Hanyi Wang (University of California, San Diego) will present her paper “Beyond Borders: The Impact of Embodied Carbon Policy Costs on Industrial Firm Performance” on February 2nd at 11:00 AM, room QA406.
While policymakers generally regard carbon pricing as effective and efficient, the average price of emissions worldwide remains low. A major concern is that unilateral enhancement of carbon policy could negatively impact firms’ competitiveness and performance. This paper investigates the impact of carbon policy on industrial firm outcomes in Europe, introducing a novel measure of embodied carbon policy costs that incorporates multi-region input-output linkages. In contrast to prior studies that have found limited effects from direct carbon policy costs, the inclusion of indirect costs via the global value chain leads to findings here that include a decrease in firm employment and output and an increase in total factor productivity and investment. These impacts tend to be more pronounced for small firms and for capital-intensive firms. Finally, a novel test for input substitution in this context estimates the extent to which carbon policy costs drive European industrial sectors to source inputs from countries lacking carbon regulations.
Nadine Hahn (Katholieke Universiteit Leuven) will present her paper “Who Is in the Driver’s Seat? Markups, Markdowns, and Profit Sharing in the Car Industry” on January 31st at 11:00 AM, room QA406.
I develop a general framework for markup and markdown estimation that allows for profit sharing along value chains without making assumptions on conduct between vertically related firms. I derive the conditions under which the markup and markdown estimates relate to the firms’ equilibrium bargaining weights. To account for vertical and horizontal product differentiation in the production function estimation, I include plant-level prices and employ car characteristics as demand-based quality controls. Between 2002 and 2018, the European car manufacturers’ margins on their input and product markets combined were stable around 10% to 15% on average. The manufacturers’ share of the margin on the input market, however, depends on the car segments in which they produce. The suppliers’ share depends negatively on the variety of their product portfolio and depends positively on their relationship intensity to car manufacturers. The analysis shows that the manufacturers’ bargaining weights decreased during crisis years, such as the financial crisis in 2007 or the diesel gate scandal in 2015.
Evgeniya Kudinova (London School of Economics and Political Science) will present her paper on “Exploration, Exploitation, Amelioration: Experimentation with Endogenously Changing Arms” on January 24th at 11:00 AM, room QA406.
I analyse how economic agents adapt to new risky opportunities, such as new technologies, when the agents can invest in increasing the likelihood of a successful outcome, while also learn about its original quality. I build on a single risky arm Poisson bandit environment and explore how the ability to endogenously change the arm, by investing, affects the incentives for experimentation. More specifically, I assume that successful investment turns a bad arm into a good one. As opposed to standard good news Poisson bandits, I find that beliefs may evolve non-monotonically and that the agent may get stuck on a certain belief and invest at some intensity until the news arrives. In the context of adaptation, this means that the agent may keep pursuing the new opportunity forever despite not reaching a success for a long time, in contrast to necessarily giving up according to the traditional experimentation models. This creates discontinuity in the long-term outcomes of experimentation and suggests strong implications for innovation design and organisational strategies for technological adaptation.
Evangelia Spantidaki (Universitat Pompeu Fabra) will present her paper on “How Narcissists Match and Play in Games” on January 25th at 11:00 AM, room QA405.
I investigate experimentally how subjects choose their partners and how they play depending on their personality characteristics. In particular, I study the role of narcissism within the context of games of collaboration, fairness, and competition. I find that no matter how narcissistic participants are, they tend to prefer to be matched with less narcissistic individuals in all games. Participants’ level of narcissism significantly predicts behavior in all contexts. The higher their level of narcissism, the less they contribute in a public goods game, the smaller the offer in an ultimatum game, and the poorer the performance in competition is. In the context of collaboration, participants adjust their behavior based on the characteristics of their partner; the more narcissistic the partner, the less they contribute. Subjects do not adapt their behavior in the context of competition and fairness. This paper sheds light on the under-investigated topic of matching and economic behavior of individuals across different levels of narcissism.