Essays in Industrial Organization and Information Technology

Chapter 1 studies how consumers’ switching costs affect the pricing and profits of firms competing in two-sided markets such as Apple and Google in the smartphone market. When two-sided markets are dynamic – rather than merely static – I show that switching costs lower the first-period price if network externalities are strong, which is in contrast to what has been found in one-sided markets. By contrast, switching costs soften price competition in the initial period if network externalities are weak and consumers are more patient than the platforms. Moreover, an increase in switching costs on one side decreases the first-period price on the other side. Chapter 2 examines firms’ incentives to invest in local and flexible resources when demand is uncertain and correlated. I find that market power of the monopolist providing flexible resources distorts investment incentives, while competition mitigates them. The extent of improvement depends critically on demand correlation and the cost of capacity: under social optimum and monopoly, if the flexible resource is cheap, the relationship between investment and correlation is positive, and if it is costly, the relationship becomes negative; under duopoly, the relationship is positive. The analysis also sheds light on some policy discussions in markets such as cloud computing. Chapter 3 develops a theory of sequential investments in cybersecurity. The regulator can use safety standards and liability rules to increase security. I show that the joint use of an optimal standard and a full liability rule leads to underinvestment ex ante and overinvestment ex post. Instead, switching to a partial liability rule can correct the inefficiencies. This suggests that to improve security, the regulator should encourage not only firms, but also consumers to invest in security.

Age, Sex, and Telomere Dynamics in a Long-Lived Seabird with Male-Biased Parental Care

The examination of telomere dynamics is a recent technique in ecology for assessing physiological state and age-related traits from individuals of unknown age. Telomeres shorten with age in most species and are expected to reflect physiological state, reproductive investment, and chronological age. Loss of telomere length is used as an indicator of biological aging, as this detrimental deterioration is associated with lowered survival. Lifespan dimorphism and more rapid senescence in the larger, shorter-lived sex are predicted in species with sexual size dimorphism, however, little is known about the effects of behavioral dimorphism on senescence and life history traits in species with sexual monomorphism. Here we compare telomere dynamics of thick-billed murres (Uria lomvia), a species with male-biased parental care, in two ways: 1) cross-sectionally in birds of known-age (0-28 years) from one colony and 2) longitudinally in birds from four colonies. Telomere dynamics are compared using three measures: the telomere restriction fragment (TRF), a lower window of TRF (TOE), and qPCR. All showed age-related shortening of telomeres, but the TRF measure also indicated that adult female murres have shorter telomere length than adult males, consistent with sex-specific patterns of ageing. Adult males had longer telomeres than adult females on all colonies examined, but chick telomere length did not differ by sex. Additionally, inter-annual telomere changes may be related to environmental conditions; birds from a potentially low quality colony lost telomeres, while those at more hospitable colonies maintained telomere length. We conclude that sex-specific patterns of telomere loss exist in the sexually monomorphic thick-billed murre but are likely to occur between fledging and recruitment. Longer telomeres in males may be related to their homogamous sex chromosomes (ZZ) or to selection for longer life in the care-giving sex. Environmental conditions appeared to be the primary drivers of annual changes in adult birds.

Marginal Return of Infrastructure Investment on Bilateral Trade Performance

Investing in transport infrastructures such as roadways, airports and seaports has proven to improve a country's trade performance through reduction of transportation costs and providing access to production and market. This research investigates the diminishing return of infrastructure investment and also the rate of return of two types of infrastructure investment strategies on trade. An augmented gravity model is used with econometric analysis methods in this study. The results have shown that as roadway and airport densities increase, the marginal returns on trade decrease. Empirical evidence from the United States and China with all their trading partners from the past twenty years has also suggested existence of diminishing return of infrastructure investment on roadways and airports. Infrastructure investment strategy that focuses on increasing roadway and airport density experiences smaller diminishing return on trade. In contrast, seaport investment that focuses on port quality and efficiency generates higher return on trade. A trade benefiting infrastructure investment strategy that best utilizes financial resources must balance between quality and quantity based on a country's current level of infrastructure asset.

Separation of Ownership from Control and Discretionary Managerial Behaviour in a Transition Economy

This study was the final stage of a four-year study of managerial behaviour and company performance in Bulgaria and examined the influence of changing ownership and control structures of companies on managerial behaviour and initiative. It provides a theoretical summary of the specific types of ownership, control, governance structures and managerial strategies in the Bulgarian transitional economy during 1992-1996. It combines two theoretical approaches, the property-rights approach to show concentrated property-rights structure and private and majority types of control as determinants of efficient enterprise risk bearing and constrained managerial discretion, and the agency theory approach to reveal the efficient role of direct non-market governance mechanisms over managers. Mr. Peev also used empirical information collected from the Central Statistical office in Bulgaria, three different enterprise investigations of corporatised state-owned enterprises between 1992 and 1994, and his own data base of privatised and private de novo industrial companies in 1996-1996. The project gives a detailed description of the main property-rights structures in Bulgaria at the present time and of the various control structures related to these. It found that there is a strong owner type of control in private and privatised firms, although, contrary to expectations, 100% state -owned enterprises tended to be characterised by a separation of ownership from control, leaving scope for managerial discretion. Mr. Peev predicts that after the forthcoming mass privatisation, many companies will acquire a dispersed ownership structure and there will be a greater separation of ownership from control and potential or inefficient managerial behaviour. The next aspect considered in detail was governance structures and the influence of the generally unstable macroeconomic environment in the country during the period in question. In examining managerial strategies, Mr. Peev divided the years since 1990 into 3 periods. Even in the first period (1990-1992) there were some signs of a more efficient role for managers and between 1992 and 1994 the picture of control structures and different managerial behaviour in state-owned companies became more diversified. Managerial strategies identified included managerial initiatives for privatisation, where managers took initiative in resolving problems of property rights and introducing restructuring measures and privatisation proposals, managerial initiatives for restructuring without privatisation, and passive adjustment and passive management, where managers seek outside services for marketing, finance management, etc. in order to adjust to the new environment. During 1995-1996 some similarities and differences between the managerial behaviour of privatised and state-owned firms emerged. Firstly, the former have undergone many changes in investment and technology, while managers of state-owned companies have changed little in this field, indicating that the private property-rights structure is more efficient for the long-term adaptation of enterprises. In the area of strategies relating to product quality, marketing, and pricing policy there was little difference between managers of private, privatised and state-owned firms. The most passive managerial behaviour was found in non-incorporated state-owned firms, although these have only an insignificant stake in the economy.

The quantitative genetic basis of offspring solicitation and parental response in a passerine bird with biparental care

The coevolution of parental investment and offspring solicitation is driven by partly different evolutionary interests of genes expressed in parents and their offspring. In species with biparental care, the outcome of this conflict ma!: be influenced by the sexual conflict over parental investment, Models for the resolution of such family conflicts have made so far untested assumptions about genetic variation and covariation in the parental resource provisioning response and the level of offspring solicitation. Using a combination of cross-fostering and begging playback experiments, we show that, in the great tit (Parus major), (i) the begging call intensity of nestlings depends on their common origin, suggesting genetic variation for this begging display, (ii) only mothers respond to begging calls by increased food provisioning, and (iii! the size of the parental response is positively related to the begging call intensity of nestlings in the maternal but not paternal line. This study indicates that genetic covariation, its differential expression in the maternal and paternal lines and/or early environmental and parental effects need to be taken into account when predicting the phenotypic outcome of the conflict over investment between genes expressed in each parent and the offspring. [References: 36]

Economic benefits and costs of technologies for sustainable land management (SLM): a preliminary analysis of global WOCAT data

The WOCAT network has collected, documented, and assessed more than 350 case studies on promising and good practices of SLM. Information on on- and off-site benefits of different SLM types, as well as on investment and maintenance costs is available, sometimes in quantitative and often in qualitative form. The objective of the present paper is to analyse what kind of economic benefits accrue to local stakeholders, and to better understand how these benefits compare to investment and maintenance costs. The large majority of the technologies contained in the database are perceived by land users as having positive benefits that outweigh costs in the long term. About three quarters of them also have positive or at least neutral benefits in the short term. The analysis shows that many SLM measures exist which can generate important benefits to land users, but also to other stakeholders. However, methodological issues need to be tackled and further quantitative and qualitative data are needed to better understand and support the adoption of SLM measures. Keywords: Sustainable Land Management, Costs, Benefits, Technologies

Relations between adolescents' self-evaluations, time perspectives, motivation for school and their achievement in different countries and at different ages

The present study focused on the relations between the self-efficacy, social self-concept, time perspectives, school investment and academic achievement of students in four different European countries and in different adolescence periods. A total of 1623 students completed questionnaires. The relations between the concepts proved not to be specific to the Western or to the former Communist bloc countries studied. The expected general decline in investment and academic achievement over the adolescence period showed up in all four countries studied. Contrary to our hypothesis, however, this decline could not be explained by growing influences of either social self-concept or time perspectives regarding personal development on their investment. In fact, the effects of social self-concept were strongest for the youngest adolescence group. Students’ social self-concept was the best predictor for their investment, while self-efficacy proved to predict academic achievement best in all adolescence periods.

Soil abiotic factors influence interactions between belowground herbivores and plant roots

Root herbivores are important ecosystem drivers and agricultural pests, and, possibly as a consequence, plants protect their roots using a variety of defensive strategies. One aspect that distinguishes belowground from aboveground plant–insect interactions is that roots are constantly exposed to a set of soil-specific abiotic factors. These factors can profoundly influence root resistance, and, consequently, the outcome of the interaction with belowground feeders. In this review, we synthesize the current literature on the impact of soil moisture, nutrients, and texture on root–herbivore interactions. We show that soil abiotic factors influence the interaction by modulating herbivore abundance and behaviour, root growth and resistance, beneficial microorganisms, as well as natural enemies of the herbivores. We suggest that abiotic heterogeneity may explain the high variability that is often encountered in root–herbivore systems. We also propose that under abiotic stress, the relative fitness value of the roots and the potential negative impact of herbivory increases, which may lead to a higher defensive investment and an increased recruitment of beneficial microorganisms by the plant. At the same time, both root-feeding herbivores and natural enemies are likely to decrease in abundance under extreme environmental conditions, leading to a context- and species-specific impact on plant fitness. Only by using tightly controlled experiments that include soil abiotic heterogeneity will it be possible to understand the impact of root feeders on an ecosystem scale and to develop predictive models for pest occurrence and impact.

Hit-and-run trophallaxis of small hive beetles

Some parasites of social insects are able to exploit the exchange of food between nestmates via trophallaxis, because they are chemically disguised as nestmates. However, a few parasites succeed in trophallactic solicitation although they are attacked by workers. The underlying mechanisms are not well understood. The small hive beetle (=SHB), Aethina tumida, is such a parasite of honey bee, Apis mellifera, colonies and is able to induce trophallaxis. Here, we investigate whether SHB trophallactic solicitation is innate and affected by sex and experience. We quantified characteristics of the trophallactic solicitation in SHBs from laboratory-reared individuals that were either bee-naïve or had 5 days experience. The data clearly show that SHB trophallactic solicitation is innate and further suggest that it can be influenced by both experience and sex. Inexperienced SHB males begged more often than any of the other groups had longer breaks than their experienced counterparts and a longer soliciting duration than both experienced SHB males and females, suggesting that they start rather slowly and gain more from experience. Successful experienced females and males were not significantly different from each other in relation to successful trophallactic interactions, but had a significantly shorter soliciting duration compared to all other groups, except successful inexperienced females. Trophallactic solicitation success, feeding duration and begging duration were not significantly affected by either SHB sex or experience, supporting the notion that these behaviors are important for survival in host colonies. Overall, success seems to be governed by quality rather than quantity of interactions, thereby probably limiting both SHB energy investment and chance of injury (<1%). Trophallactic solicitation by SHBs is a singular example for an alternative strategy to exploit insect societies without requiring chemical disguise. Hit-and-run trophallaxis is an attractive test system to get an insight into trophallaxis in the social insects.

Corruption and Growth Under Weak Identification

The goal of this paper is to revisit the influential work of Mauro [1995] focusing on the strength of his results under weak identification. He finds a negative impact of corruption on investment and economic growth that appears to be robust to endogeneity when using two-stage least squares (2SLS). Since the inception of Mauro [1995], much literature has focused on 2SLS methods revealing the dangers of estimation and thus inference under weak identification. We reproduce the original results of Mauro [1995] with a high level of confidence and show that the instrument used in the original work is in fact 'weak' as defined by Staiger and Stock [1997]. Thus we update the analysis using a test statistic robust to weak instruments. Our results suggest that under Mauro's original model there is a high probability that the parameters of interest are locally almost unidentified in multivariate specifications. To address this problem, we also investigate other instruments commonly used in the corruption literature and obtain similar results.

The Level of Development and the Determinants of Productivity Growth

We examine the effects of technology on productivity growth by disaggregating total output into sectoral components, exploring the roles of investment and technology on productivity growth for countries in different income groups. We find that for low-income countries, investment is the most important determinant of productivity growth. While investment plays an important role in determining productivity growth in middle-income countries, additional effects resulting from technological change also emerge. Investment ceases to have a significant effect on productivity growth in high-income countries.

HEALTH MAINTENANCE ORGANIZATION ENVIRONMENT: AN EMPIRICAL STUDY OF THE RELATIONSHIP OF EXTERNAL CONTEXT AND PERFORMANCE

The research project is an extension of a series of administrative science and health care research projects evaluating the influence of external context, organizational strategy, and organizational structure upon organizational success or performance. The research will rely on the assumption that there is not one single best approach to the management of organizations (the contingency theory). As organizational effectiveness is dependent on an appropriate mix of factors, organizations may be equally effective based on differing combinations of factors. The external context of the organization is expected to influence internal organizational strategy and structure and in turn the internal measures affect performance (discriminant theory). The research considers the relationship of external context and organization performance.^ The unit of study for the research will be the health maintenance organization (HMO); an organization the accepts in exchange for a fixed, advance capitation payment, contractual responsibility to assure the delivery of a stated range of health sevices to a voluntary enrolled population. With the current Federal resurgence of interest in the Health Maintenance Organization (HMO) as a major component in the health care system, attention must be directed at maximizing development of HMOs from the limited resources available. Increased skills are needed in both Federal and private evaluation of HMO feasibility in order to prevent resource investment and in projects that will fail while concurrently identifying potentially successful projects that will not be considered using current standards.^ The research considers 192 factors measuring contextual milieu (social, educational, economic, legal, demographic, health and technological factors). Through intercorrelation and principle components data reduction techniques this was reduced to 12 variables. Two measures of HMO performance were identified, they are (1) HMO status (operational or defunct), and (2) a principle components factor score considering eight measures of performance. The relationship between HMO context and performance was analysed using correlation and stepwise multiple regression methods. In each case it has been concluded that the external contextual variables are not predictive of success or failure of study Health Maintenance Organizations. This suggests that performance of an HMO may rely on internal organizational factors. These findings have policy implications as contextual measures are used as a major determinant in HMO feasibility analysis, and as a factor in the allocation of limited Federal funds. ^

Disciplining Investment Incentives: A Lost Cause?

An E15 Initiative think piece: Investment incentives rank among the most important policy instruments governments employ to influence the locational decisions of multinational firms. In the wake of the recent increase in locational competition and the growing impact of investment incentives and support measures for state-owned enterprises (SOEs), the need for enhanced disciplines on investment incentives has gained political and academic salience. This think piece explores the evolution of investment incentives from a development and rule-making perspective. It summarises the existing literature and examines current practices and recent trends in FDI flows and the use of various investment incentives. This is followed by a discussion of the reasons for the observed stalemate in attempts at disciplinary rule-making. The paper concludes by putting forth recommendations for data gathering and transparency that could further the move toward improved global governance founded on the increasing complementarities of trade, investment, and competition law and policy as the core pillars of a more open, inclusive, and just world economy.

Post-decentralization regional economies and actors -- putting the capacity of Local governments to the test

Decentralization in Indonesia was introduced institutionally in 2001, with a democratization drive promoted by international donors and by the intention of the new government to clear away the centralistic image of Soeharto. Decentralization has had some effects on regional economies and on local government administration. Compared to the period before decentralization, the share of gross regional domestic product and local government finance has increased in Java, though investment and bank borrowing have expanded to the outer islands. In qualitative aspects, decentralization has transferred not only administrative authority but also many new vested interests from the center to regions. Local governments have become more extensive economic actors in regional economies. Regional economic actors now compete actively for such vested interests and have missed the opportunity to create market-friendly regional economies. The government sector should not be a mere rent-seeking economic actor, but should play a role as a facilitator promoting private sector activities in regional economies.