This paper examines a market where the provision of information service is costly, but information service has the characteristics of a public good. Consumers, on the other hand, can use the information service to make an informed purchase decision and derive higher utility from consuming their ideal product. However, after receiving the information service from an information service provider, consumers can easily free ride by purchasing at low-price sellers who do not provide any information service. The paper examines the competition where sellers compete by providing information service for horizontally differentiated products and where technology reduces consumers' search cost. It is found that in this market a seller needs to establish itself as an information service provider in order to make positive profits, even when there is free riding. A seller, however, cannot make positive profits by free riding all the time. Also, with an increase in competition in the information service market, sellers have reduced incentives to provide information service. It is also found that in this market a decrease in search cost may increase or decrease social welfare.free riding, search cost, electronic markets, electronic commerce
The information systems (IS) literature suggests that by lowering coordination costs, information technology (IT) will lead to an overall shift towards more use of markets. Empirical work in this area provides evidence that IT is associated with a decrease in vertical integration (VI). Economy-wide data, however, suggests that over the last 25 years the average level of VI has, in fact, increased. This paper studies this empirical anomaly by explicating the moderating impact of two measures of competitive environment, demand uncertainty, and industry concentration, on the relationship between IT and VI. We examine firms included in 1995 to 1997 InformationWeek 500 and the COMPUSTAT database. Consistent with the IS literature, the analysis suggests that IT is associated with a decrease in VI when demand uncertainty is high or industry concentration is low. However, contrary to the IS literature, IT is found to be associated with an increase in VI when industry concentration is high or demand uncertainty is low. Furthermore, as demand uncertainty increases, less vertically integrated firms invest more in IT, while as industry concentration increases, more vertically integrated firms invest more in IT. The analysis also suggests that firms' choice of the level of VI and IT investment, under different levels of demand uncertainty and industry concentration, are rational. When demand uncertainty is high or industry concentration is low, increase in VI may increase coordination and production costs. Thus, less VI is rational. However, when industry concentration is high or demand uncertainty is low, increase in VI may decrease coordination and production costs. Thus, firms choose more VI in such industries. The implications for research and practice are discussed.
How does contract manufacturing /outsourcing affect productivity? Existing studies have conflicting empirical findings regarding this issue. This paper aims to reconcile these conflicting findings in the literature by viewing the research question through the lens of the property rights theory. The authors develop a moderated moderation model to empirically examine how productivity is influenced by the interactions among contract manufacturing, competition, and suppliers’ productivity spillover. Our model shows that though conflicting findings have been reported in the literature, each finding holds true under certain conditions which are identified in our paper. In brief, contract manufacturing /outsourcing improves productivity when suppliers’ productivity growth is above average and focal industry’s competition is at medium level. On the other hand, if suppliers’ productivity growth is low, or focal industry’s competition is too high or too low, the impact of contract manufacturing /outsourcing could be negative or not significant.
We present pydynpd, a Python package which implements all the features in dynamic panel model with GMM (general method of moments). These features include: (1) difference and system GMM, (2) one-step, two-step, and iterative estimators, (3) robust standard errors including the one suggested by (Windmeijer, 2005), (4) Hansen over-identification test, (5) Arellano-Bond test for autocorrelation, (6) time dummies, (7) allows users to collapse instruments to reduce instrument proliferation issue, and (8) a simple grammar for model specification. As far as we know, pydynpd is the first Python package that allows researchers to estimate dynamic panel model.
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