We assess the common ownership hypothesis (COH) in the US banking industry; our preferred estimates do not support it. Public banks offer similar deposit rates in markets where they have common shareholders with rivals and in markets where they do not. Our preferred panel regressions of deposit rates on profit weights implied by the COH yield precise zeros. Estimated effects on deposit quantities also do not support the COH.
The global cell phone market has transitioned significantly from feature phones to smartphones since 2007. This particular period of smartphone industry expansion, and a detailed product-level dataset of all the cell phones sold in 40 major economies between 2007 and 2016, give us an unprecedented chance to study how the order of entry affects the performance of the same firm in different markets. We begin with a theoretical framework wherein the order of a firm’s entry affects both consumers’ preferences and suppliers’ delivery costs. We then document a market sales advantage for early entrants, especially those originating from developed countries, offering higher-priced products, or having diversified product lines. Finally, we show that adopting product-specific innovations, such as the Android operating system and high-performance hardware components, can help late followers leapfrog over formerly leading firms.
Exporting is precarious. In Australia, one-third of exporters in a given year are entrants; however, around 60 percent of these entrants exit within their first year. These firms start small, but those that survive expand rapidly and drive the country’s total trade in the subsequent years. One explanation in the literature is that exporters are hit with an ex-post shock upon entry; hence, some survive, and others do not. The paper finds that the answer is more nuanced. Using Australian administrative data, the study: i) applies conventional econometric and machine learning techniques, along with Shapley values, to predict and understand exporter survival; ii) provides a systematic comparison of the predictive performance of ML and conventional approaches. The study documents two key findings. First, exporter survival is shaped by firms’ ex-ante heterogeneity, such as export portfolio, size, and prior export experience, as well as strategic complementarities through compatriot-firm networks. Second, ML models outperform conventional approaches in out-of-sample prediction and deliver more balanced reductions in misclassification errors and their associated costs. The results shed light on the determinants of exporter survival and highlight the value of ML for solving prediction problems such as targeting of export promotion activities, which tend to be distributed ad hoc.
How firms generate and select ideas influences their strategic path and the development of entire industries. To better understand this process, we experimentally analyze the impact of knowledge on idea generation and selection in an incentivized ideation task. Between treatments, we vary whether or not ideators are provided with examples of previous successful ideas before working on the task. We provide causal evidence that knowledge about such example ideas leads to path dependencies, i.e., knowledge increases the similarity of new ideas to those provided. Consistent with the hypothesis that knowledge affects the search for new ideas, we find evidence of path dependencies during idea generation, but do not find statistically significant evidence of additional path dependencies during idea selection. Overall, when knowledge is provided, we observe an increase in selected innovative ideas that are similar to previous ideas and a decrease in selected innovative ideas that are different from previous ideas.
This paper develops a model of dynamic pricing with boundedly rational consumer search. Consumers observe one price, can choose to engage in costly search to learn the other prices, and then purchase from the firm with the lowest observed price. Each consumer searches only if the observed price exceeds their dynamically tuned reservation price. Firms optimize given the current distribution of reservation prices. Short run pricing is characterized by Edgeworth cycles. Rather than resetting as a mixed strategy, each cycle resets when the firm with the larger installed base relents by monopolizing its residual demand. Both the lower and upper bounds of the cycles move with consumer search, though not necessarily in the same direction. Whether these cycles persist in the long run or the pricing dynamic converges to the Diamond paradox, the Bertrand paradox, or a kinked-demand equilibrium depends on exogenous conditions that we outline.
