Communication in Organizations and Markets

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Program

10:00–10:20 Coffee/tea

10:20–11:00 Jordi Blanes i Vidal (London School of Economics)
Face-to-Face Communication in Organisations

Communication is integral to organisations, and yet field evidence on the relation between communication and worker productivity remains scarce. We argue that a core role of communication is to transmit information that helps co-workers do their job better. We build a simple model in which the optimal amount of communication tradesoffs this benefit against the time cost incurred by the sender, and use it to derive a set of empirical predictions. We then exploit a natural experiment in an organisation where problems arrive and must be sequentially dealt with by two workers. For exogenous reasons, the first worker can sometimes communicate face-to-face with their colleague. Consistently with the predictions of our model we find that: (a) the second worker works faster (at the cost of the first worker having less time to deal with incoming problems) when face-to-face communication is possible, (b) this effect is stronger when the second worker is inherently slower, busier, and dealing with more urgent tasks, and (c) the effect is also stronger for teams that are more homogenous and located closer to each other. Our findings illustrate how workers in teams adjust the amount of mutual communication to its costs and benefits.

11:00–11:40 Theo Offerman (University of Amsterdam)
Morals in Multi-unit Markets

The result that markets erode morals (Falk & Szech, 2013) has recently been challenged (for instance by Bartling et al., 2019). Experiments on norm erosion restrict market participants to trade at most one unit. This choice may limit the extent to which market forces facilitate selfish behavior and outcomes. In this project, we study norm erosion with multi-unit trading. Aggregate outcomes in such markets can be closer to selfish predictions even without erosion of moral norms, as marginal trades can be executed by traders with low moral concerns. Additionally, norm erosion in multi-unit markets can be particularly strong. In particular, these markets may activate the replacement logic, according to which people justify immoral trading behavior with their belief that others will take advantage if they do not trade themselves. In this experiment, we establish whether the moral concerns of traders are reflected in market outcomes to the degree that is theoretically predicted, and whether there is norm erosion in markets by comparing valuations of a charity donation in individual decision-making to the valuations in markets with single and multi-unit trading.

11:40–12:20 Jeannette Brosig‐Koch (University Duisburg Essen)
Incomplete Contracts and Control in Procurement Auctions

In real-world procurement of services it often appears to be beneficial for buyers to forgo control of suppliers by leaving contracts deliberately incomplete. We study behavior in buyer-determined procurement auctions and ask how sellers react to contracts that are left deliberately incomplete. In our experiment, we allow buyers to send a (non-binding) message and request a quality level from sellers before an auction begins. Providing higher quality is costly for sellers, but it increases the surplus generated through the transaction. We observe that incomplete contracts are more efficient than suggested by standard theory. In line with control aversion, supplied quality may increase further when buyers select an incomplete contract deliberately. We also observe that sellers react to buyers’ non-binding requests for quality, but their reactions are not influenced by whether the incomplete contract was chosen deliberately.

12:20–13:20 Lunch break

13:20–14:00 Jana Friedrichsen (DIW Berlin and Humboldt University Berlin)
Choosing between Explicit Cartel Formation and Tacit Collusion – An Experiment

Antitrust authorities try to detect and sanction existing cartels and hinder the formation of new ones. Firms nevertheless try to collude while avoiding sanctions, for example by colluding tacitly instead of explicitly forming a cartel. In this paper, we focus on differences in the communication of firms that either form an explicit cartel or try to collude tacitly. The latter may still involve communication, but not (at least not explicitly) about prices. We use an experimental treatment variation that manipulates how explicitly firms communicate about prices. Using text mining techniques, we then analyze how the content of communication influences the firms' price setting behavior.

14:00–14:40 Ayse Mermer (University of Amsterdam)
The Effect of Communication on Adoption of New Technologies

It has been documented that the industry take up the new innovative production technologies is at a slower pace than technological progress justifies, even when these technologies are both energy and cost effective. The possibility of communication among firms might potentially foster adoption of these technologies, while it is considered as a violation of anti-cartel law by authorities. In this paper, we experimentally investigate the potential role of stringent anti-cartel laws in the uptake of new technologies by the industry. To do so, we modify Volunteer’s Timing Dilemma game (Weesie 1993) by introducing a communication stage. In this game, players choose their investment times for adopting a new technology (or not adopting), which will succeed or fail with 50-50 probability. The player with the earliest investment time pays the cost of investment, while others enjoy the returns without bearing any cost. The cost is divided equally in the case of simultaneous investment. We implement free communication by giving players the opportunity to chat prior to deciding their investment times. We find that the opportunity to communicate helps firms to adopt a new technology significantly earlier when there are there 2 firms, but has no effect when there are 4 firms. We find that this result is driven by the fact that cartels formed in markets with 4 firms breaks down almost half of the time, sweeping away the positive effect of communication.

14:40–15:20 Céline Bonnet (Toulouse School of Economics)
Empirical Methodology for the Evaluation of Collusive Behaviour in Vertically-related Markets: An Application to the “Yogurt Cartel” in France

The paper proposes a five-step methodology based on the estimation of demand and supply models to test the existence of manufacturers’ collusive behaviour and evaluate its impact on market and welfare. This methodology allows for the estimation of profit sharing in vertical chains by properly modelling the contracting stage between manufacturers and retailers. We apply this methodology to analyse the effects of the "yogurt cartel" that prevailed in the French dairy dessert market between private label providers during the period 2006-2012. We find that data supports collusive behaviour between private label manufacturers, and lead to average price increase varying from 7.3% and 11.3%, according to the product category. We found an umbrella effect on dairy products sold under national brands at the wholesale level but not at the retail level. The cartel benefits manufacturers both for the sales of the national brand and private label products, while retailers lost profits over the private label products but gained profits over the national brand products. The cartel implies a relatively low decrease in consumer welfare —lower than the gain for the industry—such that the overall welfare effect of the cartel is positive.

15:20–15:40 Coffee/tea break

15:40–16:20 Harold Houba (VU University of Amsterdam)
The Personalized-Pricing Paradox

In this project we extend Hotelling’s model to analyze the incentives for the sellers to switch from uniform pricing to personalized pricing technology in an asymmetric oligopoly with differentiated products. The work is motivated by increasing use of data-driven AI pricing algorithms in on-line markets. The availability of detailed information collected about consumer characteristics and the adoption of the new pricing technologies making use of this information has implications for consumer welfare. We also analyze possible consumer harm that can arise due to switching to personalized pricing technology.

16:20–17:00 Greg Taylor (Oxford University)
Data and Competition

Data has become one of the most important issues in the ongoing debate about regulating the digital sector. Concerns are wide-ranging, and encompass privacy, barriers to entry, exploitative practices, and data-driven mergers. Many data-intensive markets are highly-concentrated, raising additional concerns about the role of data in the consolidation of market power. However, data has many users and uses (ad targeting, product personalisation, price discrimination, etc.) and the literature has mostly focused on models of specific applications. It therefore remains difficult to draw a clear and general picture of how policy should be made in this space. We develop a parsimonious model that allows us to study the effects of data on competition in a wide range of different contexts. We use this model to analyse the implications of data for competition and to study various policy issues, such as control of data-driven mergers.

17:00–18:00 Drinks

18:00– Dinner (by invitation)

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