Publication database

This paper asks whether firms respond to cost shocks by introducing process innovations and increasing the use of managerial incentives. Using a large panel data set of workplaces in Canada, our identification strategy relies on exogenous variation in costs arising from increased border security along the 49th parallel fol- lowing 9/11. Our longitudinal difference-in-differences estimates indicate that firms responded to the cost shock by introducing new or improved processes, but did not change their use of managerial incentives. These results suggest that the threat of bankruptcy may provide impetus for improving efficiency.

© 2013 Wiley Periodicals, Inc.

Payment card networks, such as Visa, require merchants' banks to pay substantial "interchange" fees to cardholders' banks, on a per transaction basis. This paper shows that a network's profit-maximizing fee induces an inefficient price structure, over-subsidizing card usage and over-taxing merchants. In contrast to the literature we show that this distortion is systematic and arises from the fact that consumers make two distinct decisions (membership and usage) whereas merchants make only one (membership). These findings are robust to competition for cardholders and/or for merchants, network competition, and strategic card acceptance to attract consumers.

Copyright © 2013 by the American Economic Association.

A study involving a Global 500 company finds that frontline employees’ perceptions of corporate social responsibility (CSR) can contribute to their customer orientation (self-rated) and objective job performance (supervisor-rated) by activating social identification processes. Employees identify with the organization based in part on the extent to which CSR is supported by salient and job-relevant others both internal and external to the organization. Looking internally, employees identify with the organization to the extent that they perceive management to support CSR. Looking externally, employees can identify with customers (called employee-customer identification) to the extent they perceive customers to support the company’s CSR. Both effects are enhanced when employees feel CSR is an important (versus non-important) part of their self-concept. Organizational identification directly drives job performance while employee-customer identification contributes to job performance through its effects on organizational identification and customer orientation.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

At times, consumers are motivated to reduce the influence of a product recommendation on their judgments. Based on previous research, it is unclear whether this correction process will increase or decrease consumers’ confidence in their judgments. We find that source credibility moderates the effect of correction on confidence: correction decreases confidence when a product recommendation comes from a high credibility source but increases confidence when the same message comes from a low credibility source. As a result, correction increases the effectiveness of recommendations from low credibility sources on purchase intentions. Notably, this “confidence via correction” effect is further moderated by elaboration, such that the effect is attenuated for high elaboration consumers. Our results have implications for understanding consumers’ reactions to persuasive messages and for both marketing practitioners and consumer protection agencies using correction cues to influence message persuasiveness.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

We show that prices and incentives recommended by the salesforce literature when targeting a profitable segment can attract unprofitable customers, particularly when salespeople have high productivity and low risk (i.e., risk aversion times uncertainty). Therefore, when customers are unidentifiable, unprofitable customers may also enter the market creating an adverse selection problem for the salespeople. By solving the moral hazard and adverse selection problems simultaneously, we show that firms can prevent the entry of unprofitable customers by “screening”. Although, screening generally requires a higher price to dissuade unprofitable customers, when firms hire salespeople, however, it requires lowering of both selling effort and the price. It also leads to a “sales trap” restricting the sales to the profitable segment to a fixed level. Screening, therefore, lowers firm profits obtained from the profitable customers. When salespeople are highly productive and risk tolerant, this drop in profit can be so high that “accommodating” unprofitable customers becomes the preferred strategy. Furthermore, the adverse selection problem intensifies and accommodation becomes more preferable when there is no moral hazard between firm and the salesperson. Behavior of unprofitable customers, therefore, must be an important consideration when targeting high-value customers and designing salesforce compensation.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).