamics, in which we focus on the monetary nature of payment devices and consider an alternative microfoundation for the two-sided market approach. In a competitive economy, the adoption of an emerging payment method is determined by the distribution of consumer incomes and firm sizes, and the change of consumer income, adoption cost, and card-industry market structure each have important influence on payment pricing and usage dynamics. Our findings suggest that both the increasing concentration of payment card network and the growth of consumer income relative to card service costs may help explain the puzzles surrounding payment card interchange fees. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkpw:psrwp06-01&r=bec |