Firms can share data to discover potential synergies between their data sets and algorithms, eventually leading to more efficient mergers and acquisitions (M&A) decisions. However, data sharing also modifies the competitive balance when firms do not merge, and a company may be reluctant to share data with potential rivals. Under general conditions, we show that firms benefit from (partially) sharing data. By doing so, they can merge conditionally based on high synergies. Compared to a laissez-faire situation, the presence of a regulator allowing or refusing the M&A may increase or decrease data sharing, with a concomitant increase or decrease in consumer surplus. Hence, regulation can reduce the surplus of consumers it is willing to protect. We revisit the Google/Fitbit acquisition through the lens of this interplay between strategic data sharing and antitrust policy.

The value principle in organizational economics states that the net market value of the goods that a firm sells is a key determinant of its organizational design. We survey and extend some recent developments in the theoretical literature at the nexus of organizational and industrial economics, focusing on this precept as the unifying theme. Under perfect competition, we study how market price influences the use of scarce professional management and the degree of organizational heterogeneity in an industry. In a more general setting, we show how changes in demand influence not only the use of professional management, but also the size and the market power of firms. And we show how prices can affect the internal control structure of firms, sometimes in highly distorted ways. We discuss applications to comparative industrial organization and to technological diffusion.

Little is known theoretically, and even less empirically, about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers. We test the predictions of the model using a novel dataset that combines measures of vertical integration and delegation for a large set of firms from many countries and industries. In line with the model’s predictions, we obtain three main results: (i) integration and delegation co-vary positively; (ii) producers are more likely to integrate suppliers in input sectors with greater productivity variation (as the option value of integration is greater); and (iii) producers are more likely to integrate suppliers of more important inputs and to delegate decisions to them.

Industrial organization: understanding the mechanisms of market structures Patrick Legros, Professor of Econonmics at Université libre de Bruxelles, explores how Industrial Organization can help understand the positive and normative consequences of different market structures through three main topics: The OIO approach and reverse causality, market power enhancement: regulation and divestitures, and market power and the quiet life. He begins by analysing when and why do mergers or divestitures happen, and the degrees of integration varying within and across industries, even when controlling for exogenous differences. Professor Legros also looks to how can we explain the heterogeneity in performance among seemingly identical firms. Overall, he demonstrates that fringe firms can co-exist with powerful firms and that concentration increases with the market size, suggesting a demand-side driver of recent trends that profit margins and market concentration increase in many industries. Noting that stable oligopolies may lead to a market price that is inferior to the price in a perfectly competitive structure.

An agent can perform a job in several ways, which we call tasks. Choosing agents’ tasks is the prerogative of management within firms, and of agents themselves if they are entrepreneurs. While agents’ comparative advantage at different tasks is unknown, it can be learned by observing their performance. However, tasks that generate more information could lead to lower short-term profits. Hence, firms will allocate workers to more informative tasks only if agents cannot easily move to other firms. When, instead, workers can easily move to other firms, agents may prefer to become entrepreneurs and acquire task discretion, even if their short-term payoff is lower than employees. Our model generates novel predictions with respect to, for example, how the wage dynamics of agents who switch between entrepreneurship and employment are affected by labor and contracting frictions. (JEL D83, J24, J62, J63, L26, M13).

Firms may share information to discover potential synergies between their data sets and algorithms, eventually leading to more efficient mergers and acquisitions (M&A) decisions. However, as pointed out by Arrow, information sharing also modifies the competitive balance when companies do not merge, and a firm may be reluctant to share information with potential rivals. Under general conditions, we show that firms benefit from (partially) sharing information. More sharing of information may increase industry expected profits both when there is head-to-head competition and when there is a M&A. Compared to a laissez-faire situation, a regulator in charge of allowing or refusing the M&A may decrease or increase the level of information sharing, as well as consumer surplus. A regulator who can also control the level of information sharing will allow firms to share information.

On Monday, April 19th, 2021, twelve of Europe’s elite football clubs triggered a figurative earthquake upon the landscape of professional football. The ‘European SuperLeague’ was a de facto coup d’etat against UEFA and perhaps epitomized the unbridled impact of commercialization on the game of football as the dubbed ‘Super Clubs’ sought a greater share of the financial pie. As a student of the game, I was both fascinated and disturbed by this event but ultimately it laid the inspiration for me to write this thesis. My research involved a thorough examination of the legality of UEFA’s vice grip on the organization of professional football in Europe. In response to the SuperLeague, UEFA moved to secure their position by banning the clubs from participating in UEFA competitions and fining them for breach of the UEFA Statutes. The article of UEFA’s statutes under scrutiny is article 49 which enables UEFA to prohibit any member club from participating in external events that are not sanctioned by UEFA. In other words, this prevented clubs from participating in unsanctioned breakaway leagues which had been rumoured by the games power figures for a long time. As such, I decided to test Article 49 for its compatibility with EU competition law and this thesis provides a simulation of a Commission investigation and decision were it ever to materialize. It must be noted that the CJEU recently heard a preliminary ruling hearing on this matter with a decision expected in late 2022/early 2023. UEFA is a complex organization to say the least. Unravelling the intricacies of its composition meant that this thesis, and a prospective Commission decision, proved this issue is more complicated than a simplification of “UEFA=monopoly”. In fact, my contention is that a case brought against UEFA would be best brought under the auspices of article 101, rather than the more obvious article 102. In chapter 3, I outline why this is the more strategically sound route for the Commission. Moreover, this thesis details the extensive body of jurisprudence on EU competition and sports law with commentary on the decisions of, inter alia, Bosman, Meca-Medinah, ISU and Wouters. To the best of my knowledge, this is the only substantial body of research carried out on this topic since the European SuperLeague was announced last year. Prior research is plentiful but limited to speculation as to how a breakaway league would look and operate which means that the conclusions drawn can’t be fully sure of whether a SuperLeague would be pro or anti-competitive. In fact, this is the premise of my concluding chapter where I delve into the concept of competitive balance in professional sport and how it squares (or not) with the ideals of European competition law. Comparison is drawn to professional sports in the US which are given autonomy to deviate from antitrust law in order to produce a sustainable and lasting product. I analyse whether such a model would be appropriate in Europe in light of some fundamental differences in how European sport operates such as the promotion/relegation concept and professional/amateur solidarity mechanisms. The light shone on the competitive merit of UEFA’s organizational approach is incisive and definitive. It is designed to give a snapshot of how the inevitable CJEU case between the SuperLeague and UEFA will pan out. Moreover, it is pressing as other professional sports such as golf face breakaway threats from their status quo systems. The reality is that professional sport for too long remained in competition law limbo, and this is the beginning of an era of significant upheaval.

The paper studies the effectiveness of communication in a two-player two-sided asymmetric information context. Both players choose simultaneously between two actions, with action L leading to a lower payoff for the co-player than action H. There are two types of players: D-types for whom L is dominant, and C-types for whom the optimal action is the same as the one chosen by the co-player, with both player choosing H providing the C-type a higher payoff than both players choosing L. Before the actions are chosen, each player can signal his/her intention to choose H. We consider three communication environments: No communication (NC), cheap talk (CT), and an environment with extrinsic communication costs (FC). For this game the range of equilibrium payoffs of both types is the same in NC and CT, while for C-types the equilibrium payoff is highest in FC due to the Spence mechanism (Spence 1973). When we tested these predictions experimentally, the C-type payoffs were the highest in CT. In this environment the average observed C-type payoff was even higher than the maximum equilibrium payoff. In CT about half of the D-types did not mimic the communication behavior of C-types, and hence even cheap talk revealed some information to the C-types. This indicates that half of the D-types were reluctant to make promises they would break. We introduce a theoretical model with promisekeepers. When the probability of an agent being promise-keeper is around 50%, the signaling rate will be higher in CT than in FC. On the other hand, for the same signal structure C-types choose more often H in the FC than in CT. These predictions are confirmed by the experimental results. Overall, the effect of the higher signalling rate in CT dominates: Together with presence of promisekeepers the higher signalling rate allows the C-types to coordinate more often on the \good" (H;H) outcome in CT, resulting in higher C-type payoffs in CT than in FC. JEL Classification: C7, C9

This paper studies how opioid analgesic sales are empirically related to socioeconomic disparities in France, with a focus on poverty. This analysis is made possible using the OpenHealth database, which provides retail sales data for opioid analgesics available on the French market. We exploit firm-level data for each of the 94 departments in Metropolitan France between 2008 and 2017. We show that increases in the poverty rate are associated with increases in sales: a one percentage point increase in poverty is associated with approximately a 5% increase in mild opioid sales. Our analysis further shows that opioid sales are positively related to the share of middle-aged people and individuals with basic education only, while they are negatively related to population density. The granularity and longitudinal nature of these data allow us to control for a large pool of potential confounding factors. Our results suggest that additional interventions should be more intensively addressed toward the most deprived areas. We conclude that a combination of policies aimed at improving economic prospects and strictly monitoring access to opioid medications would be beneficial for reducing opioid-related harm.

Managers have imperfect information about each other's willingness to collude and may signal this willingness through direct communication or market actions. Owners offer bonuses to managers and trade off productive effort provision, higher profits if managers coordinate on high prices, and the risk of antitrust fines if managers explicitly communicate. Our model shows that the distribution of fines between the owners and the managers is crucial for com- munication to be informative. High or low bonuses can reflect the willingness of owners to induce managers to explicitly communicate, and are red flags for corporate responsibility when collusion is supported by direct communication.

Increased competition tends to benefit all buyers with increasing product variety and decreasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, local surplus is better provided by local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and local surplus is better provided by local monopoly.

We study college diversity policies in the presence of local peer effects and pre-college investments. If students are constrained in the side payments they can make within peer networks, the free market allocation displays excessive segregation and investment disparity compared to the first-best. Effective diversity policy must overcome market forces both within and across college boundaries, combining admission and association policies. When based on achievement, policies can increase aggregate investment and income, reduce inequality, and increase aggregate welfare relative to the market outcome. They may also be more effective than cross-subsidization schemes.

Proponents for government transparency and accountability would argue that a well-informed public can lead to reduced moral hazard issues for incumbents (Barro, 1973; Ferejohn, 1986), induce positive selection among candidates (Dal Bó et al., 2016), and elect honest or competent officials (Besley, 2005). Based on this logic, a number of nations worldwide require asset disclosures for those running for political office. Where previous studies have relied on cross-country correlations to provide information on disclosure laws, this paper offers a more compelling identification strategy based on a natural experiment. In addition, the authors analyze the mechanisms driving the changes in government performance following mandated disclosure.

In recent years, several US states have introduced college admission policies that reward local rather than global relative performance by guaranteeing admission to students graduating in the top N-percent of their high school. This column examines how these policies affected socioeconomic and ethnic segregation at both the university and high school levels in the state of Texas. While the policies did not replicate the level of diversity in universities seen under earlier affirmative action policies, they did lead to a reduction in the overall level of ethnic segregation in high schools.

When labor mobility is imperfect, employers (firms) will invest in the discovery of their employees’ talent at different tasks; in this case, agents become entrepreneurs only if they have a valuable business idea or cannot find employment. If instead employees can easily move to other firms, employers have little incentive to invest in talent discovery. In this case, an additional motive for entrepreneurship emerges: learning one’s comparative advantage over tasks. We develop such a model and show a causal relationship between the degree of labor-market frictions and the level of entrepreneurial activity; the value of entrepreneurial failures; the payoff of entrepreneurs relative to workers; the wage of former entrepreneurs relative to former workers; the degree of firms’ short-termism; the rate of within-firm talent discovery. The theoretical correlations between these variables are consistent with the evidence available for the US and continental Europe. JEL classification: D83, J24, J62, J63, L26, M13.

Discrimination is an economic concern because it distorts not only the allocation, but also groups’ payoffs from decisions made before the market, for instance school or neighborhood choice. Policies such as affirmative action aiming at desegregation as a response to discrimination must therefore be evaluated also in terms of their effects on earlier choice. We find that a policy only operating at a later stage, conditioning on earlier individual choice, but not on exogenous markers such as race or gender, may achieve desegregation with respect to that marker in both stages. An example for this is a college admission rule based on relative performance at school. If groups that are to be integrated are disadvantaged ex ante, this policy rewards some advantaged individuals for integrating at school. We present empirical evidence for a decrease in segregation at the high school level as an unintended consequence of introducing of the Texas Top Ten percent college admission rule.

We provide a simple framework for analyzing how competition affects the choice of audit structures in an oligopolistic insurance industry. When the degree of competition increases, fraud increases but the response of the industry in terms of investment in audit quality follows a U-shaped pattern. Following increases in competition, the investment in audit quality will decrease if the industry is initially in a low competition regime while it will increase when the industry is in a high competition regime. We show that firms will benefit from forming a joint audit agency only when the degree of competition is intermediate; in this case, cooperation might improve total welfare and we analyze the effects of contract innovation on the performance of the industry.

The Institute for Economic Development (IED) is a research center within Boston University’s Department of Economics focusing on development economics and related fields of finance, trade, foreign investment, health, education, political economy, organizations and economic history. #282 The Distortionary Effects of Incentives in Government: Evidence from China’s Death Ceiling program 2 Raymond Fisman, Yongxiang Wang #283 Financial Disclosure and Political Selection: Evidence from India 3 Raymond Fisman, Florian Schulz, Vikrant Vig #284 Reexamining anAsiento between Philip II of Spain and Tomás Fiesco 4 Carlos Álvarez-Nogal and Christophe Chamley #285 Agricultural Diversity, Structural Change and Long-run Development: Evidence from the U.S. 5 Martin Fiszbein #286 College Admission and High School Integration 6 Fernanda Estevan, Thomas Gall, Patrick Legros, and Andrew F. Newman #287 Enhancing the Diffusion of Information about Agricultural Technology 7 Kyle Emerick, Alain de Janvry, Elisabeth Sadoulet, and Manzoor H. Dar #288 The Cost of Favoritism in Network-based Markets 8 Kyle Emerick #289 Social Ties and Favoritism in Chinese Science 9 Raymond Fisman, Jing Shi, Yongxiang Wang, and Rong Xu #290 Bypassing Intermediaries via Vertical Integration: A Transaction-Cost-Based Theory 10 Dilip Mookherjee, Alberto Motta, and Masatoshi Tsumagari #291 The Effects of Education on Financial Outcomes: Evidence from Kenya 11 Kehinde F. Ajayi and Phillip H. Ross #292 Unity in Diversity? Ethnicity, Migration, and Nation Building in Indonesia 12 Samuel Bazzi, Arya Gaduh, Alexander Rothenberg, and Maisy Wong #293 Finding the Poor vs. Measuring their Poverty: Exploring the Drivers of Targeting Effectiveness in Indonesia 13 Adama Bah, Samuel Bazzi, Sudarno Sumarto, and Julia Tobias #294 Identifying Productivity Spillovers Using the Structure of Production Networks 14 Samuel Bazzi, Amalavoyal Chari, Shanthi Nataraj, and Alexander D. Rothenberg

The Impact of Incomplete Contracts on Economics collects papers and opinion pieces on the impact that this property right approach to the firm has had on the economics profession. It shows that the impact has been felt sometimes in significant ways in a variety of fields, ranging from the theory of the firm and their internal organization to industrial organization, international trade, finance, management, public economy, and political economy and political science. Beyond acknowledging how the property rights approach has permeated economics as a whole, the contributions in the book also highlight the road ahead—how the paradigm may change the way research is performed in some of the fields, and what type of research is still missing. The book concludes with a discussion of the foundations of the property rights, and more generally the incomplete contracting, approaches and with a series of contributions showing how behavioral considerations may provide a new way forward.