Stephanie Rosenkranz

Simultaneous choice of process and product innovation when consumers have a preference for product variety

Abstract This paper analyses simultaneous product and process innovation if demand is characterized by preference for product variety. It investigates the strategic decisions of two identical duopolists, who choose production technology as well as product differentiation through R&D investment and discusses factors which determine the optimal proportion of R&D activities. If firms coordinate their R&D activities and either conduct R&D in one lab, or R&D-cost functions are sufficiently steep, they will invest more in R&D than under competition and shift the optimal proportion of R&D investment towards product innovation. Firms’ investment is also driven to product innovation if consumers’ willingness to pay is high.

Reserve Prices in Auctions as Reference Points

We consider second-price and first-price auctions in the symmetric independent private values framework. We modify the standard model by the assumption that the bidders have reference-based utility, where a publicly announced reserve price has some influence on the reference point. It turns out that the sellers optimal reserve price increases with the number of bidders. Also in contrast to the standard model, we find that secret reserve prices can outperform public reserve prices, and that setting the optimal reserve price can be more valuable for the seller than attracting additional bidders.

Innovation and cooperation under vertical product differentiation

Abstract This paper analyzes the strategic decisions of two identical duopolists who determine both the timing and the quality of their innovation through their research and development activities. The product market is vertically differentiated and the firms choose the prices of their innovations in Bertrand competition. The firms interact in a two-stage, non-cooperative game, where they first decide on the quality and innovation date and then choose the prices in the second stage appropriately. The existence of equilibria in pure and mixed strategies is analyzed. It is shown that the firms have an incentive to form a Research Joint Venture and to share their research know-how even when research results are certain and there are no spillover effects, and that cooperation is not socially desirable.

Optimal allocation of ownership rights in dynamic R&D alliances

We explore the dynamic evolution of property rights regimes in R&D alliances using the incomplete contract approach pioneered by Grossman, Hart and Moore. In contrast to the standard analysis, the productive asset is an excludable public good such as a patent. Moreover, both firms can decide whether to disclose their know-how and invest effort. Know-how that has once been released cannot be concealed later. We characterize different scenarios in which the optimal ownership structure may change over time due to a trade-off between inducing know-how disclosure and ensuring maximum effort.

Know-How Disclosure and Incomplete Contracts

When two parties invest in human capital and at the same time decide on know-how disclosure it can be shown that joint ownership with veto power is the optimal ownership structure, given that only incomplete contracts can be written.

Joint Ownership And Incomplete Contracts: The Case Of Perfectly Substitutable Investments

Important results of the property rights approach based on incomplete contracts, as outlined by Hart (1995), say that all ownership structures lead to underinvestment and that joint ownership cannot be optimal, provided that investments are strategic complements and affect human capital only. We show that when only the total amount invested matters, these conclusions are still true in a static setting, even if investments are in physical capital. However, if the parties can invest and generate a surplus twice, then joint ownership may imply first-best investments in the first stage and can well be the optimal ownership structure.

Can Coasean Bargaining Justify Pigouvian Taxation

The fact that according to the celebrated Coase theorem rational parties always try to exploit all gains from trade is usually taken as an argument against the necessity of government intervention through Pigouvian taxation in order to correct externalities. We show that the hold-up problem, which occurs if non-verifiable investments have external effects and parties cannot be prevented from always trying to exploit all gains from trade, may in fact be solved by taxation. Thus, in our framework Coasean bargaining is not a substitute for Pigouvian taxation; instead it is the very reason for government intervention.

To Reveal or Not to Reveal: Know-How Disclosure and Joint Ventures in Procurement Auctions

Firms incentives to form joint ventures are analyzed in an incomplete-information framework when technological know-how is private information. Firms first decide on cooperation and then compete in a second-price procurement auction. Provided that firms indicate their willingness to cooperate by revealing a fraction of their know-how, it can be shown that noncooperation is always an equilibrium. If spillovers are sufficiently low, cooperation can also occur in equilibrium. For intermediate levels of spillovers there exists an equilibrium in which only firms with low know-how cooperate.

Netzwerkbildung und Gründungserfolg

▪ Der „network success approach“ der Grundungsforschung untersucht, ob und wie der Aufbau personlicher Netzwerke durch Unternehmensgrunder den Grundungserfolg po sitiv beeinflusst. Dieser Beitrag stellt die theoretischen Grundlagen dieses Forschungsansatzes dar und ordnet ihn in die bestehenden betriebswirtschaftlichen Netzwerktheorien ein. ▪ Bisherige empirische Untersuchungen zum Zusammenhang zwischen Netzwerkbildung und Grundungserfolg kommen zu sehr unterschiedlichen Ergebnissen. Das liegt vor allem an sehr verschiedenen Methoden, die unabhangigen Variablen (Netzwerkaktivitaten von Unternehmensgrundern) und die abhangige Variable (Erfolg einer Neugrundung) zu messen. ▪ In diesem Beitrag wird ein erweitertes Modell entwickelt, das neben den strukturellen auch die qualitativen Eigenschaften von einzelnen Beziehungen und ganzen Netzwerken berucksichtigt. Auf der Basis dieses Modells lasst sich u.a. die Existenz einer optimalen Netzwerkgrose herleiten.

Reputation Effects in Social Networks Do Not Promote Cooperation : An Experimental Test of the Raub & Weesie Model

Despite the popularity of the notion that social cohesion in the form of dense social networks promotes cooperation in Prisoner’s Dilemmas through reputation, very little experimental evidence for this claim exists. We address this issue by testing hypotheses from one of the few rigorous game-theoretic models on this topic, the Raub & Weesie model, in two incentivized lab experiments. In the experiments, 156 subjects played repeated two-person PDs in groups of six. In the “atomized interactions” condition, subjects were only informed about the outcomes of their own interactions, while in the “embedded” condition, subjects were informed about the outcomes of all interactions in their group, allowing for reputation effects. The design of the experiments followed the specification of the RW model as closely as possible. For those aspects of the model that had to be modified to allow practical implementation in an experiment, we present additional analyses that show that these modifications do not affect the predictions. Contrary to expectations, we do not find that cooperation is higher in the embedded condition than in the atomized interaction. Instead, our results are consistent with an interpretation of the RW model that includes random noise, or with learning models of cooperation in networks.