In this light, we analyze the origin of a culture based in innovation technology. We also describe, with the support of a large number of empirical and theoretical studies, the most important conditions for the generation of a corporate culture based on technological innovation.3

We discuss several extensions and show that the effect of emulation on prices is stronger when (i) the number of firms increases, (ii) consumers' first visits are more elastic with respect to market shares, and (iii) prices are adjusted more frequently. Science and Innovation (MINECO-ECO2014-59225-P) and AGAUR (2014 SGR 694). All errors are to be attributed to the authors only.1 These theoretical models have found extraordinary support in empirical work. For a recent discussion on the vast literature on social learning, see Möbius and Rosenblat (2014). 224C 2018, The RAND Corporation. 2 In Section 3, we review the empirical evidence on emulation and learning. 3 See the third subsection of Section 5 and the online web Appendix C for extensions to an infinite-horizon model with dynamic pricing. 4 A similar consideration arises in models of switching costs, further discussed in the literature review.C The RAND Corporation 2018. / THE RAND JOURNAL OF ECONOMICSconverges to zero as the search cost increases. A higher search cost exacerbates the impact of emulation because the share of consumers who never search increases. In the standard model, firms have monopoly power over this segment, so that as the proportion of these consumers increases, so does the price. In our model, however, these consumers follow their predecessors and as a result, their purchasing decisions depend on the decisions of those who actively search. The latter group becomes increasingly price-elastic when search costs increase, resulting in Bertrand-like competition and prices that can be as low as the marginal cost.Once a consumer has chosen where to start her search, learning has an opposite effect on prices. In equilibrium, a predecessor's purchase at a firm is taken as bad news by her successor for prospects elsewhere. This induces consumers to free-ride on each other and search less than in the standard model. Furthermore, a consumer is less responsive to price changes when she learns from a predecessor's purchase. Consider, for example, an unexpected price increase by a firm. This price increase triggers a direct demand reduction among those consumers who are able to compare prices. Consumers who are deciding whether or not to search become more pessimistic about utility draws at the other firm, reasoning that a firm with a higher-than-expected price is more likely to have attracted the predecessor when the other firm is offering a poorer product. Both lower search intensity and lower responsiveness to price increases induce firms to charge high prices.The total effect of learning on equilibrium prices is, therefore, not straightforward. On the one hand, emulation pushes prices down, but on the other hand, learning during searches pushes price up. We show that for intermediate search costs, emulation prevails; price is decreasing in search cost and is lower than in the standard model. The price can be as low as the marginal cost for high search costs, if learning is limited in scope and emulation dominates. For very low and very high searc...

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper characterizes the optimal information structure in competitive insurance markets with adverse selection. A regulator assigns ratings to individuals according to their risk characteristics, insurers offer fixed insurance contracts to each rating group, and the market clears as in Akerlof (1970). The optimal rating system minimizes ex-ante risk subject to participation constraints. We prove that in any such market there exists a unique optimal system under which all individuals trade and the ratings match low risk types with high risk types negative assortatively. A simple algorithm yields the optimal system. We examine implications for government regulations of insurance markets. JEL-Codes: D820. Terms of use: Documents in

We study the optimal provision of information in a procurement auction with horizontally differentiated goods. The buyer has private information about her preferred location on the product space and has access to a costless communication device. A seller who pays the entry cost may submit a bid comprising a location and a minimum price. We characterize the optimal information structure and show that the buyer prefers to attract only two bids. Further, additional sellers are inefficient since they reduce total and consumer surplus, gross of entry costs. We show that the buyer will not find it optimal to send public information to all sellers. On the other hand, she may profit from setting a minimum price and that a severe hold-up problem arises if she lacks commitment to set up the rules of the auction ex ante.

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