Results 11 - 20
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201
Architectural Innovation and Dynamic Competition: The Smaller "Footprint" Strategy
, 2006
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The positive effects of biased self-perceptions in firms’, Review of Finance 11(3
, 2007
"... Abstract. We study a firm in which the marginal productivity of agents ’ effort increases with the effort of others. We show that the presence of an agent who overestimates his marginal productivity may make all agents better off, including the biased agent himself. This Pareto improvement is obtain ..."
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Abstract. We study a firm in which the marginal productivity of agents ’ effort increases with the effort of others. We show that the presence of an agent who overestimates his marginal productivity may make all agents better off, including the biased agent himself. This Pareto improvement is obtained even when compensation contracts are set endogenously to maximize firm value. We show that the presence of a leader improves coordination, but self-perception biases can never be Pareto-improving when they affect the leader. Self-perception biases are also shown to affect job assignments within firms and the likelihood and value of mergers. JEL Classification: D21, D62, L23, G30, G34. 1.
A COMMITMENT FOLK THEOREM
, 2008
"... Real world players often increase their payoffs by voluntarily committing to play a fixed strategy, prior to the start of a strategic game. In fact, the players may further benefit from commitments that are conditional on the commitments of others. This paper proposes a model of conditional commit ..."
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Real world players often increase their payoffs by voluntarily committing to play a fixed strategy, prior to the start of a strategic game. In fact, the players may further benefit from commitments that are conditional on the commitments of others. This paper proposes a model of conditional commitments that unifies earlier models while avoiding circularities that often arise in such models. A commitment folk theorem shows that the potential of voluntary conditional commitments is essentially unlimited. All feasible and individually rational payoffs of a two-person strategic game can be attained at the equilibria of one (universal) commitment game that uses simple commitment devices. The commitments are voluntary in the sense that each player maintains the option of playing the game without commitment, as originally defined.
Financial Constraints and Product Market Competition: Ex-ante vs. Ex-post Incentives ⋆
"... This paper analyzes the interaction of financing and output market decisions in a duopoly in which one firm is financially constrained and can borrow funds to finance production costs. Two ideas have been analyzed separately in previous work: some authors argue that debt strategically affects a firm ..."
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This paper analyzes the interaction of financing and output market decisions in a duopoly in which one firm is financially constrained and can borrow funds to finance production costs. Two ideas have been analyzed separately in previous work: some authors argue that debt strategically affects a firm’s output market decisions, typically making it more aggressive; others argue that the threat of bankruptcy makes debt financing costly, typically making a firm less aggressive. Our model integrates both ideas; moreover, unlike most previous work we derive debt as an optimal contract. Compared with a situation in which both firms are unconstrained, the constrained firm produces less, while its unconstrained rival produces more; prices are higher for both firms. Both firms ’ outputs depend on the constrained firm’s internal funds; the relationship is U-shaped for the constrained firm and inversely U-shaped for its unconstrained rival. The unconstrained rival has a higher market share, not because of predation but because of the cost disadvantage of the financially constrained firm.
Hawks and doves in segmented markets: a formal approach to competitive aggressiveness
, 2007
"... de l'Université catholique de LouvainHawks and doves in segmented markets: A formal approach to competitive aggressiveness ..."
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de l'Université catholique de LouvainHawks and doves in segmented markets: A formal approach to competitive aggressiveness
Overconfidence, compensation contracts, and capital budgeting
- Journal of Finance
, 2011
"... A risk-averse manager’s overconfidence makes him less conservative. As a result, it is cheaper for firms to motivate him to pursue valuable risky projects. When compensation endogenously adjusts to reflect outside opportunities, moderate levels of overconfidence lead firms to offer the manager flatt ..."
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A risk-averse manager’s overconfidence makes him less conservative. As a result, it is cheaper for firms to motivate him to pursue valuable risky projects. When compensation endogenously adjusts to reflect outside opportunities, moderate levels of overconfidence lead firms to offer the manager flatter compensation contracts that make him better off. Overconfident managers are also more attractive to firms than their rational counterparts because overconfidence commits them to exert effort to learn about projects. Still, too much overconfidence is detrimental to the manager since it leads him to accept highly convex compensation contracts that expose him to excessive risk. AVAST EXPERIMENTAL LITERATURE finds that individuals are usually overconfident in that they believe their knowledge to be more precise than it actually is. The incidence of overconfidence is likely to be even greater among CEOs than among individuals at large; for example, Goel and Thakor (2008) show that overconfident individuals are more likely to win the intrafirm tournaments that lead to the rank of CEO. Since overconfidence directly influences decision-making, it is logical to investigate the effects that overconfident managers have on corporate policies and firm value. How does overconfidence affect the investment decisions that managers make on behalf of shareholders? How do compensation contracts optimally adjust to these effects? Do firms benefit from managerial overconfidence? Can overconfidence ever benefit the biased
Strategic competition in retail banking under expense preference behaviour’,
- Journal of Banking and Finance,
, 2000
"... Abstract This paper presents a theoretical analysis of strategic competition in retail banking when some of the ®rms show expense preference behavior. The literature on expense preference behavior by banking ®rms is fairly large, but to our knowledge, so far, the strategic interaction between pro®t ..."
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Abstract This paper presents a theoretical analysis of strategic competition in retail banking when some of the ®rms show expense preference behavior. The literature on expense preference behavior by banking ®rms is fairly large, but to our knowledge, so far, the strategic interaction between pro®t maximizing banks and banks with expense preference behavior has not been investigated. The paper has also an empirical interest since it is motivated by the current situation in Spanish retail banking where commercial banks, pro®t maximizers, compete with savings banks, non pro®t maximizers. Ó 2000 Elsevier Science B.V. All rights reserved. JEL classi®cation: G21
Downstream competition, bargaining and welfare
- Journal of Economics and Management Strategy
, 2008
"... Note: The Discussion Papers in this series are prepared by members of the Department of Economics, University of Essex, for private circulation to interested readers. They often represent preliminary reports on work in progress and should therefore be neither quoted nor referred to in published work ..."
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Note: The Discussion Papers in this series are prepared by members of the Department of Economics, University of Essex, for private circulation to interested readers. They often represent preliminary reports on work in progress and should therefore be neither quoted nor referred to in published work without the written consent of the author. Downstream Competition, Bargaining and Welfare
Delegated Bargaining and Renegotiation
"... This paper examines the commitment effect of delegated bargaining when renegotiation of the delegation contract cannot be ruled out. We consider a seller who can either bargain face-to-face with a prospective buyer or hire an intermediary to bargain on her behalf. The intermediary is able to interru ..."
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This paper examines the commitment effect of delegated bargaining when renegotiation of the delegation contract cannot be ruled out. We consider a seller who can either bargain face-to-face with a prospective buyer or hire an intermediary to bargain on her behalf. The intermediary is able to interrupt his negotiation with the buyer to renegotiate the delegation contract. In this model, the time cost of renegotiation prevents a full elimination of the commitment effect of delegation. In particular, there are always gains from delegation when the players are sufficiently patient. An extension of the basic model to a search market shows that the gains from delegation are negatively related to the efficiency of search.
