nep-bec New Economics Papers
on Business Economics
Issue of 2012‒12‒06
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Do buyer groups facilitate collusion? By Normann, Hans-Theo; Rösch, Jürgen; Schultz, Luis Manuel
  2. Enterprise Agglomeration, Output Prices, and Physical Productivity: Firm-Level Evidence from Ethiopia By Siba, Eyerusalem; Soderbom, Mans; Bigsten, Arne; Gebreeyesus, Mulu
  3. Firm Dynamics: The Death of New Canadian Firms: A Survival Analysis of the 2002 Cohort of Entrants to the Business Sector By Macdonald, Ryan
  4. Intellectual Property Rights and Efficient Firm Organization By Ponzetto, Giacomo AM
  5. Dynamic Contracts Under Loss Aversion By Andrea Repetto
  6. Assortative Matching Gender By Luca Paolo Merlino; Pierpaolo Parrotta; Dario Pozzoli
  7. The “Revealed” Competitiveness of U.S. Exports By Massimo Del Gatto; F. di Mauro; J. Gruber; B. Mandel
  8. Market power, efficiencies, and entry: Evidence from an airline merger By Hüschelrath, Kai; Müller, Kathrin
  9. Stakeholder theory and care management: An inquiry into social enterprises By Giuseppe Marcon; Lorenzo Dorigo
  10. Price Reveal Auctions By Andrea Gallice
  11. Incentives and behavior in markets. By Wolk, Kjell Leonard
  12. Agency Problem II and Convergence in CEO Pay By Janto Haman; Hristos Doucouliagos; Michael Graham

  1. By: Normann, Hans-Theo; Rösch, Jürgen; Schultz, Luis Manuel
    Abstract: We explore whether buyer groups, in which firms legally purchase inputs jointly, facilitate collusion in the product market. In a repeated game, abandoning the buyer group altogether or excluding single firms from them constitute more severe credible threats, hence, in theory buyer groups facilitate collusion. We run several experimental treatments in a three-firm Cournot framework to test these predictions, and we also explore the impact communication has on buyer groups. The experimental results show that buyer groups lead to lower outputs when groups can exclude single firms. Communication is identified as a main factor causing collusive product markets. --
    Keywords: buyer groups,cartels,collusion,communication,experiments,repeated games
    JEL: C7 C9 L4 L41
    Date: 2012
  2. By: Siba, Eyerusalem; Soderbom, Mans; Bigsten, Arne; Gebreeyesus, Mulu
    Abstract: We use census panel data on Ethiopian manufacturing firms to analyze the connections between enterprise agglomeration, firm-level output prices and physical productivity. We find a negative and statistically significant relationship between the agglomerat
    Keywords: agglomeration, productivity, output prices, firm-level data, Ethiopia, Africa, manufacturing
    Date: 2012
  3. By: Macdonald, Ryan
    Abstract: This paper examines the survival characteristics of firms, using microdata from the Longitudinal Employment Analysis Program (LEAP) of Statistics Canada. Entry rates and survival functions for the 2002 cohort are analyzed. The business sector is disaggregated along industry and size dimensions.
    Keywords: Business performance and ownership, Entry, exit, mergers and growth
    Date: 2012–11–07
  4. By: Ponzetto, Giacomo AM
    Abstract: This paper shows that intellectual property rights yield static efficiency gains, irrespective of their dynamic role in fostering innovation. I develop a property-rights model of firm organization with two dimensions of non-contractible investment: how much cost-minimizing effort to exert, and whether to direct it towards partnership or defection. In equilibrium, the first best can be attained if and only if property rights are as strong for intangible as for tangible assets. When IP rights are weaker, the structure of the firm is distorted and efficiency declines. An entrepreneur must either integrate her suppliers, which induces a fall in their investment; or else risk their defection, which entails a waste of her human capital. My model predicts greater prevalence of vertical integration in response to weaker IP rights. It also predicts a switch from integration to outsourcing over the product cycle. Both empirical predictions are consistent with evidence on the organization of multinational companies. As a normative implication, I find that IP rights should be strong but narrowly defined, to protect one business opportunity without holding up its potential spin-offs.
    Keywords: Hold-up problem; Intellectual property; Licensing; Organization; Outsourcing; Product cycle; Property rights; Spin-off; Vertical integration
    JEL: D23 D86 K11 L22 L24 O34
    Date: 2012–11
  5. By: Andrea Repetto (Escuela de Gobierno, Universidad Adolfo Ibáñez)
    Date: 2012–09
  6. By: Luca Paolo Merlino; Pierpaolo Parrotta; Dario Pozzoli
    Keywords: assortative matching; gender gap; glass ceiling; sticky floor
    JEL: J16 J24 J62
    Date: 2012–11
  7. By: Massimo Del Gatto; F. di Mauro; J. Gruber; B. Mandel
    Abstract: We investigate the factors behind the recent decline in the U.S. share of world merchandise exports in an attempt to determine how big a role the changing productivity of U.S. firms has played. We do so against the backdrop of a measure of cost competitiveness which, insofar it is inferred from actual trade ows, we refer to as revealed marginal costs (RMC). Although, in line with our purpose, we derive such measure as an implication of a trade model with (intra-industry) firm heterogeneity, computation does not require firm level data but only aggregate bilateral trade ows, domestic trade included. Brought to the data for the manufacturing sector, such measure reveals that, notwithstanding significant heterogeneity across industries, most U.S. sectors are indeed losing momentum relative to their main competitors, as we find U.S. s RMC to grow by an average 14%, relative to the other G20 countries. The RMC structure identifies in market size, trade freeness and imports its "revealing-observable" components - while market size is found to be the main responsible of such decline on average, cost competitiveness seems to have benefited from a good combination of increasing trade freeness and decreasing imports, relative to the other G20 countries. The best performing countries in terms of RMC (China and India among others) characterize, however, for an increase in trade freeness higher than in the U.S. At the sectoral level, the "Machinery" industry is the most critical, followed by the "Chemicals" and "Equipment" industries.
    Keywords: Productivity; competitiveness; export shares; marginal costs; firm heterogeneity; firm selection; gravity equation; trade costs
    JEL: F12 R13
    Date: 2012
  8. By: Hüschelrath, Kai; Müller, Kathrin
    Abstract: We investigate the competitive effects of the merger between Delta Air Lines and Northwest Airlines (2009) in the domestic U.S. airline industry. Applying fixed effects regression models we find that the transaction led to short term price increases of about 11 percent on overlapping routes and about 10 percent on routes which experienced a merger-induced switch of the operating carrier. Over a longer period, however, our analysis reveals that both merger efficiencies and post-merger entry by competitors initiated a downward trend in prices leaving consumers with a small net price increase of about 3 percent on the affected routes. --
    Keywords: airline industry,merger,market power,efficiencies,entry-inducing effects
    JEL: L40 L93
    Date: 2012
  9. By: Giuseppe Marcon (Department of Management, Università Ca' Foscari Venezia); Lorenzo Dorigo
    Abstract: This work aims to introduce care management from the moral viewpoint of stakeholder theory. It considers stakeholder theory a useful methodology for managerial descriptions, narratives and theorising of business ethics, and the feminist thought, especially the moral grounding of care, a valuable normative core to earn productive remarks and insights into stakeholder research in modern capitalism. Care leads researchers to meaningful conceptualizations of the firm as a relational entity, both in itself and as part of the network of stakeholders within which it is involved, paving the way for organisational analysis deeply entangled in the subjective and interpersonal aspects of specific business context. Of major importance for advancing the understanding of care as virtue ethics affecting the managerial decision-making is the problem of bordering organisation-stakeholder relationships. To this purpose, a quantitative measuring on managerial practices of stakeholder involvement in a sample of small Italian social enterprises has been carried out. Findings reveal that a fully Òcare for the otherÓ turns in favour of those stakeholders who are formally entitled to take part in the co-production of organisation's activities through the formal involvement in the governance structures.
    Keywords: care management, stakeholder theory, social enterprise, business ethics, feminism, stakeholder involvement
    JEL: M14 M29 B54
    Date: 2012–11
  10. By: Andrea Gallice (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: A price reveal auction is a Dutch auction in which the current price of the item on sale remains hidden. Bidders can privately observe the price only by paying a fee, and every time a bidder does so, the price falls by a predetermined amount. We solve for the perfect Bayesian equilibria of the game. If the number of participants n is common knowledge, then in equilibrium at most one bidder observes the price and the profits that the mechanism raises, if any, are only marginally higher than those that would stem from a normal sale. If instead n is a random variable then multiple entry can occur and profitability is enhanced.
    Keywords: pay-per-bid auctions, endogenous price decrease
    JEL: C72 D44
    Date: 2012–11
  11. By: Wolk, Kjell Leonard (Maastricht University)
    Date: 2012
  12. By: Janto Haman; Hristos Doucouliagos; Michael Graham
    Abstract: Convergence in CEO pay occurs when pay differentials narrow over time. We analyze and compare differences in the rate of convergence in CEO pay of Australian listed firms with high shareholding concentration (HSC) and without, for the period 1992 to 2009. We find zero and negative pay-for-performance and pay-for-firm size associations in HSC firms, indicating entrenchment and suboptimal CEO contract design. In contrast, positive pay-for-performance effects exist in non-HSC firms. The rate of convergence in CEO pay is higher in HSC firms. While there is relatively strong investor protection, our findings indicate that Australian HSC firms face high private benefits of control and one avenue for extracting these benefits is through a higher rate of convergence in CEO pay.
    Keywords: Agency Problem II; CEO Pay; Convergence; Shareholding Concentration
    JEL: G30 J33 M52
    Date: 2012–11–16

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