Should a buyer approach sellers of complementary goods informed or uninformed of her private valu... more Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers “read” into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings. (JEL D11, D81, D82, D83)
Should a buyer approach sellers of complementary goods informed or uninformed of her private valu... more Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers “read” into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings. (JEL D11, D81, D82, D83)
We depart from the traditionally viewed role of advertisement as a marketing device and instead f... more We depart from the traditionally viewed role of advertisement as a marketing device and instead focus on its role as a disclosure and com-mitment mechanism. We allow for heterogeneity among suppliers and show that given product homogeneity and buyer's knowledge of prod-uct ...
International Journal of Industrial Organization, Jan 31, 2015
We model a firm's exploration support and employees' start-up formation.Ideas with moderate exter... more We model a firm's exploration support and employees' start-up formation.Ideas with moderate externalities may be explored internally and developed externally.Valued ideas with weak externalities are explored and developed externally.Increasing support can reduce employee retention after internal exploration.A rise in firm's appropriability increases support but may reduce firm's profit.We model an employee's decision to pursue an innovative idea at his employing firm (internally) or as a start-up (externally). We characterize an idea by its market profitability and the degree of positive/negative externality that it imposes on the employing firm's profits. The innovation process consists of exploration and development. Exploring an idea internally grants the employee access to exploration support provided by the firm but reduces his appropriability of the idea. We demonstrate that ideas exhibiting weak externalities are explored and developed externally, whereas ideas with strong externalities are explored and handled internally. Moderate externalities are associated with internal exploration but subsequent external development. An increase in the firm's exploration support attracts internal exploration of a wider range of ideas but may increase the likelihood of subsequent external development. We further show that while the optimal level of exploration support rises with the firm's innovation appropriability, overall profits may decline.
Evidence suggests little informed giving. To understand this behavior, we examine a model of char... more Evidence suggests little informed giving. To understand this behavior, we examine a model of charitable giving with costly information. We find that an individual who considers a smaller contribution is less likely to seek information, and thus the percentage of informed giving diminishes as the population grows. We also find that a direct grant to the charity exacerbates crowding-out by discouraging information acquisition, whereas a matching grant increases donations by encouraging it. We further show that a (first-order) stochastic increase in valuations for charity can decrease donations; and that facilitating private acquisition of information can be a better fund-raising strategy
than directly supplying it.
A model of process innovation is presented that o ffers an explanation for the negative relations... more A model of process innovation is presented that o ffers an explanation for the negative relationship between patent strength and R&D investment. It shows that for non-drastic innovations, that do not render the pre-existing technology obsolete, the innovator might favor imitation if the expected royalty rate determined by the court is sufficiently high. Since imitation is discouraged for very high levels of patent protection, R&D investment is often maximized for an intermediate level of patent strength. In addition to supporting empirical evidence, this finding may serve as a justi cation for the imperfections of the existing patent system that allows for some infringement.
This paper investigates the sequencing choice of a buyer who negotiates with the sellers of two c... more This paper investigates the sequencing choice of a buyer who negotiates with the sellers of two complementary objects with uncertain payoffs. We show that the sequencing matters to the buyer only when equilibrium trade can be inefficient. In this case, the buyer begins with the less powerful seller if the sellers have sufficiently diverse bargaining powers. If, however, both sellers are strong bargainers, then the buyer begins with the stronger of the two. For either choice, the buyer’s sequencing (weakly) increases the social surplus. Our analysis further reveals that it is sometimes optimal for the buyer to raise her own cost of acquisition to better manage the sellers' competition. As such, we find that the buyer may commit to paying the sellers a minimum price strictly above the marginal cost; and that the buyer may outsource an input even though it can be made in-house. Finally, we identify the first- and second-mover advantages in negotiations for the sellers.
"The preference between public and private negotiations for a buyer who sequentially visits two s... more "The preference between public and private negotiations for a buyer who sequentially visits two sellers is examined. It is shown that the buyer (weakly) prefers private negotiations so as to create strategic uncertainty about the trade history. With substitute goods, such uncertainty is valuable only when price off ers have short deadlines that prevent a head-to-head competition. With complementary goods, strategic uncertainty
is valuable to the extent that price coordination becomes a concern for sellers, which is likely to be the case when sellers possess high bargaining powers; their price o ffers have short deadlines; and/or goods are weak complements. Sellers' strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated."
Should a buyer approach sellers of complementary goods informed or uninformed of her private valu... more Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers “read” into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings. (JEL D11, D81, D82, D83)
Should a buyer approach sellers of complementary goods informed or uninformed of her private valu... more Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. Informed (or careful) sequencing may, however, hurt the buyer as sellers “read” into it. The buyer may, therefore, commit to ignorance, perhaps, by overloading herself with unrelated tasks, delegating the sequencing decision, or letting sellers self-schedule. Absent such commitment, we show that ignorance is not time-consistent for the buyer, but it increases trade. Evidence on land assembly supports our findings. (JEL D11, D81, D82, D83)
We depart from the traditionally viewed role of advertisement as a marketing device and instead f... more We depart from the traditionally viewed role of advertisement as a marketing device and instead focus on its role as a disclosure and com-mitment mechanism. We allow for heterogeneity among suppliers and show that given product homogeneity and buyer's knowledge of prod-uct ...
International Journal of Industrial Organization, Jan 31, 2015
We model a firm's exploration support and employees' start-up formation.Ideas with moderate exter... more We model a firm's exploration support and employees' start-up formation.Ideas with moderate externalities may be explored internally and developed externally.Valued ideas with weak externalities are explored and developed externally.Increasing support can reduce employee retention after internal exploration.A rise in firm's appropriability increases support but may reduce firm's profit.We model an employee's decision to pursue an innovative idea at his employing firm (internally) or as a start-up (externally). We characterize an idea by its market profitability and the degree of positive/negative externality that it imposes on the employing firm's profits. The innovation process consists of exploration and development. Exploring an idea internally grants the employee access to exploration support provided by the firm but reduces his appropriability of the idea. We demonstrate that ideas exhibiting weak externalities are explored and developed externally, whereas ideas with strong externalities are explored and handled internally. Moderate externalities are associated with internal exploration but subsequent external development. An increase in the firm's exploration support attracts internal exploration of a wider range of ideas but may increase the likelihood of subsequent external development. We further show that while the optimal level of exploration support rises with the firm's innovation appropriability, overall profits may decline.
Evidence suggests little informed giving. To understand this behavior, we examine a model of char... more Evidence suggests little informed giving. To understand this behavior, we examine a model of charitable giving with costly information. We find that an individual who considers a smaller contribution is less likely to seek information, and thus the percentage of informed giving diminishes as the population grows. We also find that a direct grant to the charity exacerbates crowding-out by discouraging information acquisition, whereas a matching grant increases donations by encouraging it. We further show that a (first-order) stochastic increase in valuations for charity can decrease donations; and that facilitating private acquisition of information can be a better fund-raising strategy
than directly supplying it.
A model of process innovation is presented that o ffers an explanation for the negative relations... more A model of process innovation is presented that o ffers an explanation for the negative relationship between patent strength and R&D investment. It shows that for non-drastic innovations, that do not render the pre-existing technology obsolete, the innovator might favor imitation if the expected royalty rate determined by the court is sufficiently high. Since imitation is discouraged for very high levels of patent protection, R&D investment is often maximized for an intermediate level of patent strength. In addition to supporting empirical evidence, this finding may serve as a justi cation for the imperfections of the existing patent system that allows for some infringement.
This paper investigates the sequencing choice of a buyer who negotiates with the sellers of two c... more This paper investigates the sequencing choice of a buyer who negotiates with the sellers of two complementary objects with uncertain payoffs. We show that the sequencing matters to the buyer only when equilibrium trade can be inefficient. In this case, the buyer begins with the less powerful seller if the sellers have sufficiently diverse bargaining powers. If, however, both sellers are strong bargainers, then the buyer begins with the stronger of the two. For either choice, the buyer’s sequencing (weakly) increases the social surplus. Our analysis further reveals that it is sometimes optimal for the buyer to raise her own cost of acquisition to better manage the sellers' competition. As such, we find that the buyer may commit to paying the sellers a minimum price strictly above the marginal cost; and that the buyer may outsource an input even though it can be made in-house. Finally, we identify the first- and second-mover advantages in negotiations for the sellers.
"The preference between public and private negotiations for a buyer who sequentially visits two s... more "The preference between public and private negotiations for a buyer who sequentially visits two sellers is examined. It is shown that the buyer (weakly) prefers private negotiations so as to create strategic uncertainty about the trade history. With substitute goods, such uncertainty is valuable only when price off ers have short deadlines that prevent a head-to-head competition. With complementary goods, strategic uncertainty
is valuable to the extent that price coordination becomes a concern for sellers, which is likely to be the case when sellers possess high bargaining powers; their price o ffers have short deadlines; and/or goods are weak complements. Sellers' strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated."
Uploads
Papers by Silvana Krasteva
than directly supplying it.
existing patent system that allows for some infringement.
is valuable to the extent that price coordination becomes a concern for sellers, which is likely to be the case when sellers possess high bargaining powers; their price o ffers have short deadlines; and/or goods are weak complements. Sellers' strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated."
than directly supplying it.
existing patent system that allows for some infringement.
is valuable to the extent that price coordination becomes a concern for sellers, which is likely to be the case when sellers possess high bargaining powers; their price o ffers have short deadlines; and/or goods are weak complements. Sellers' strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated."