2013 - Working Papers: Strategy, Innovation and Entrepreneurship

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Backward integration, forward integration, and vertical foreclosure, 35 pp.
Y. Spiegel
(Working Paper No. 1/2013)

I show that partial vertical integtaion may either alleviates or exacebate the concern for vertical forclosure and I examine the circumstances under which it enhances or harms welfare relative to full vertical integration.

 

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Partial cross ownership and tacit collusion under cost asymmetries, 33 pp.
D. Gilo, Y. Spiegel and U. Temurshoev
(Working Paper No. 6/2013)
No. : 08690100

We examine the effects that passive investments in rival firms have on the incentives to collude when firms have asymmetric marginal costs. We first show that unilateral investments by the most efficient firm in rivals may not only facilitate collusion but also raise the collusive price. We also show that the most efficient firm prefers to invest in its most efficient rival and only if this investment is insufficient to sustain collusion will it begin to invest in less efficient rivals. We then consider multilateral passive investments in rivals and show that an increase in such investments never hinders tacit collusion and we establish necessary and sufficient conditions for such investments to strictly facilitate tacit collusion.

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Motivating a supplier to test product quality, 42 pp.
Y. Yehezkel
(Working Paper No. 7/2013)

This paper considers a supplier that offers a buyer a new product of unknown quality. The supplier can run a test that partially reveals unverifiable information concerning the quality, and the buyer can learn the actual quality after agreeing to buy the new product. I identify two main features of a contract for motivating the supplier to run the test. First, the contract may specify an upward or downward quantity distortion. Second, the contract may include slotting allowances, which may be welfare reducing when they discriminate against financially constrained suppliers.

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Organizational Structure, Police Activity and Crime, 29 pp.
I.Ater, Y. Givati and O. Rigbi
(Working Paper No. 11/2013)

We examine the consequences of an organizational reform in Israel that transferred the responsibility for housing arrestees from the Police to the Prison Authority. Using the staggered introduction of the reform in different regions of the country, we document strong evidence that this organizational change led to an increase of 11 percent in the number of arrests and to a decrease of 4 percent in the number of reported crimes, with these effects concentrated in more minor crimes. The reform also led to a decrease in the quality of arrests, measured by the likelihood of being charged following an arrest. These findings are consistent with the idea that the reform externalized the cost of housing arrestees from the Police's perspective, and therefore led the Police to increase its activity against crime.

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