Victor Manuel Bennett

Organization and Bargaining: Sales Process Choice at Auto Dealerships

This paper examines how firms’ organizational form affects prices negotiated. Negotiated prices are one factor determining whether a vendor or customer captures the value from a transaction. Firms that systematically negotiate more effectively capture more value. Research has investigated individual- and market-level determinants of negotiation outcomes, but little has been done on the firm-level determinants of negotiated prices. I present a first look at one feature, sales process: whether salespeople handle the entire sale in parallel or customers begin with less experienced salespeople who can escalate difficult assignments. I model firms’ choice of sales process as a biform game and test predictions of the model using a combination of transaction-level data on new car purchases in the U.S. and a unique survey of dealership management practices. I find that a serial process has implications consistent with improving firms’ bargaining power and reducing customers’ outside option.

Cannibalization and Option Value Effects of Secondary Markets: Evidence from the US Concert Industry

We examine how reducing search frictions in secondary markets affects the value appropriated by firms in primary markets. We characterize two effects on primary market firms caused by intermediaries entering secondary markets: the ‘cannibalization’ and ‘option value’ effects. Separation between primary and secondary markets can drive which of the two effects dominates. Firms selling valuable and scarce products are more likely to have separate primary and secondary markets, and will therefore appropriate more value when secondary markets thicken. Firms selling products which are not valuable and scarce will be hurt. Further, we hypothesize that firms have incentives to engineer scarcity by limiting supply when secondary markets thicken to separate primary and secondary markets. We find support for these hypotheses in the U.S. concert ticket industry.

Motivation matters: Corporate scope and competition in complementary product markets

We argue that a pure capabilities-based view does not accurately explain the competitive dynamics of increasingly common settings where firms act as both complementors and competitors. We propose that the Awareness-Motivation-Capability framework is more appropriate for these settings. We derive predictions from both a pure capabilities view and the AMC framework and test those predictions in the United States auto leasing market, where the leasing subsidiaries of car manufacturers directly compete with the same independent lessors who provide complements to the manufacturers. Although our results are consistent with capabilities playing an important role, motivation appears to be a critical factor explaining the competitive dynamics of the market.

The Wages of Dishonesty: The Supply of Cheating under High-Powered Incentives

We use a novel design to identify how dishonesty changes through a broad reward range that, at the high end, exceeds participants’ average daily wages. Using a sample of online Indian workers who earn bonuses based on six simultaneous coin flips, we show that the relationship between dishonesty and financial rewards depends on the incentive range. We find two novel effects as incentives exceed those used in most prior research. First, dishonesty increases and reaches its maximum as rewards increase from

Firm Lifecycles: Linking Employee Incentives and Firm Growth Dynamics

0.50 to

The Empirics of Learning from Failure

3 per reported head and as earnings reach

Resource redeployability, uncertainty, and entry

15, indicating that rewards can indeed motivate more cheating when large enough. More importantly, we show that dishonesty declines at the highest reward levels (up to

Workers on Tap? How Labor Flexibility Fosters Experimentation and Business Creation

5 per head) as individuals appear to engage in lower magnitudes of dishonesty. We detail how our results could be explained by a reference-dependent utility with internal costs of dishonesty that are convex in the magnitude of the lie, and show survey and simulation-based evidence that support this explanation.

Changes in Persistence of Performance Over Time

We develop a formal model that links the design of a firm’s incentive structure to the firm’s rate of growth. Motivated by the prospect of promotion, employees exert effort over and above their formal job requirements to improve processes and make the firm more efficient. Firms that are growing faster, in turn, have more promotion opportunities which links firms’ growth rate and the incentives managers experience. We show that the associated dynamics lead to three distinct epochs of a firm’s lifecycle: rapid growth and high-powered incentives driven by frequent promotion opportunities; moderate growth with infrequent promotion opportunities but large salary increases contingent on promotion; and finally stagnant firms with low-powered incentives.

Factor Rigidity, Experimentation, and Entry

The ability to learn from experience is central to an organization’s performance. A set of qualitative management studies argues that learning from failure is the exception rather than the rule. Another literature, using econometric methods, finds strongly statistically- and economically-significant effects. There are many possible explanations for this discrepancy, but we argue that one contributor is that a problem with one of the standard empirical approaches to identifying learning from failure may result in erroneously significant results. We generate simulated placebo data in which no learning takes place and show that the standard approach yields strong significant results. We provide a simple example that provides intuition for why this might be. We then propose and implement improved specifications using data on liver transplantation and find no direct evidence of learning from failure.