The impact of reputation on the outcomes of ethnic minority users of a popular ride-sharing platform is studied in this paper. Using a large unique dataset, we find that minorities achieve lower economic outcomes: compared to non-minority users, their listings are less popular, they sell fewer seats and have lower revenue. We also show that reputation is instrumental in reducing the ethnic performance gap, which is concentrated during the first interactions of minority drivers, and reduces substantially after they establish a reputation. We develop a model of career concerns, which allows us to model markets’ beliefs about the expected quality of service of drivers. We show that these beliefs are formed based on socio-demographic characteristics of drivers and updated with reviews. We show that a significant part of the initial performance gap is due erroneous, overly pessimistic beliefs about the expected quality of minority drivers. Finally, we conduct a counterfactual analysis of this market in the absence of a reputation system. Our research stresses the importance of a well-designed reputation system in alleviating discrimination.
This paper studies settlements between an incumbent patent holder and multiple potential entrants to the market in the shadow of patent litigation. We show that there exists litigation in equilibrium for patents with intermediate strength, whereas sufficiently weak or strong patents are not taken to court. The incumbent pays to delay some entrants while accommodates the others, either through licensing or litigation. This identifies a new source of sequentiality in equilibrium entry to markets governed by patents. Settlement externalities between the entrants are the driving force behind our results: when one more entrant is delayed from entering the market, there is less competition and the litigation threat from the other entrants is increased. Our results bring new important insights for the hotly debated topic of pay-for-delay agreements, witnessed in the pharmaceutical industry and sanctioned by antitrust authorities both in the US and Europe.
Emil Palikot: Competition-Innovation Nexus: Product vs. Process, does it matter?, December 2015
This paper investigates competition and innovation relationship with a special focus on the product vs. process distinction. Competitive advantages stemming from different types of innovation are of distinct nature, therefore the impact of market structure on the firms’ incentives to innovate should differ. First, I develop a theoretical model allowing a study of differences in the competition-innovation relationship depending on the type of innovation: product vs. process. Second, conjectures stemming from the
theoretical model are tested using a new data. Dataset is constructed using the Community Innovation Survey and the Structural Business Statistics, it encompasses over 90 thousand European enterprises and provides new measures of competition and innovation: innovation intensity by successful innovators and a ratio of gross operating profit to turnover. Inverted U-shape relationship is found between competition and innovation. Difference in product and process- oriented sectors is tested.