Spacial Equilibrium in a State Space Approach to Demand Uncertainty

Firms are likely to be uncertain about consumer preferences when launching products. The existing literature models preference uncertainty as an additive shock to the consumer distribution in a characteristic space model. The additive shock only shifts the mean of the consumers' ideal points. We generalize this approach to a state space model in which a vector of parameters can give rise to dierent distributions of consumer tastes in dierent states, allowing other moments of the consumer density to be uncertain. An equilibrium existence result is given. In the case of symmetric distributions, the unique subgame-perfect equilibrium can be described by a simple closed-form solution.Location; Product Dierentiation; Uncertainty; Hotelling

Uncertainty in Spatial Duopoly with Possibly Asymmetric Distributions: a State Space Approach

In spatial competition firms are likely to be uncertain about consumer locations when launching products either because of shifting demograph- ics or of asymmetric information about preferences. Realistically distri- butions of consumer locations should be allowed to vary over states and need not be uniform. However, the existing literature models location uncertainty as an additive shock to a uniform consumer distribution. The additive shock restricts uncertainty to the mean of the consumers loca- tions. We generalize this approach to a state space model in which a vector of parameters gives rise to different distributions of consumer tastes in dif- ferent states, allowing other moments (besides the mean) of the consumer distribution to be uncertain. We illustrate our model with an asymmetric consumer distribution and obtain a unique subgame perfect equilibrium with an explicit, closed-form solution. An equilibrium existence result is then given for the general case. For symmetric distributions, the unique subgame perfect equilibrium in the general case can be described by a simple closed-form solution.Location, Product Differentiation, Uncertainty, Hotelling

Who decides about change and restructuring in organizations?

The authors of this paper model the determinants of who makes decisions, the principal or an agent, when there are multiple decisions. Decision making takes effort and time; and, once implemented, the expected loss from a particular decision (or project) increases with the length of time since the last decision was made. The model shows delegation is more likely as: (i) controllable uncertainty increases; (ii) uncontrollable uncertainty decreases; (iii) the number of plants in the firm decreases; (iv) the complexity of the decision increases; and (v) the importance of the decision increases. The theoretical predictions are consistent with the authors\u27 novel empirical results on the delegation of major organizational change decisions using workplace data. Their unique data allows them to identify who made a decision to implement a significant change, as well as key internal and external factors highlighted as potentially important in their theory. Empirically, delegation is more likely in organizations that: face a competitive product market; export; have predictable product demand; have a larger workplace; and that have fewer other workplaces in the same organization producing a similar output. The authors find business strategy is not related to the allocation of decision making authority; delegation, however, is associated with the use of human resource techniques such as the provision of bonuses to employees

Gaussian Process: A Smooth and Flexible Approach to Estimating Index Complementarities in Organizational Economics

A common question in organizational economics is how does a bundle or index of managerial practices or characteristics impact on firm or employee level outcomes. The presence of complementarities is of particular interest but we argue should not be restricted to particular functional forms like the multiplicative ‘interaction’ of slope coefficients. As an alternative we propose the use of Gaussian processes to estimate a smooth non-linear function of the management practices index/bundle

original papers : Returns to scale in one-shot information processing when hours count

The decentralized information processing approach pioneered by Radner and Van Zandt endogenously determines the optimal hierarchy for decision making within an organization. The simplest information processing model is the one-shot problem (one set of information to process) which serves as the testing ground for ever richer descriptions of managers and their tasks. Meagher and Van Zandt observed that an hours-based measure should be used for calculating managerial costs rather than the fixed cost per employee used by Radner. Surprisingly they show that the set of efficient hierarchies is equivalent under the two different measures. In this paper we show that using the hours-based measure can give quite different results for returns to scale than were found by Radner. We find constant returns to scale over a wide range of delay costs, whereas Radner found increasing returns to scale: In other words, costs rise proportionally with the size of the firm's information problem. Constant returns to scale implies that distortions in firm size will not arise from the need for hierarchical organization per se, but rather from organizational issues from the theory of the firm, such as incentives and abilities.Organizations, returns to scale, wage costs, parallel processing

A Duopoly Location Toolkit: Consumer Densities Which Yield Unique Spatial Duopoly Equilibria

Anderson, Goeree and Ramer (1997) observe that although the Uniform consumer density is almost universally assumed in Hotelling style location games, it is more realistic to assume non-uniform distributions. Using Anderson et al.'s (1997) sufficient conditions for the existence of a unique pure strategy equilibrium, we extend the list of known distributions with characterised equilibria from two (Uniform and Triangular) to seven. Our extension includes the Normal and Logistic distributions which are commonly used in empirical research. We also analyse the effects of density choice on equilibrium outcomes. Holding the mean and dispersion of consumer tastes constant, we find that the Uniform distribution inflates differentiation effects.