nep-bec New Economics Papers
on Business Economics
Issue of 2012‒08‒23
twenty papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Competition between Multiproduct Firms with Heterogeneous Costs By Roberto Roson
  2. Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly By Mitraille, Sébastien; Moreaux, Michel
  3. The Executive Turnover Risk Premium By Florian S. Peters; Alexander F. Wagner
  4. The Anatomy of French Production Hierarchies By Caliendo, Lorenzo; Monte, Ferdinando; Rossi-Hansberg, Esteban
  5. Does Reliable Pirated Product Lead to More Piracy? By Yuanzhu Lu; Sougata Poddar
  6. Do Employees Profit from Profit Sharing? Evidence from Canadian Panel Data By Long, Richard J.; Fang, Tony
  7. Labour relations quality and productivity : An empirical analysis on French firms. By Gilbert Cette; Nicolas Dromel; Rémy Lecat; Anne-Charlotte Paret
  8. Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion By Hugo E. Silva; Erik T. Verhoef; Vincent A.C. van den Berg
  9. Long-run Trends or Short-run Fluctuations – What Establishes the Correlation between Oil and Food Prices?The Interplay of Standardized Tests and Incentives – An Econometric Analysis with Data from PISA 2000 and PISA 2009 By Karoline Krätschel; Torsten Schmidt
  10. Strategie di prezzo e profittabilità nel mercato degli oli extra-vergine di oliva:un modello di analisi attraverso gli scanner data. By Stasi, Antonio; Diotallevi, Francesco; Marchini, Andrea
  11. Team Structure and the Effectiveness of Collective Performance Pay By Ratto, Marisa; Tominey, Emma; Vergé, Thibaud
  12. Reference points in renegotiations: The role of contracts and competition By Björn Bartling; Klaus M. Schmidt
  13. Matching with Contracts: The Critical Role of Irrelevance of Rejected Contracts By Orhan Aygün; Tayfun Sönmez
  14. Some Consequences of the Early Twentieth Century Divorce of Ownership from Control By James Foreman-Peck; Leslie Hannah
  15. Leverage vs. Feedback: Which Effect Drives the Oil Market? By Sofiane Aboura; Julien Chevallier
  16. Wage structure and firm performance By N. CECI-RENAUD; V. COTTET
  17. The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications By Olivier Coibion; Yuriy Gorodnichenko; Gee Hee Hong
  18. Organizational strategies, firms’ performance and spatial spillovers: the Canadian case in research and development. By Rosa, Julio Miguel
  19. Why Do Entrepreneurial Parents Have Entrepreneurial Children? By Lindquist, Matthew J.; Sol, Joeri; van Praag, Mirjam
  20. Japan out of the Lost Decade: Divine Wind or Firms’ Effort? By Mika Saito; Ichiro Tokutsu; Kazuo Ogawa

  1. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari)
    Abstract: This paper draws upon Feenstra and Ma (2007, 2008), to develop a model of asymmetric competition between multiproduct firms. The model is used to analyze how cost asymmetry affects the equilibrium, with determination of quantity/price as well as product scope per firm. By treating the number of firms as a continuous variable, the model is extended to account for the endogenous determination of the number of firms in a long-run, monopolistically competitive equilibrium, with free entry by heterogeneous firms.
    Keywords: Multiproduct firm, monopolistic competition, product scope, cost asymmetry.
    JEL: D43 L11 L13
    Date: 2012
  2. By: Mitraille, Sébastien (Université de Toulouse, Toulouse Business School); Moreaux, Michel (Toulouse School of Economics (IDEI and LERNA))
    Abstract: Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash-perfect equilibria, in which some firms store to exert endogenously a leadership over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased sales and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and aggregate sales increase due to the strategic use of inventories.
    JEL: D43 L13
    Date: 2012–02
  3. By: Florian S. Peters (Duisenberg school of finance, University of Amsterdam); Alexander F. Wagner (Swiss Finance Institute, University of Zuerich, CEPR, Harvard University)
    Abstract: We establish that CEOs of companies experiencing volatile industry conditions are more likely to be dismissed. At the same time, industry risk is, controlling for various other factors, unlikely to be directly associated with CEO compensation other than through dismissal risk. Using this identification strategy, we document that CEO turnover risk is significantly positively associated with compensation. This finding is important because job-risk compensating wage differentials arise naturally in competitive labor markets. By contrast, the evidence rejects a simple entrenchment model according to which powerful CEOs have lower job risk and at the same time secure higher compensation.
    Keywords: CEO turnover; CEO Compensation; Corporate Governance
    JEL: D8 G34 M52
    Date: 2012–03–08
  4. By: Caliendo, Lorenzo; Monte, Ferdinando; Rossi-Hansberg, Esteban
    Abstract: We use a comprehensive dataset of French manufacturing firms to study their internal organization. We first divide the employees of each firm into `layers' using occupational categories. Layers are hierarchical in that the typical worker in a higher layer earns more, and the typical firm occupies less of them. In addition, the probability of adding (dropping) a layer is very positively (negatively) correlated with value added. We then explore the changes in the wages and number of employees that accompany expansions in layers, output, or markets (by becoming exporters). The empirical results indicate that reorganization, through changes in layers, is key to understand how firms expand and contract. For example, we find that firms that expand substantially add layers and pay lower average wages in all pre-existing layers. In contrast, firms that expand little and do not reorganize pay higher average wages in all pre-existing layers.
    Keywords: Firm Dynamics; Firm Growth; Organizational Change; Organizations; Skills; Wages
    JEL: D22 F16 J24 J31
    Date: 2012–07
  5. By: Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics, Beijing, China.); Sougata Poddar (Department of Economics, Auckland University of Technology, Auckland, New Zealand.)
    Abstract: Conventional wisdom would suggest if a pirated product, which is cheaper than the original product, becomes more reliable then the relative demand of the pirated product or the rate of piracy will increase when consumers have different willingness to pay. However, is this always true? We address this question in a framework where the original product developer makes costly investment to deter pirate(s) in a given regime of IPR protection. We show that the relationship between the rate of piracy and the reliability of the pirated product depends on the nature of the pirate as well as on the nature of the market competition if the pirate is commercial. Under commercial piracy, when the original firm and the pirate compete in quantities, the conventional wisdom holds i.e. the more reliable the pirated product, the higher is the rate of piracy. However, the relationship is non-monotonic, hence the wisdom does not hold when they compete in prices or the pirates are the end-users.
    Keywords: IPR protections, price competition, quantity competition, product quality.
    JEL: D23 D43 L13 L86
    Date: 2012–05
  6. By: Long, Richard J. (University of Saskatchewan); Fang, Tony (York University, Canada)
    Abstract: Using panel data from a large sample of Canadian establishments, this paper examines whether employee earnings increase, decrease, or do not change in the period subsequent to adoption of profit sharing, relative to establishments that do not adopt profit sharing. Our research contributes to knowledge by utilizing longitudinal analysis to assess the effects of profit sharing adoption on employee earnings growth within a carefully constructed sample of Canadian establishments, and by assessing both cash real earnings growth and total real earnings growth, while controlling for a wide array of variables that may affect these results. On average, employees in Canadian establishments that adopted profit sharing during 1999-2001 appeared to benefit from the introduction of profit sharing, in terms of both their cash real earnings growth and total real earnings growth, in the five-year span following introduction of profit sharing. This advantage was both statistically and practically significant, adding about 15 percentage points to real employee earnings growth over the five-year period, a period during which employee earnings growth was generally modest.
    Keywords: profit sharing plans, employee earnings, firm-worker linked survey, Canada
    JEL: J33 J31 J38
    Date: 2012–07
  7. By: Gilbert Cette (Banque de France et DEFI - Université de la Méditerranée); Nicolas Dromel (Paris School of Economics - Centre d'Economie de la Sorbonne); Rémy Lecat (Banque de France); Anne-Charlotte Paret (Banque de France et ENSAE)
    Abstract: This analysis characterizes empirically how good labour relations can alleviate the negative impact on productivity of regulatory constraints or workforce opposition. Our evidence of good labour relations lies in the existence of binding collective agreements, at the firm or at the industry level. The estimations are based on a unique dataset collected by the Banque de France about the obstacles French firms may face in increasing their utilisation of production factors. Data are an unbalanced sample of 7,441 observations, corresponding to 1,545 companies, over the period 1991-2008. Our main results may be summarised as follows : i) ‘workforce or union opposition’ interacted with ‘regulatory constraints’ has a negative significant impact on total factor productivity (TFP). Regulatory constraints would become really binding when workers or unions use them as a tool to oppose management's decisions ; ii) ‘regulatory constraints’ interacted with ‘branch or firm agreement’ has a positive significant impact on TFP. These agreements, which can only be obtained if labour relations are supportive, would be used by firms to offset the negative impact of regulatory constraints. These results confirm that labour relations quality, at the branch or the firm levels, is an important factor of productive performance.
    Keywords: Labour relation, collective bargaining, trade unions, productivity.
    JEL: J53 J52 J51
    Date: 2012–07
  8. By: Hugo E. Silva (VU University); Erik T. Verhoef (VU University); Vincent A.C. van den Berg (VU University)
    Abstract: This paper analyzes airlines' strategic interactions and airport efficient pricing, with a deterministic bottleneck model of congestion, in Cournot-Nash competition and in sequential competition where a Stackelberg leader interacts with perfectly competitive airlines. We show that the internalization of self-imposed congestion by non-atomistic carriers is consistent with earlier literature based on static models of congestion, but the congestion tolls are not. The tolls derived for fully atomistic airlines achieve the social optimum, when charged to all carriers, in the simultanous setting as well as in the sequential setting. We also find that alternative efficient pricing schemes exist for the sequential competition between a dominant airline and a competitive follower. The analysis suggests that airport congestion pricing has a more signicant role than what previous studies have suggested. Moreover, the financial deficit under optimal pricing may be less severe than what earlier studies suggest, as congestion toll revenues may cover optimal capacity investments. Political feasibility would be enhanced as ecient congestion charges do not depend on market shares and therefore may not be perceived as inequitable.
    Keywords: Airport pricing; Congestion; Bottleneck model
    JEL: H23 L50 L93 R48
    Date: 2012–05–25
  9. By: Karoline Krätschel; Torsten Schmidt
    Abstract: In this paper we use the frequency domain Granger causality test of Breitung/Candelon (2006) to analyse short- and long-run causality between energy prices and prices of food commodities. We find that the oil price Granger causes all the considered food prices. However, when controlling for business cycle fluctuations this link exists especially at low frequencies. Thus, short-run phenomena like herd behaviour and speculation do not seem to have a considerable effect on the studied food prices. The relation between oil and food prices is rather established by long-term developments. A possible explanation for this could be the production of biofuel.
    Keywords: Granger causality; spectral analysis; commodity prices
    JEL: C32 E43
    Date: 2012–07
  10. By: Stasi, Antonio; Diotallevi, Francesco; Marchini, Andrea
    Abstract: Given the recent changes in olive oil market and the growing importance of Distribution for commerce and for private labeling srategies, our work aims at conducting a market analysis that studies the competition within the sector and foresees the profitability of the different possible business strategies. The study refers to the industrial organization theory and estimates olive oil demand in order to calculate the price cost margins. The main findings concern low expectation about price wars. In general private labels seem to perform better then multinational strategies. Small-medium enterprises are less competitive but still able to survive in the competitive arena.
    JEL: A13 Q13 C01
    Date: 2012
  11. By: Ratto, Marisa (Université Paris-Dauphine); Tominey, Emma (University of York); Vergé, Thibaud (CREST)
    Abstract: The adoption of performance related pay schemes has become increasingly popular in the public sector of several countries. In the UK, the scheme designers favoured collective performance pay with the aim to foster cooperation across offices. The resulting team structure included several offices (subteams) within the same team, defined by the remuneration scheme. In this paper we analyse the strategic interactions across subteams created by a two-level team structure, in order to assess whether rewarding collective performance necessarily promotes cooperation. We show that such team structure creates conflicting incentives to free-ride across and within subteams. Moreover, the relative size of subteams can be a powerful means to deliver incentives when funds for performance rewards are limited. Using data for one of the incentive schemes piloted in the UK, we analyse the role of the target level and of the relative size of subteams on subteams' performance.
    Keywords: incentives, teams performance, sub-teams, cooperation
    JEL: M52 M54 J33
    Date: 2012–07
  12. By: Björn Bartling; Klaus M. Schmidt
    Abstract: Several recent papers argue that contracts provide reference points that affect ex post behavior. We test this hypothesis in a canonical buyer-seller relationship with renegotiation. Our paper provides causal experimental evidence that an initial contract has a highly significant and economically important impact on renegotiation behavior that goes beyond the effect of contracts on bargaining threatpoints. We compare situations in which an initial contract is renegotiated to strategically equivalent bargaining situations in which no ex ante contract was written. The ex ante contract causes sellers to ask for markups that are 45 percent lower than in strategically equivalent bargaining situations without an initial contract. Moreover, buyers are more likely to reject given markups in renegotiations than in negotiations. We do not find that these effects are stronger when the initial contract is concluded under competitive rather than monopolistic conditions.
    Keywords: Renegotiation, bargaining, reference points, contracts, competition
    JEL: C78 C91 D03 D86
    Date: 2012–08
  13. By: Orhan Aygün (Boston College); Tayfun Sönmez (Boston College)
    Abstract: We show that an ambiguity in setting the primitives of the matching with contracts model by Hatfield and Milgrom (2005) has serious implications for the model. Of the two ways to clear the ambiguity, the first (and what we consider more "clean") remedy renders several of the results of the paper invalid in the absence of an additional irrelevance of removed contracts condition implicitly assumed throughout the paper, whereas the second remedy results in the lack of transparency in presentation of results while at the same time reducing the scope of the analysis with no clear benefit.
    Keywords: Matching with Contracts, Stability, Market Design
    JEL: C78 D63 D78
    Date: 2012–05–31
  14. By: James Foreman-Peck (Cardiff University); Leslie Hannah (University of Tokyo)
    Abstract: Because ownership was already more divorced from control in the largest stock market of 1911 (London) than in the largest stock market of 1995 (New York), the consequences for the economy, for good or ill, could have been considerable. Using a large sample of quoted companies with capital of £1 million or more, we show that this separation did not generally operate against shareholders’ interests, despite the very substantial potential for agency problems. More directors were apparently preferable to fewer over a considerable range, as far as their influence on company share price and return on equity was concerned: company directors were not simply ornamental. A greater number of shareholders was more in shareholders’ interest than a smaller, despite the enhanced difficulties of coordinating shareholder ‘voice’. A larger share of votes controlled by the Board combined with greater Board share ownership was also on average consistent with a greater return on equity. Corporate governance thus appears to have been well adapted to the circumstances of the Edwardian company capital market. Hence the reduction in the cost of capital for such a large proportion of British business conferred a substantial advantage on the economy.
    Keywords: corporate governance, company directors, shareholders, board voting control, directors’ shareholdings, corporate performance
    JEL: G32 G34 L25
    Date: 2012–07
  15. By: Sofiane Aboura (CEREG - Centre de Recherche sur la gestion et la Finance - DRM UMR 7088 - Université Paris IX - Paris Dauphine); Julien Chevallier (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense)
    Abstract: This article brings new insights on the role played by (implied) volatility on the WTI crude oil spot price. An increase in the volatility subsequent to an increase in the oil price (i.e. inverse leverage effect) remains the dominant effect as it might reflect the fear of oil consumers to face rising oil prices. However, this effect is amplified by an increase in the oil price subsequent to an increase in the volatility (i.e. inverse feedback effect) with a two-day delayed effect. This lead-lag relation between the oil price and its volatility is determinant for any type of trading strategy based on futures and options on the OVX implied volatility index, and thus is of interest to traders, risk- and fund-managers.
    Keywords: WTI, Crude Oil Price, Implied Volatility, Leverage Effect, Feedback Effect
    Date: 2012–07–23
  16. By: N. CECI-RENAUD (Insee); V. COTTET (Insee)
    Abstract: This study describes the human resources management along several dimensions, based on administrative data (DADS and tax data): wage schedule both in terms of level but also dispersion, stability of the workforce, proportion of different qualifications and age, share of subsidized jobs ... A typology of these companies is available from these dimensions. Then we compare these wage structures with the performance. We observe that the most productive firms are also those who pay the highest wages, even after taking into account their specific characteristics (size, sector) and those of their employees. The link between wage dispersion and the productivity is more difficult to characterize: the estimate parameters are very sensitive to the empirical specification.
    Keywords: wage dispersion, wage structure, productivity
    JEL: L25 M52 J31 J33
    Date: 2012
  17. By: Olivier Coibion; Yuriy Gorodnichenko; Gee Hee Hong
    Abstract: We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) in a dataset containing prices and quantities sold for numerous retailers across a variety of U.S. metropolitan areas. Both the frequency and size of sales fall when local unemployment rates rise and yet the inflation rate for effective prices paid by consumers declines significantly with higher unemployment. This discrepancy can be reconciled by consumers reallocating their expenditures across retailers, a feature of the data which we document and quantify. We propose a simple model with household shopping effort and store-switching consistent with these stylized facts and document its implications for business cycles and policymakers.
    JEL: E3 E4 E5
    Date: 2012–08
  18. By: Rosa, Julio Miguel (Maastricht University)
    Date: 2012
  19. By: Lindquist, Matthew J. (SOFI, Stockholm University); Sol, Joeri (University of Amsterdam); van Praag, Mirjam (University of Amsterdam)
    Abstract: Parental entrepreneurship is a strong, probably the strongest, determinant of own entrepreneurship. We explore the origins of this intergenerational association in entrepreneurship. In particular, we identify the separate effects of pre- and post-birth factors (nature and nurture), by using a unique dataset of Swedish adoptees. Its unique characteristic is that it not only includes data on occupational status for the adoptees and their adoptive parents, but also for their biological parents. Moreover, we use comparable data on entrepreneurship for a large, representative sample of the Swedish population. Based on the latter sample, and consistent with previous findings, we show that parental entrepreneurship increases the probability of children's entrepreneurship by about 60%. We further show that for adoptees, both biological and adoptive parents make significant contributions. These effects, however, are quite different in size. The effect of post-birth factors (adoptive parents) is approximately twice as large as the effect of pre-birth factors (biological parents). The sum of these two effects for adopted children is almost identical to the intergenerational transmission of entrepreneurship for own-birth children. We explore several candidate explanations for this important post-birth effect and present suggestive evidence in favor of role modeling.
    Keywords: occupational choice, intergenerational mobility, self-employment, entrepreneurship, adoption, role model
    JEL: J24 J62 L26
    Date: 2012–07
  20. By: Mika Saito; Ichiro Tokutsu; Kazuo Ogawa
    Abstract: A surge of exports in the 2000s helped Japan exit the severe decade-long stagnation known as the lost decade. Using panel data of Japanese exporting firms, we examine the sources of the export surge during this period. One view argues that the so-called "divine wind" or exogenous external demand boosted Japanese exports. The other view emphasizes the role of supply factors such as productivity gains, materialized after long-fought restructuring efforts during the lost decade. Estimating the firm-level export function allows us to assess the relative importance of these demand and supply factors. Evidence shows that firms' efforts were more important than the divine wind.
    Keywords: Economic models , Export growth , Export performance , Manufacturing , Productivity , Statistical annexes ,
    Date: 2012–07–02

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