Bargaining with Non-Monolithic Players

This paper analyses strategic bargaining in negotiations between non-monolithic players, i.e. agents starting negotiations can split up in smaller entities during the bargaining process. We show that the possibility of scission in the informed coalition implies that it loses its information advantages. We also show that when the possibility of a scission exists the uninformed player does not focus on his or her beliefs about the strength of the informed coalition but on the proportion of weak/strong players within this coalition. Finally, our results show that the possibility of a scission reduces the incentives for the leader to propose a high offer to ensure a global agreement. We apply this framework to international negotiations on global public goods and to wage negotiations.Strategic bargaining, Non-monolithic players, Scission, Noncooperative game-theory

Innovation and market concentration with asymmetric firms

This paper considers a theoretical model of n asymmetric firms that reduce their initial unit costs by spending on R&D activities. In accordance with Schumpeterian hypotheses we obtain that more efficient (bigger) firms spend more in R&D and this leads to a more concentrated market structure. We also find a positive relationship between innovation and market concentration. This calls for a corrective tax on R&D activities to curtail strategic incentives to over-invest in R&D trying to achieve a higher market share. Klassifikation: L11, L52, O31 . February, 2004

North-South knowledge spillovers and competition: Convergence versus divergence

Technology;International Relations;Research and Development;Knowledge

Essays on Disclosure

The purpose of this paper is two-fold. First, I attempt a taxonomy of the extant accounting literature on disclosure: that is, a categorization of the various models of disclosure in the literature into well-integrated topics. With regard to the taxonomy, I suggest three broad categories of disclosure research in accounting. The first category, which I dub “association-based disclosure”, is work that studies the effect of exogenous disclosure on the cumulative change or disruption in investors’ individual actions, primarily through the behavior of asset equilibrium prices and trading volume. The second category, which I dub “discretionary-based disclosure”, is work that examines how managers and/or firms exercise discretion with regard to the disclosure of information about which they may have knowledge. The third category, which I dub “efficiency-based disclosure”, is work that discusses which disclosure arrangements are preferred in the absence of prior knowledge of the information, that is, preferred unconditionally. Then, in the final section of the paper, I recommend information asymmetry reduction as one potential starting point for a comprehensive theory of disclosure. That is, I recommend information asymmetry reduction as a vehicle to integrate the efficiency of disclosure choice, the incentives to disclose, and the endogeneity of the capital market process as it involves the interactions among individual and diverse investors

The Role of Information in Competitive Experimentation

Technological progress is typically a result of trial-and-error research by competing firms. While some research paths lead to the innovation sought, others result in dead ends. Because firms benefit from their competitors working in the wrong direction, they do not reveal their dead-end findings. Time and resources are wasted on projects that other firms have already found to be dead ends. Consequently, technological progress is slowed down, and the society benefits from innovations with delay, if ever. To study this prevalent problem, we build a tractable two-arm bandit model with two competing firms. The risky arm could potentially lead to a dead end and the safe arm introduces further competition to make firms keep their dead-end findings private. We characterize the equilibrium in this decentralized environment and show that the equilibrium necessarily entails significant efficiency losses due to wasteful dead-end replication and a flight to safety – an early abandonment of the risky project. Finally, we design a dynamic mechanism where firms are incentivized to disclose their actions and share their private information in a timely manner. This mechanism restores efficiency and suggests a direction for welfare improvement.

The Impact of Corporate Reputation on Earnings Management Decisions

This thesis consists of empirical tests and theoretical works exploring how the corporate reputation influences manager’s earnings management decisions. Building and protecting corporate reputation is one of the challenges to CEOs today. Some researchers suggest that corporate reputation is one important factor when investors evaluate a firm. The other scholars indicate that corporate reputation has an impact on manager’s information disclosure and strategies making. Earnings management occurs when managers bias financial reporting or construct transactions strategically to impact the cash flow. I am curious whether the corporate reputation has an effect in earnings management behaviour to mislead investors. Firstly, I test how the corporate reputation affects manager’s earnings management behaviour in both accruals manipulation and real manipulations. I find that firms with worse reputation use more increasing discretionary accruals and intend to manipulate sales. Then, I study the reputation effect on discretionary accruals in a repeated cheap-talk game. I find that for managers in firms without prior good reputation among investors, smoothing earnings is an effective way to alter the investors’ opinion

Opinion leaders, influence activities and leadership rents

Consumers may observe previous consumers’ choices. They may follow their choices if they think these consumers are better informed. In turn, firms may concentrate on influencing the early consumers. This, in turn, changes the nature of early consumers’ choice behavior as a signal for other consumers. In this paper, I show that firms’ influence activities need not distort earlier consumers’ decisions, but may reduce the informative value of these decisions for other consumers if influence activities are noisy or if some firms have deep pockets and others are liquidity constrained. -- Wenn die Kaufentscheidungen früher Konsumenten von nachfolgenden Konsumenten beobachtbar sind, können frühe Kaufentscheidungen von wohlinformierten Konsumenten auch informativ für nachfolgende Konsumenten sein und diese zur Imitation früher Kaufentscheidungen veranlassen. Unternehmer haben deshalb bei Produktinnovationen einen Anreiz, das Kaufverhalten früher Konsumenten durch Preisnachlässe oder Werbegeschenke zu beeinflussen. Aus diesen Vergünstigungen resultiert für die frühen Konsumenten eine Konsumentenrente. Die Vergünstigungen verändern aber auch den Informationswert der Kaufentscheidung früher Konsumenten. In dem Beitrag wird gezeigt, dass die frühen Konsumenten im Gleichgewicht aus den Vergünstigungen eine erhebliche Rente erhalten, ihre Kaufentscheidung aber durch die Vergünstigungen nicht beeinflusst wird und als Signal für nachfolgende Käufer informativ bleibt. Das gilt vor allem, wenn die Beeinflussungsaktivitäten der Unternehmen effizient sind (z.B. in Form von Preisnachlässen erfolgen), und wenn die konkurrierenden Unternehmen ex-ante in einer symmetrischen Wettbewerbssituation sind. Der Beitrag untersucht zudem die Rolle von Budgetbeschränkungen der Unternehmen. Diese erweisen sich für das budgetbeschränkte und für das konkurrierende Unternehmen als vorteilhaft. Asymmetrische Budgetbeschr änkungen senken aber die Effizienz des Marktergebnisses.Opinion leaders,influence activities,promotional competition,leadership,deep pockets,liquidity constraints

ESSAYS IN (I) STRATEGIC ORDERING WITH ENDOGENOUS SEQUENCE OF EVENTS IN SUPPLY CHAIN (II) STRATEGIC MANAGEMENT OF NEW PRODUCT INNOVATION AND PROCESS IMPROVEMENT

This dissertation discusses two research problems. First topic is strategic information management in supply chain, and second topic is analytical modeling approach in productivity dilemma. The first two chapters of dissertation discuss the impact of information asymmetry and competition on vertical contractual relationships, and risk neutral firms' strategic ordering decisions with minimal assumptions. Modern business environment caused by competition and information asymmetry plagues most firms across industries, often leading to suboptimal outcomes. Given the lead times in planning capacity, suppliers prefer earlier orders from their downstream partners (retailers). Much attention has been given in the literature to Advance Purchase Discount (APD), where the supplier lowers the wholesale price to entice the retailers to order early. In this dissertation, we suggest another avenue of early purchase model considering more realistic ways - competition between downstream retailers and information flows (from information acquisition to dissemination) in supply chain. We show that with one retailer having "better" market demand information on uncertain demand than the other, the supplier can induce earlier ordering from the better-informed retailer without any reduction in the wholesale price, or creating rationing risk. In addition, we investigate firm's information investment decisions corresponding to the timing of the orders. We extend the model with different information structures of firms such as imperfect and evolving information. In reality, firms can have more accurate market information near the selling season by acquiring it from more diverse resources. Consistent with practice, we explorer firm's equilibrium outcomes of endogenous sequencing game with this setting. The third chapter of dissertation is in the trade-off between production efficiency and new product innovation. A firm's ability to compete over time has been rooted not only in improved efficiency, but also in its ability to be simultaneously innovative (Abernathy (1978)). This trade-off between efficiency and innovation has long been discussed in the business context, but limited analytical research has been done using the `extreme value theory' (Dahan & Mendelson (2001)) to investigate this issue. Our model considers important exogenous innovation factors such as innovation characteristics (Benner & Tushman (2003)) and degree of competition, which has yielded the following theoretical results and practical implications. First, we highlight new product characteristics. If R&D projects are paradigm-shifting innovations, there is a stronger adverse effect between efficiency and innovation than incremental innovation. Second, competition results in underinvestment effort in innovation performance for the firms. For example, in the symmetric firms' competition, the optimal size of R&D projects decreased, as competition increases. On the other hand, firms are more likely to focus on process improvement activities