Jeanine Miklos-Thal

Belief Precision and Effort Incentives in Promotion Contests

Jeanine Miklos-Thal et al. — Fri, 19 Nov 2010 11:03:29 PST

This short paper analyzes contests in which the agent with the highest perceived ability wins a prize. We show that each agent's equilibrium effort is non-monotonic in the precision of the prior beliefs about his ability. If little (much) is known about an agent's ability, his effort incentives are increasing (decreasing) in the degree of precision of the beliefs about his ability. The findings have implications for the design of promotion and incentive schemes in organizations.

Strategic Demarketing

Jeanine Miklos-Thal et al. — Thu, 20 May 2010 10:22:41 PDT

This paper shows that a seller can benefit from "demarketing", a practice that purposely suppresses marketing efforts to discourage demand even if such efforts are costless. By modestly marketing a product, the seller reduces sales ex ante but improves its quality image ex post, as buyers attribute any lackluster sales to insufficient marketing rather than low quality. The findings shed new light on classic marketing problems such as advertising scheduling and market selection.

Vertical Relations

Jeanine Miklos-Thal et al. — Sun, 07 Feb 2010 11:49:16 PST

The paper presents recent advances in the analysis of successive oligopolies characterized by interlocking relationships, where competing upstream suppliers deal with the same set of competing downstream partners. We first highlight the extent to which interlocking relationships alter competition, and may allow vertical restraints such as Resale Price Maintenance to eliminate it upstream as well as downstream. Modeling difficulties, such as the inexistence or a large multiplicity of equilibria, however arise. After reviewing how similar issues have been successfully addressed in the case of a single supplier, we draw lessons for more general multilateral settings.

Career Prospects and Effort Incentives: Evidence from Professional Soccer

Jeanine Miklos-Thal et al. — Mon, 12 Oct 2009 10:30:20 PDT

This paper provides direct evidence that future career prospects affect current effort incentives. Using data from professional soccer, we test whether the prospect of being selected to a Euro Cup national team has effects on players' pre-Cup performances. Players who work for the same clubs but are nationals of countries that did not participate in the Euro Cup serve as a control group. We find that the Euro Cup career prospect has substantial positive effects on the performances of players with intermediate chances of being selected to their national team, but negative effects on the performances of players whose nomination is close to certain.

Optimal Collusion under Cost Asmmetry

Jeanine Miklos-Thal — Wed, 23 Sep 2009 16:54:30 PDT

Cost asymmetry is generally thought to hinder collusion because a more efficient firm has both more to gain from a deviation and less to fear from retaliation than less efficient firms. Our paper reexamines this conventional wisdom and characterizes optimal collusion without any prior restriction on the class of strategies. We first stress that firms can credibly agree on retaliation schemes that maximally punish even the most efficient firm. This implies that whenever collusion is sustainable under cost symmetry, some collusion is also sustainable under cost asymmetry; efficient collusion, however, remains more difficult to sustain when costs are asymmetric. Finally, we show that in the presence of side payments cost asymmetry facilitates collusion.

The Value of Recommendations

Jeanine Miklos-Thal et al. — Thu, 28 May 2009 18:51:28 PDT

We analyze the repeated interaction between a firm, short-lived consumers, and a monitor that sells recommendations about the firm to consumers. In each period, the monitor decides whether to recommend the firm, the current consumer decides whether to purchase the recommendation and whether to buy from the firm, and the firm decides whether to exert high effort to provide quality. We show that, in a broad range of settings, the monitor's desire to maximize the value of its recommendations to consumers is in conflict with (constrained) efficient effort provision by the firm.

Linking Reputations through Umbrella Branding

Jeanine Miklos-Thal — Sat, 11 Oct 2008 11:45:37 PDT

This paper develops a theory of umbrella branding as a way to link the reputations of otherwise unrelated products. The analysis predicts that umbrella branding can credibly signal positive correlation between the qualities of the included products to consumers, but cannot certify high quality or signal negative quality correlation. Moreover, whenever umbrella branding signals perfect positive quality correlation, firms that already sell a high (low) quality product have stronger (weaker) incentives to invest in developing another high quality product than new entrants.

Buyer Power and Intrabrand Coordination

Jeanine Miklos-Thal et al. — Sat, 11 Oct 2008 11:38:17 PDT

We analyse the competitive effects of various contractual provisions in a situation where rival retailers make offers to a common manufacturer. In contrast to Marx and Shaffer (2007), who find that a strong retailer can use slotting allowances (that is, upfront payments from manufacturers) to exclude its weaker rival, we show that foreclosure is no longer inevitable once retailers' offers can be contingent on the relationship being exclusive or not. There then exist equilibria that sustain the industry monopoly outcome; moreover, as long as retailers can use non-linear tariffs, such equilibria exist irrespectively of whether slotting allowances are allowed or banned. Non-contingent contracts, on the other hand, necessarily lead to exclusion, with or without slotting allowances. A ban on slotting allowances may therefore prove ineffective, while a ban on exclusive dealing options in supply contracts leads to foreclosure.

Delivered Pricing and the Impact of Spatial Differentiation on Cartel Stability

Jeanine Miklos-Thal — Sat, 11 Oct 2008 11:33:02 PDT

This paper analyzes the impact of spatial differentiation on the sustainability of collusion on delivered prices. It shows that the choice of the punishment mechanism that enforces collusion is crucial for determining whether differentiation facilitates cartel pricing or not. If punishments are optimal, then differentiation tends to facilitate collusion. Optimal punishments impose minmax profits on deviators independently of the degree of differentiation. A high degree of differentiation then renders deviations less profitable, since it makes business stealing more costly but does not affect the deviator's punishment profits. Depending on the transport cost technology, excessive differentiation may have a countervailing effect, however, because it also implies high transport costs for the cartel. If collusion is sustained by standard grim trigger punishments instead, then collusion may be easiest for minimal differentiation. The reason is that competitive and thus grim trigger punishment profits are higher the higher the degree of differentiation.

Optimal Collusion under Cost Asymmetry

Jeanine Miklos-Thal — Sat, 11 Oct 2008 11:18:04 PDT

Cost asymmetry is generally thought to hinder collusion because a more effcient firm has both more to gain from a deviation and less to fear from retaliation than less efficient firms. Our paper reexamines this conventional wisdom and characterizes optimal collusion without any prior restriction on the class of strategies. We first stress that firms can credibly agree on retaliation schemes that maximally punish even the most efficient firm. This implies that whenever collusion is sustainable under cost symmetry, some collusion is also sustainable under cost asymmetry; effcient collusion, however, remains more difficult to sustain when costs are asymmetric. Finally, we show that, in the presence of side payments, cost asymmetry generally facilitates collusion.