Entry and market selection of firms: a laboratory study

We study competition in experimental markets in which two incumbents face entry by three other firms. Our treatments vary with respect to three factors: sequential vs. block or simultaneous entry, the cost functions of entrants and the amount of time during which incumbents are protected from entry. Before entry incumbents are able to collude in all cases. When all firms' costs are the same entry always leads consumer surplus and profits to their equilibrium levels. When entrants are more efficient than incumbents, entry leads consumer surplus to equilibrium. However, total profits remain below equilibrium, due to the fact that the inefficient incumbents produce too much and efficient entrants produce too little. Market behavior is satisfactory from the consumers' standpoint, but does not yield adequate signals to other potential entrants. These results are not affected by whether entry is simultaneous or sequential. The length of the incumbency phase does have some subtle effects.

Leadership and overcoming coordination failure with asymmetric costs

We study how the heterogeneity of agents affects the extent to which changes in financial incentives can pull a group out of a situation of coordination failure. We focus on the connections between cost asymmetries and leadership. Experimental subjects interact in groups of four in a series of weak-link games. The treatment variable is the distribution of high and low effort cost across subjects. We present data for one, two and three low-cost subjects as well as control sessions with symmetric costs. The overall pattern of coordination improvement is common across treatments. Early coordination improvements depend on the distribution of high and low effort costs across subjects, but these differences disappear with time. We find that initial leadership in overcoming coordination failure is not driven by low-cost subjects but by subjects with the most frequent cost. This conformity effect can be due to a kind of group identity or to the cognitive simplicity of acting with identical others.

Personal relations and their effect on behavior in an organizational setting: an experimental study

We study how personal relations affect performance in organizations. In the experimental game we use a manager has to assign different degrees of decision power to two employees. These two employees then have to make distributive decisions which affect themselves and the manager. Our focus is on the effects on managers' assignment of decision power and on employees' distributive decisions of one of the employees and the manager knowing each other personally. Our evidence shows that managers tend to favor employees that they personally know and that these employees tend, more than other employees, to favor the manager in their distributive decisions. However, this behavior does not affect the performance of the employees that do not know the manager. All these effects are independent of whether the employees that know the manager are more or less productive than those who do not know the manager. The results shed light on discrimination and nepotism and its consequences for the performance of family firms and other organizations.

Financial incentives in academia: research versus development

This paper investigates the effects of monetary rewards on the pattern of research. We build a simple repeated model of a researcher capable to obtain innovative ideas. We analyse how the legal environment affects the allocation of researcher's time between research and development. Although technology transfer objectives reduce the time spent in research, they might also induce researchers to conduct research that is more basic in nature, contrary to what the skewing problem would presage. We also show that our results hold even if development delays publication.

The Evolution of roommate networks: a comment on Jackson and Watts JET (2002)

We extend Jackson and Watts's (2002) result on the coincidence of S-stochastically stable and core stable networks from marriage problems to roommate problems. In particular, we show that the existence of a side-optimal core stable network, on which the proof of Jackson and Watts (2002) hinges, is not crucial for their result.

Frames and games

Decision-makers are sometimes influenced by the way in which choice situations are presented to them or "framed" This can be seen as an important challenge to the social sciences, since strong and pervasive framing effects would make it difficult to study human behavior in a synthetic or theoretic manner. We present results from experiments with dilemma games designed to shed light on the effects of several frame variations. We study, among others, the particular public bad frame used by Andreoni (1995) and two more naturalistic frames involving stories. Our results show that none of the frame manipulations have a significant effect on average behavior, but we do find some effects on extreme behavior. We also find that incentives do matter where frames do not matter.

Cooperative production and efficiency

We characterize the sharing rule for which a contribution mechanism achieves efficiency in a cooperative production setting when agents are heterogeneous. The sharing rule bears no resemblance to those considered by the previous literature. We also show for a large class of sharing rules that if Nash equilibrium yields efficient allocations, the production function displays constant returns to scale, a case in which cooperation in production is useless.

The Determinants of pricing in pharmaceuticals: are U.S. prices really higher than those of Canada?

This paper studies price determination in pharmaceutical markets using data for 25 countries, six years and a comprehensive list of products from the MIDAS IMS database. We show that market power and the quality of the product has a significantly positive impact of prices. The nationality of the producer appears to have a small and often insignificant impact on prices, which suggests that countries which regulates prices have relatively little power to do it in a way that advances narrow national interest. We produce a theoretical explanation for this phenomenon based on the fact that low negotiated prices in a country would have a knock-on effect in other markets, and is thus strongly resisted by producers. Another key finding is that the U.S. has prices that are not significantly higher than those of countries with similar income levels. This, together with the former observation on the effect of the nationality of producers casts doubt on the ability of countries to purs

Multimarket contact in pharmaceutical markets

The purpose of this paper is to analyze the effect of multimarket contact on the behavior of pharmaceutical firms controlling for different levels of regulatory constraints using IMS MIDAS database. Theoretically, firms that meet in several markets are expected to be capable of sustaining implicitly more profitable out- comes, even if perfect monitoring is not possible. Firms may find it profitable to redistribute their market power among markets where they are operating. We present evidence for nine OECD countries with different degrees of regulation and show that regulation affects the importance of economic forces on firms' price setting behavior. Furthermore, our results confirms the presence of the predictions of the multimarket theory for more market friendly countries (U.S. and Canada) and less regulated ones (U.K., Germany, Netherlands), in contrast, for highly regulated countries (Japan, France, Italy and Spain) the results are less clear with some countries being

Evaluating active labor markets in Romania

We evaluate the presence of effects from joining one of four active labour market programs in Romania in the late 1990s compared to the no-program state. Using rich follow-up survey data and propensity score matching, we find that three programs (training and retraining, self-employment assistance, and employment and relocation services) had success in improving participants' economic outcomes and were cost-beneficial from society's perspective. In contrast, public employment was found detrimental for the employment prospects of its participants.

A Comparison of polarization measures

This paper provides a systematic classification of the different measures of polarization based on their properties. Together with the axioms proposed in Duclos, Esteban and Ray (2004) and in Wang and Tsui (2000) we consider three additional properties. We examine which properties are common to all indices and which set them apart.

A Model of ethnic conflict

We present a model of conflict, in which discriminatory government policy or social intolerance is responsive to various forms of ethnic activism, including violence. It is this perceived responsiveness -captured by the probability that the government gives in and accepts a proponed change in ethnic policy- that induces individuals to mobilize in support for their cause. Yet, mobilization is costly and demonstrators have to be compensated accordingly. Individuals have to weigh their ethnic radicalism with their material well-being to determine the size of their money contribution to the cause. Our main results are: (i) a one-sided increase in radicalism or in population size increases conflict; (ii) a one-sided increase in income has ambiguous effects depending on the elasticity of contributions to income; (iii) an increase in within-group inequality increases conflict; and (iv) an increase in the correlation between ethnic radicalism and inequality also increases conflict.

The Social contract with endogenous sentiments

Moral values infuence individual behavior and social interactions. A specially signif- cant instance is the case of moral values concerning work e¤ort. Individuals determine what they take to be proper behaviour and judge the others, and themselves, accordingly. They increase their esteem -and self-esteem- for those who perform in excess of the standard and decrease their esteem for those who work less. These changes in self-esteem result from the self-regulatory emotions of guilt or pride extensively studied in Social Psychology. We examine the interactions between sentiments, individual behaviour and the social contract in a model of rational voting over redistribution where individual self-esteem and relative es-teem for others are endogenously determined. Individuals di¤er in their productivities. The desired extent of redistribution depends both on individual income and on individual attitudes toward others. We characterize the politico-economic equilibria in which sentiments, labor supply and redistribution are simultaneously determined. The model has two types of equilibria. In "cohesive" equilibria, all individuals conform to the standard of proper behav- iour, income inequality is low and social esteem is not biased toward any particular type. Under these conditions equilibrium redistribution increases in response to larger inequality. In a "clustered" equilibrium skilled workers work above the mean while unskilled workers work below. In such an equilibrium, income inequality is large and sentiments are biased in favor of the industrious. As inequality increases, this bias may eventually overtake the egoistic demand for greater taxation and equilibrium redistribution decreases. The type of equilibrium that emerges crucially depends on inequality. We contrast the predictions of the model with data on inequality, redistribution, work values and attitudes toward work and toward the poor for a set of OECD countries.

Polarization, fractionalization and conflict

A recent upsurge of empirical studies on the causes of conflict attempts to connect various features of the distribution of the relevant characteristic (typically ethnicity or religion) to conflict. The distributional indices differ (polarization, fractionalization or Lorenz-domination) and so do the various specifications of "conflict" (onset, incidence or intensity). Overall, the results are far from clear, and combined with the mixture of alternative indices and notions of "conflict" it is not surprising that the reader may come away thoroughly perplexed. The aim of this paper is to provide a theoretical framework that permits us to distinguish between the occurrence of conflict and its severity and that clarifies the role of polarization and fractionalization in each of these cases.

Dynamics of the third order Lyness' difference equation

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