This paper examines the relationship between a differentiated downstream market and a specialized upstream market. We analyze four different types of vertical relation between the upstream and downstream sectors when the upstream market supplies specialized and complementary inputs to a downstream product differentiated market. The first is the benchmark case of decentralized markets, the secon...

This paper compares the efficiency of flat and tall hierarchies from the perspective of ‘socialism in internal capital markets’ (SICM) — a recently documented problem of multi-segment firms in which high-profit segments tend to be underinvested and low-profit segments tend to be overinvested. SICM is characterized with the possibility of divisionalization — grouping elementary business segments...

Delegation of Authority as an Optimal (In)complete Contract The present paper aims to contribute to the literature on the foundations of incomplete contracts by providing conditions under which simple delegation of authority is the solution to the complete-contracting problem of the parties. We consider a hold-up framework where both parties profit from an investment that raises the value of an...

We take a game theory approach to study the make-or-buy decisions of firms in a mixed duopoly. We assume that a managerial firm and a profit-oriented firm compete in a duopoly market for a final good, and they can choose whether making an intermediate input or buying it from a monopolistic upstream firm. We find that different equilibria may arise, depending on parameter constellations. In part...

This paper presents a theoretical foundation to the possibility that multimarket contact enhances firms' ability to sustain implicit collusion. When firms operate in a single market and cannot perfectly monitor their opponents' choices, it is impossible to achieve efficiency even if these firms have a long-term strategic relationship. We show that when firms encounter each other in a number of ...

In this global world many firms present a complex shareholding structure with indirect participation, such that it may become difficult to assess a firm’s controllers. Furthermore, if there are numerous dominant shareholders, the control can be shared between them. Determining who has the most influence often is a difficult task. To measure this influence, game theory allows modeling voting gam...

We extend previous work on efficiently training linear models by applying stochastic updates to non-zero features only, lazily bringing weights current as needed. To date, only the closed form updates for the l1, l∞, and the rarely used l2 norm have been described. We extend this work by showing the proper closed form updates for the popular l22 and elastic net regularized models. We show a dyn...

FDI comes from different sources, with different levels of technology, different modes of transferring it and into different industries. The spillover effects of FDI may therefore differ. The paper attempts to study empirically the spillover effects of Japanese and U.S. FDI on the total factor productivity growth of the Indian firms, both at the firm and the industry level. The results show tha...

This paper presents a model in which economies of scope in production play a key role in a vertically-linked production structure. It identifies the divergence in the degrees of economies of scope and the attribute spaces of the products in different stages of production as a fundamental economic force behind outsourcing. Among other things, it is shown that outsourcing occurs in the following ...

New approaches in health care, such as e.g. Integrated Delivery Systems, affect the role and tasks of medical suppliers. More and more, medical suppliers are incorporated into the process of guiding patients to medical specialists and hospitals and thus managing the course of disease. In this context, the role of medical gatekeepers and case managers may provide opportunities for undesirable be...