Rafael Rob's research while affiliated with University of Pennsylvania and other places
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Publications (53)
We develop a theory of the …rm in which the willingness of workers to cooperate with each other plays a central role. We study a dynamic principal-agent problem. In each period, the …rm (the principal) chooses an incentive intensity (how much to pay workers per-unit of measured output) and the employees (the agents) allocate e¤ort between individua...
The increasing dependence of individuals on debt financing raises several welfare considerations that we analyze in this paper.
We develop a dynamic, competitive model of relationship banking to determine how regulation influences borrowing and lending
behavior, and analyze how it affects welfare in the market. We characterize the lending regimes t...
The increasing dependence of American households on debt financing and the rising rates of personal bankruptcy raise several welfare considerations that we analyze in this paper. We pose a theoretical model of relationship banking to first evaluate how strategic actions between banks and borrowers yield interest rates for various credit types and d...
Using survey data on movie consumption by about 500 University of Pennsylvania undergraduate students, we ask whether unpaid consumption of movies displaces paid consumption. A variety of cross-sectional and longitudinal empirical approaches show large and statistically significant evidence of displacement. In the most appropriate empirical specifi...
We consider a repeated duopoly game where each firm privately chooses its investment in quality, and realized quality is a noisy indicator of the firm's investment. We focus on turnover equilibria in which a low-quality realization is penalized by lowering future demand of the firm that delivered this quality. We determine when a turnover equilibri...
We analyze a repeated prisoners’ dilemma game played in a community setting with heterogeneous types. The setting is such
that individuals choose whether to continue interacting with their present partner, or separate and seek a new partner. Players’
types are not directly observed, but may be imperfectly inferred from observed behavior. We focus o...
Recording industry revenue has fallen sharply in the last three years, and some -- but not all -- observers attribute this to file sharing. We collect new data on albums obtained via purchase and downloading, as well as the consumers' valuations of these albums, among a sample of US college students in 2003. We provide new estimates of sales displa...
This paper estimates the elasticity of substitution of an aggregate production function. The estimating equation is derived from the steady state of a neoclassical growth model. The data comes from the PWT in which different countries face different relative prices of the investment good and exhibit different investment-output ratios. Then, taking...
We develop a model in which the value of a Þrm's reputation for quality increases gradually over time. In our model, a Þrm's ability to deliver high quality at any given period depends on how much it invests in quality. This investment is the Þrm's private information. Also, a Þrm's current quality is unobservable. Thus the only observable is a Þrm...
In this paper we construct and analyze a growth model with the following three in- gredients. (i) Technological progress is embodied. (ii) The production function of a firm is such that the firm makes both technology upgrade as well as capital and la- bor decisions. (iii) The firm's production technology is putty-clay. We assume that there are disi...
We consider a repeated duopoly game where each firm privately chooses its investment in quality, and realized quality is a noisy indicator of the firm's investment. We focus on dynamic reputation equilibria, whereby consumers "discipline" a firm by switching to its rival in the case that the realized quality of its product is too low. This type of...
We consider a repeated, community, prisoner's dilemma game. After playing the com-ponent prisoner's dilemma game in some period a player observes her partner's action and can choose to separate from the partner and seek a new partner or to continue interacting with the same partner in the next period. Players come in three types: a player is either...
We develop a model of firm size, based on the hypothesis that consumers are "locked in" because of search costs, with firms they have patronized in the past. As a consequence, older firms have a larger clientele and are able to extract higher profits. The equilibrium of this model yields: (i) A downward sloping density of firm sizes. (ii) Older fir...
One measure of the health of the Social Security system is the difference between the market value of the trust fund and the present value of benefits accrued to date. How should present values be computed for this calculation in light of future uncertainties? We think it is important to use market value. Since claims on accrued benefits are not cu...
This paper asks to what extent distortions to the adoption of new technology cause income inequality across nations. We work in the framework of embodied technological progress with an individual, C.E.S. production function. We estimate the parameters of this production function from international data and calibrate the model, using U.S. National I...
We study the design of incentives in a firm in which cooperation among workers is important. Since cooperation is not observed, the firm is unable to reward workers for it. Workers may, nonetheless, cooperate because they derive direct utility from cooperation. This utility is endogenously determined and depends on how much others have cooperated i...
A striking characteristic of high-tech products is the rapid decrease of their quality-adjusted prices. Empirical studies show that the rate of decrease of QAPs is typically not constant over time; QAPs decrease rapidly at early stages of the product and then the rate of decrease tapers off. Studies also suggest that the QAP is positively correlate...
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...
Abstract We consider a repeated duopoly game where each ¯rmchooses its in- vestment in quality, and realized quality is a noisy indicator of the ¯rm's investment. We derive reputation equilibria, whereby consumers `disci- pline' a ¯rm,by switching to its rival in case its realized quality is too low. The model predicts that ¯rms withgood reputation...
We develop a theoretical framework for comparing incentives, labor productivity and the allocation of effort in public versus private enterprises. We incorporate ‘socializing’, an activity which yields utility for workers and affects a firm’s output, into a multitask model of work organization. We establish the two following results. First, the opt...
We explore entry into a foreign market with uncertain demand growth. A multinational can serve the foreign demand by two modes,
or by a combination thereof: it can export its products, or it can create productive capacity via foreign direct investment
(FDI). The advantage of FDI is that it allows for lower marginal cost than exporting does. The dis...
We compare the rates of product innovation under rental versus sales when the product is durable and the market structure is one of duopoly. Our main conclusion is that sales induce a slower and more e±cient rate of product introductions than rentals. The basic reason for this is that under rentals sellers are able to extract a higher surplus from...
We examine the diffusion of a hardware/software system. For such systems there is interdependence between the hardware-adoption decisions of consumers and the supply decisions of software manufacturers. Hence there can be bottlenecks to the diffusion of the system. We consider the CD industry and estimate the (direct) elasticity of adoption with re...
We consider a durable-good monopolist that periodically introduces new models, each new model representing an improvement upon its predecessor. We show that if the monopolist is able neither to exercise planned obsolescence (i.e., artificially shorten the lift of its products) nor to give discounts to repeat customers, the rate of product introduct...
We construct an industry-equilibrium model in which it is costly for consumers who have previously purchased from one firm to switch to competitors. This gives firms a certain degree of market power over their established customers. The equilibria we identify under these conditions have the following properties: (1) there is a nontrivial size distr...
Abstract In recent years, new and more stringent federal requlations governing bank capital have been adopted, including insurance premia linked to banks' capital-to-asset ratios and capital requirements linked to asset portfolio risk. In this paper, we model the dynamic portfolio choice problem facing banks, calibrate the model using empirical dat...
In this paper we model the dynamic portfolio choice problem facing banks, calibrate the model using empirical data from the banking industry for 1984–1993, and assess quantitatively the impact of recent regulatory developments related to bank capital. The model implies a U-shaped relationship between capital and risk-taking: As a bank's capital inc...
In this paper we examine the diffusion of a hardware/software system. For such systems there is interdependence between the hardware adoption decisions of consumers and the supply decisions of software manufacturers. Hence there can be bottlenecks to the diffusion of the system which stem not from high prices but from the fact that the complementar...
This paper examines the effect of competition on firms' efforts to experiment and learn about market demand. Consumers are assumed to know prices only at sellers they have actually visited, but must bear search costs to find the prices of other sellers. Under these conditions we show that firms' incentives to experiment are diluted by comparison wi...
This paper examines the e¤ect of competition on …rms' e¤orts to exper-iment and learn about market demand. Consumers are assumed to know prices only at sellers they have actually visited, but must bear search costs to …nd the prices of other sellers. Under these conditions we show that …rms' incentives to experiment are diluted by comparison with t...
We introduce a class of “bandwagon games” which generalizes the notion of network externalities when there are more than two competing technologies and various degrees of partial compatibilities among them. We then apply the stochastic evolutionary approach to this class of games. We determine the conditions under which aglobally pairwise risk-domi...
Machines are more expensive in poor countries, and the relation is pronounced. It is hard for a Solow (1956) type of model to explain the relation between machine prices and GDP given that in most countries equipment investment is under 10% of GDP. A stronger relation emerges in a Solow (1959) type of vintage model in which technology is embodied i...
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economist...
In this paper we examine the dyamic resolution of technological adoption in "hardware/software" systems. We are interested in determining to what extent software availability affects hardware sales and/or vice-versa. We first develop a dynamic model for estimating demand when costs (and license prices) are declining over time. We then estimate it e...
We briefly review the rationale behind technological alliances and provide a snapshot of their role in global competition, especially insofar as it is based around intellectual capital. They nicely illustrate the increased importance of horizontal agreements and thus establish the relevance of the topic. We move on to discuss the organisation of in...
We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an intangible stock, knowledge, while the second accumulates...
We extend the evolutionary process studied in Kandori et al., Econometrica 61 (1933), 29-56 to n × n games. The evolutionary process is driven by two forces: players switching to the best response against the present strategy configuration, and players experimenting with new strategies. We show that a unique behavior pattern, called the long-run eq...
This paper elucidates on the logic behind recent papers which show that a unique equilibrium is selected in the presence of higher order uncertainty, i.e., when players lack common knowledge. We introduce two new concepts: stochastic potential of the information system and p-dominance of Nash-equilibria of the game, and show that a Nash-equilibrium...
The authors analyze a search-theoretic framework in which consumers buy the product repeatedly and firms' costs vary over time. They show the cross-sectional correlation between profits and firm size, the persistence of profits over time, and the role of consumers' immobility in determining firms' profits. In contrast with previous explanations of...
We consider a dynamic model of labor mobility in a small open economy with stochastic terms of trade. Migration is costly and markets for labor income risk are absent. Risk-aversion slows down the movement of the most productive workers into the risky sector, and speeds up that of the least productive ones. The effect of tariffs and autarky on risk...
An evolutionary model with a finite number of players and with stochastic mutations is analyzed. The expansion and contraction of strategies is linked to their current relative success, but mutuation, perturbing the system from its deterministic evolution, are present as well. The focus is on the long run implications of ongoing mutations, which dr...
A competitive, dynamic model of entry into a new industry is set up and both its positive and normative aspects are studied.
The main assumptions are that entry is sequential, that it occurs under imperfect information on the size of the market and
that better information becomes available as time goes on. The gradual improvement in information is...
This paper endogenizes the frequency of major discoveries and the extent of their refinement. Four axioms deliver a one-parameter family of beliefs that guide exploratory effort. Such effort trades off the prospect of major new discovery against the chance of successfully refining discoveries made in the past. The only other parameter is the cost o...
This paper analyzes a decentralized process for the diffusion of knowledge. In equilibrium, the economy converges from an
initial distribution of knowledge over agents to the steady-state distribution, which is unique. Because of the public good
aspect of information, too little learning takes place, and ideas are implemented too early. The key dif...
This paper explores a model of innovation and spatial competition over time. A key implication of the paper is that firms'
size is positively autocorrelated across time. The mechanism that generates this persistence works only in heterogenous-product
markets and is based on the idea that larger firms possess better information about the design of f...
We develop a model ofrm size in whichrms are unable to access as many consumers as they want. Newly arrived consumers match randomly withrms. Subsequently, consumers must pay search costs to be able to switchrms. This cost promotes an inertial tendency for consumers to remain with therm they currently buy from. Consequently, establishedrms enjoy a...
A working paper in the INSEAD Working Paper Series is intended as a means whereby a faculty researcher's thoughts and findings may be communicated to interested readers. The paper should be considered preliminary in nature and may require revision.
Citations
... Also related is Bar-Isaac (2005), who shows that competition can have a non-monotonic effect on quality in experience goods markets. In the following discussion, we focus on the works of Rob and Sekiguchi (2006) and Dana and Fong (2011), which are more closely related to our approach. Interested readers are referred to Bar-Isaac and Tadelis (2008) and Mailath and Samuelson (2006) for excellent surveys of the reputation literature, and to Ivaldi et al. (2007) for a review of the literature on tacit collusion. ...
... How may contract theorists react to our attempt to integrate status of individuals into contract situations? Contract theorists such as Casadesus-Masanell (2004), MacLeod (2003), and Rob and Zemsky (2002) have expressed the view that contract theory could be made more descriptive by including some form of behavioral components into the analysis. As economists have long acknowledged social status to be an essential part of economic decision-making (Duesenberry, 1949;Veblen, 1926;Smith, 1759), the argument should readily bring status into the focus of contract theorists' attention. ...
... This question has been first studied in Robles [9], which considers Kandori, Mailath, and Rob [8] and Young [12] (KMR/Y) models where transition probabilities are polynomial functions of the mutation parameter. Robles allows the mutation parameter to decrease to zero monotonically and derives sufficient conditions for ergodicity. ...
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... We consider this further in Section 5. For two players and more than two strategies, (strict) GR-dominance implies (strict) 1 2 -dominance of Morris, Rob, and Song Shin (1995). Conversely, when there are many players but payoffs are a linear sum of payoffs from two player interactions, a strong form of 1 2 -dominance implies GR-dominance (Peski (2010)). ...
Reference: Deep and shallow thinking in the long run
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... (see Cox and Miller [1966]). Similarly, the stationary density m(zj ) for type-managers has to satisfy m(zj ) = Dm(zj ) + 1 2 2 D 2 m(zj ) + : (26) Type-managers in (b( ); x( )) are students, and they transition into productivity states to the right of this interval at the rate . Type-managers in (x( ); y) are teachers of type-students. ...
... Some work on this issue has been done. Rob and Fishman (1996) compare the optimal frequency of durable good product introductions for a social planner, monopolist and duopolist, but consider homogenous consumers and do not allow for upgrades. Ellison and Fudenberg (2000) show that firms may have an incentive to introduce more upgrades than is socially optimal when software generations are backward-but not forwardcompatible. ...
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... På detta område är forskningen livaktig: I exempelvis Ely (2002) studeras en modell där aktörer kan välja var de vill agera och uppdatera sina strategier samtidigt, vilket främjar prosocialt beteende. Rob och Yang (2003) visar att möjligheten att lämna och att hota lämna en aktör som inte samarbetar främjar långsiktiga relationer med samarbete. Jackson och Watts (2005) visar att när spelare väljer inte bara strategier utan även vem de vill spela med, kan hotet om rematching göra att jämvikter blir stabila som annars inte skulle vara det. ...
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... Aoyagi (2003) considers a repeated auction with symmetric bidders and it presents a dynamic bid rotation which can be an equilibrium and gives higher payoffs to sufficiently patient bidders than optimal static equilibria. Rob and Sekiguchi (2006) consider a repeated duopoly model in which each symmetric firm chooses an investment in quality of its product besides prices or quantities and realized quality is a noisy indicator of the firms' investments. They consider an asymmetric equilibrium in which one firm invests and the other one does not invest at each period. ...
... According to Pradhan and Shrestha (2009), Calem and Robb (1999), and Haq and Heaney (2012), there exists a positive correlation between capital deficits and ROA. Numerous scholarly works also explore the correlation between equity and risk. ...
... Supermodular games also have desirable dynamic properties. Well-known learning process like best response with mutation (Kandori and Rob (1995)) and fictitious play (Krishna (1992), Berger (2008)) converge to Nash equilibria in such games. ...
