The Organization of Supply: a Vertical Equilibrium Analysis

In this paper I study how the make-or-buy decision of a firm depends on the organization of its peers. I consider a multi-firm framework in which firms choose whether to integrate into the supply of an intermediate input or to outsource its production, and choose the size of their supplier network if outsourcing. Firms find it optimal to share the same set of suppliers, as there are economies of scope in investment to suppliers taking multiple designs. These economies are due to spillovers of technical or operational know-how between projects and to savings in the setup costs on physical capital. The model admits multiple vertical equilibria that are Pareto-ranked, the one with the highest level of outsourcing being most efficient. Outsourcing is more likely in larger markets and when the economies of scope are stronger. The size of the optimal supplier network however typically decreases when the spillovers are stronger. These findings provide insight into the patterns of reorganization of vertical supply relations observed over the last two decades.Outsourcing, Vertical Integration, Spillovers, Supply relations

The Boundary of the Firm in a Model of Trade Within a Hierarchy

In this paper I present a theory of the boundary of the firm that accounts for some important characteristics of real-world multidivisional firms: Operative decisions are in the hands of middle managers who are rewarded with incentive contracts based on the performance of their units; Managers' decisions are subject to approval and intervention by the top management of the firm; and managers are better informed regarding the affairs of their divisions than their superiors in the firm's hierarchy. In this setup, the integration of a producer of an intermediate input and its buyer as separate divisions within a single firm is unambiguously desirable, as long as the choice of trading partners can be credibly delegated to the divisions' managers. I show that this is satisfied not only under the assumption of full commitment by the general office of the firm, but also interestingly, if it has no commitment power at all. At the time of trade, the uninformed general office prefers to delegate the choice of trading partners to the divisions whose decision is ex-post optimal. An explanation of the boundaries of the firm emerges only if we assume that the general office retains some limited commitment power. The general office may then mandate internal trade in order to encourage the divisions to specialize towards one another before the trade. In the context examined, I show that the general office faces a 'time-consistency' problem. It tends to mandate internal trades in more instances than would have been optimal with full commitment, adversely affecting the levels of investment taken by the divisions' managers. Whenever such inconsistency arises, it may be optimal to have the trade conducted between independent, non-integrated parties.

Search Costs and Risky Investment in Quality

One striking development associated with the explosion of e-commerce is the increased transparency of sellers' quality history. In this paper we analyze how this affects fi…rms' incentives to invest in quality when the outcome of investment is uncertain. We identify two conflicting effects. On the one hand, reducing the consumer's cost of search for quality exacerbates the negative effects of past poor performance. This increases incentives to invest, leading to higher quality. On the other hand, the fact that a fi…rm, despite its best efforts, may fail to live up to consumers' more demanding expectations, makes investment less attractive. This discourages investment, leading to lower quality. We show that reducing the search cost leads to higher quality if the initial level of the search cost is sufficiently high but may lead to lower quality if the initial level of the search cost is sufficiently low.search, internet search, quality, risky investment

Emergence of System Optimum: A Fair and Altruistic Agent-based Route-choice Model

AbstractThe System Optimum, an optimal traffic assignment that minimizes the total travel costs on the road network is usually only referred to as a comparison to self-emerging user equilibrium. In this paper we investigate how different behavioral aspects of drivers can self-organize towards a system optimum that minimizes travel costs while providing benefits and preserving equity among drivers. We present a simple binary route-choice Agent-Based Model that provides a disaggregated view of driver behavior and a unique understanding of the potential of cognitive reinforcement models to effect a convergence to user equilibrium and a shift in driver behavior toward a system optimum without the need for an enforcing traffic policy such as tolls

(Not) Higher, Stronger or Swifter: Representation of Female Olympic Athletes in the Israeli Press

Despite the IOC declaration of intent for gender equality in sport and in light of the fact that a greater number of women are participating in the Olympic Games covert connotations are hidden behind the distorted and biased image presented of female athletes in the press. The current study asks whether the size and extent of coverage really matter; does more extensive coverage necessarily mean equal and true representation of women in sport, or are we getting more of the same? The findings in this study indicate two parallel processes in terms of article content: First, the greater the number of articles, the more stereotypical and biased the content becomes. Secondly, over the years, representation of female athletes has become increasingly negative and biased. Over the three Olympic Games examined (1996, 2000, 2004), female athletes were presented in a biased and stereotypical ways in relative to male athletes. The change in coverage over the years has proven to be a tendency to stereotypically present female athletes in a more negative light in comparison to male athletes

Case report: Blindness associated with Learedius learedi trematode infection in a green sea turtle, Chelonia mydas, of the northern Red Sea

Spirorchiid blood flukes are widespread in sea turtles, causing disease and mortality in their populations, with high prevalence in several ocean basins. Besides being leading parasitic causes of sea turtle strandings in several parts of the world, these infectious agents can cause endocarditis, vasculitis, thrombosis, miliary egg granulomas, and aneurysms, which ultimately may compromise the survival of green sea turtles. More severe cases may also result in multifocal granulomatous meningitis or pneumonia, both of which can be fatal. Herein, we report the first case of severe trematode infection, Caused by Learedius learedi, in a green sea turtle in the northern Red Sea; this infection is associated with bilateral blindness. Necropsy revealed multiple granulomas with intralesional trematode eggs in the optic nerve, eyes, spleen, heart, and lungs. The parasite was identified as Learedius learedi through specific primers of the ribosomal genome and COI sequences obtained from GenBank. Altogether, these findings emphasize the importance of recognizing the systemic nature of this particular fluke infection to ultimately protect the lives of these marine animals and ensure the sustainability of these species in the wild

The Organization of Supply: a Vertical Equilibrium Analysis ∗

In this paper I study how the make-or-buy decision of a firm depends on the organization of its peers. I consider a multi-firm framework in which firms choose whether to integrate into the supply of an intermediate input or to outsource its production, and choose the size of their supplier network if outsourcing. Firms find it optimal to share the same set of suppliers, as there are economies of scope in investment to suppliers taking multiple designs. These economies are due to spillovers of technical or operational know-how between projects and to savings in the setup costs on physical capital. The model admits multiple vertical equilibria that are Pareto-ranked, the one with the highest level of outsourcing being most efficient. Outsourcing is more likely in larger markets and when the economies of scope are stronger. The size of the optimal supplier network however typically decreases when the spillovers are stronger. These findings provide insight into the patterns of reorganization of vertical supply relations observed over the last two decades

The Boundary of the Firm in a Model of Trade Within a Hierarchy ∗

In this paper I present a theory of the boundary of the firm that accounts for some important characteristics of real-world multidivisional firms: Operative decisions are in the hands of middle managers who are rewarded with incentive contracts based on the performance of their units; Managers ’ decisions are subject to approval and intervention by the top management of the firm; and managers are better informed regarding the affairs of their divisions than their superiors in the firm’s hierarchy. In this setup, the integration of a producer of an intermediate input and its buyer as separate divisions within a single firm is unambiguously desirable, as long as the choice of trading partners can be credibly delegated to the divisions ’ managers. I show that this is satisfied not only under the assumption of full commitment by the general office of the firm, but also interestingly, if it has no commitment power at all. At the time of trade, the uninformed general office prefers to delegate the choice of trading partners to the divisions whose decision is ex-post optimal. An explanation of the boundaries of the firm emerges only if we assume that the general office retains some limited commitment power. The general office may then mandate internal trade in order to encourage the divisions to specialize towards one another before the trade. In the context examined, I show that the general office faces a ’time-consistency ’ problem. It tends to mandate internal trades in more instances than would have been optimal with full commitment, adversely affecting the levels of investment taken by the divisions ’ managers. Whenever such inconsistency arises, it may be optimal to have the trade conducted between independent, non-integrated parties. ∗ I am grateful to Michael Whinston for guidance and encouragement and to Rob Porter and Asher Wolinsky for helpful discussions and comments. I also benefited from the comments of Nir Jaimovich, Randa