Monthly Archives: August 2026

The Iran War Is a Wake-Up Call to End Our Reliance on Fossil Fuels

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The war in Iran has disrupted one of the world’s most important oil-producing regions and trade routes, sending fuel prices sharply higher. But Paasha Mahdavi, associate professor of political science at UC Santa Barbara and affiliated faculty at the Bren School, argues that the crisis also presents a rare opportunity to accelerate the transition away from fossil fuels and towards renewable energy.

Previous oil shocks created similar opportunities but failed to produce lasting change. From the 1973 oil embargo to the disruption caused by Russia’s 2022 invasion of Ukraine, governments repeatedly responded to energy crises without fundamentally reducing their dependence on fossil fuels. Mahdavi believes the current situation is different because the global economy is now less reliant on fossil fuels for economic growth. At the same time, renewable technologies have become cheaper and easier to deploy.

Solar and wind power, battery storage, and the electrification of transportation, heating and industry have all advanced significantly. These technologies can also provide countries with greater long-term energy independence. Mahdavi notes that this changing energy landscape has helped limit the impact of the enormous disruption in oil supplies through the Strait of Hormuz, despite millions of barrels per day being removed from global markets.

Yet governments may be undermining this opportunity. Mahdavi and a colleague recently reported in Science that nearly half of the world’s governments have introduced emergency measures in response to the Iran war that effectively subsidise fossil fuel consumption. These measures include temporary fuel-tax reductions and expanded consumer subsidies for gasoline, diesel and kerosene. By artificially lowering fossil fuel prices, such policies can weaken incentives to switch to cleaner alternatives.

Fuel subsidies can also create lasting economic and environmental problems. They consume government resources while supporting highly polluting forms of energy and discouraging investment in renewable alternatives. Research conducted by Mahdavi and colleagues over the past decade suggests that these subsidies can be exceptionally difficult to reverse because removing them often carries substantial political costs. Governments may therefore remain committed to expensive subsidies long after the immediate crisis has passed.

The political sensitivity surrounding fuel prices helps explain this reluctance. Gasoline prices are unusually visible to consumers, appearing prominently at filling stations and serving as an everyday reminder of changing living costs. Fuel prices also affect transportation and shipping expenses, influencing the cost of many other goods. As a result, the public often sees gasoline and diesel prices as important indicators of inflation and economic well-being, putting governments under intense pressure when prices rise.

Mahdavi argues that governments have better options for protecting households from energy shocks. Rather than broadly subsidising fossil fuels, countries can make sustained investments in renewable energy, public transportation and better urban and rural planning. Longer-term measures could include expanding electric-vehicle charging networks, bicycle infrastructure and intercity rail. In contrast, immediate assistance could include targeted cash transfers for lower-income households and subsidies for public transportation. Similar approaches are already appearing in countries including Pakistan, Indonesia, Egypt and the Philippines.

Reducing demand for fossil fuels could ultimately make it politically easier for governments to phase out costly subsidies while strengthening energy security. Mahdavi points to the enormous scale of existing support for fossil fuels, with government subsidies for fossil fuel consumption reaching record levels globally in recent years. Against that backdrop, arguments that renewable energy should compete without government assistance overlook how heavily fossil fuels themselves have historically been supported. The Iran war therefore represents not only an energy crisis, but an opportunity to reconsider how governments use public money and to accelerate the transition towards a cleaner and more resilient energy system.

More information: Paasha Mahdavi et al, The worst energy policy in the world, Science. DOI: 10.1126/science.aej2018

Journal information: Science Provided by University of California – Santa Barbara

Large Tax Break Deals Sparked Innovation in Communities

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When cities, counties or states offer large tax breaks to attract factories, corporate headquarters and other major facilities, the economic benefits may extend beyond the jobs and investment those companies bring. A new study suggests these incentives can also encourage innovation among other businesses in the surrounding community.

The study, co-authored by a University of California, Riverside scholar and published in the Journal of Accounting Research, examined large tax subsidy packages known as “Megadeals”. These incentives, valued at more than $50 million, may create conditions that help local companies and startups innovate by bringing skilled workers, technological expertise and new ideas into a region.

Researchers examined 115 Megadeals approved between 1990 and 2014. They measured innovation by analysing the number and value of patents filed by businesses in counties where the subsidies were awarded. Aruhn Venkat, assistant professor of accounting at UCR’s School of Business and a study co-author, said counties receiving Megadeals generally experienced increased patenting among local firms.

The researchers found that a substantial increase in the size of a subsidy was associated with approximately a 3.3% to 4.9% rise in patent filings by nearby companies. At the county level, this represented roughly two to three additional patents each year, suggesting that the arrival of a large company can have innovation effects extending beyond the subsidised business itself.

One explanation is the movement of skilled workers and knowledge between companies. Employees at technologically advanced businesses may eventually move to other local employers or establish their own companies, taking their experience and expertise with them. This can create “knowledge spillovers”, allowing ideas developed within one company to contribute to innovation elsewhere in the regional economy.

Tesla’s Nevada Gigafactory provides an example. In 2014, Nevada approved $1.3 billion in tax subsidies for Tesla, which subsequently built a $5 billion battery factory near Reno. Venkat noted that some former Tesla engineers later established businesses focused on recycling battery materials, applying knowledge and ideas related to recovering and reusing lithium from spent batteries. Similar spillovers could occur around other major technology companies as employees move between organisations or pursue entrepreneurial opportunities.

Workforce training associated with tax incentive agreements may spread knowledge further. Some agreements require subsidised companies to collaborate with community colleges on programmes that teach technical skills needed by the businesses. Not everyone receiving this training ultimately works for the subsidised company. Some may take their skills to other employers or start their own businesses, expanding the region’s pool of technically skilled workers and potentially creating a stronger environment for innovation.

The findings add another dimension to the debate over whether large corporate tax incentives provide sufficient public benefits to justify their costs. Venkat stressed that the research was not a comprehensive cost-benefit analysis and acknowledged that previous studies examining employment and business formation have often found limited benefits. However, he said innovation and workforce effects should also be considered when governments evaluate such subsidies. While these benefits do not occur after every Megadeal, the study suggests they appear, on average, across the incentives examined.

More information: Yoojin Lee et al, “Megadeal” Subsidies, Local Spillovers, and Corporate Innovation, Journal of Accounting Research. DOI: 10.1111/1475-679x.70079

Journal information: Journal of Accounting Research Provided by University of California – Riverside

Workplace Conflict and Its Effects on Team Performance

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Workplace conflict has long been central to theories about how people interact on the job. A new study takes a closer look at how workers express disagreement, finding that the way conflict is communicated can influence team dynamics and individual outcomes. Researchers developed a new measure that examines how expressions of opposition vary in their directness and intensity.

The research, published in Small Group Research, was conducted by researchers from Carnegie Mellon University, Indiana University, the University of California, Los Angeles, California State University, Stony Brook University, the University of Melbourne and INSEAD, along with an independent researcher. The study introduces a new way of understanding workplace conflict beyond traditional approaches.

Previous research has generally focused on either what workplace conflicts are about or how they are managed. The researchers instead examined how disagreement itself is expressed. According to co-author Laurie R. Weingart of Carnegie Mellon University’s Tepper School of Business, this approach provides a different perspective on how conflict operates within teams.

Building on conflict expression theory, the researchers developed the Conflict Expression Tendencies (CET) measure to identify patterns in how groups communicate disagreement. The measure includes four dimensions: arguing, debating, subverting and disguising. Each represents a different combination of how directly opposition is communicated and how intensely it is expressed.

The CET measure brings together several types of oppositional workplace communication that have often been studied separately. These range from subtle behaviours, such as passive aggression and social undermining, to more visible forms of disagreement, including arguing and debating. By examining these behaviours together, researchers can gain a broader picture of how conflict is expressed within a workgroup.

Across six laboratory and field studies involving diverse participants, the researchers found that different forms of conflict expression were associated with cognitive, emotional and psychological outcomes. Debating, characterised by high directness but relatively low intensity, was generally associated with positive outcomes, including greater information acquisition, more positive feelings and higher levels of trust.

Other approaches were associated with less favourable outcomes. Arguing, subverting and disguising tended to have negative effects, suggesting that workplace disagreement itself may not necessarily be harmful. Instead, the manner in which employees communicate their opposition can play an important role in determining whether conflict contributes to productive discussion or creates difficulties within a team.

The researchers also found that members of the same team may experience the same conflict differently depending on how they perceive the interaction. Lead author Yeonjeong Kim of Indiana University’s Kelley School of Business said the CET scale offers a more nuanced way to diagnose and manage workgroup conflict. The researchers suggest it could help leaders better understand team disagreements, encourage constructive communication and develop healthier, more responsive approaches to conflict management.

More information: Yeonjeong Kim et al, Conflict Expression Tendencies in Workgroups: Measure Validation and a Test of Theory, Small Group Research. DOI: 10.1177/10464964261448469

Journal information: Small Group Research Provided by Carnegie Mellon University

Study Examines How Reporting Changes Affect Gig Workers and Reveal Unreported Income

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The rapid growth of platform-based gig work means more U.S. workers are earning income through self-employment. Unlike traditional wages, these earnings are generally not subject to tax withholding, although they are often reported to workers and the Internal Revenue Service (IRS) through 1099 tax forms. A new study examined what happened when the reporting threshold for many gig workers unexpectedly increased from $600 to $20,000.

Researchers from Carnegie Mellon University, Michigan State University, the University of Chicago, and the IRS conducted the study, which was published in the Journal of Public Economics. They investigated whether changes in information reporting affected how much income gig workers reported when filing their taxes.

In 2017, a policy change meant that many gig workers with low to moderate earnings suddenly stopped receiving 1099 forms for their platform work. Andrew Garin, assistant professor of economics at Carnegie Mellon University’s Heinz College and lead author of the study, said the change provided an opportunity to examine whether workers reported their income differently when their earnings were no longer independently reported to the IRS.

The researchers focused on a gap in information reporting for gig economy payments between $600 and $20,000 following the adoption of the 1099-K form, which is used to report certain third-party network transactions. They examined how the change affected individual tax-filing behaviour and the overall reporting of income earned through gig work.

To measure the effect, the researchers used state-level information returns from Massachusetts and Vermont, where the reporting threshold remained at $600. They merged these records with federal tax returns filed with the IRS. They then compared platform workers living within the same labour market but on opposite sides of the Massachusetts border, allowing them to assess how different reporting requirements influenced tax-filing behaviour.

The results showed a substantial effect. For every dollar in gig payments that was no longer reported on a 1099 form, workers reported 17 cents less in self-employment net earnings on their own income tax returns. The findings suggest that third-party information reporting can play an important role in encouraging workers to accurately report their self-employment income.

The researchers also used state-level filings to estimate the size of the national online platform workforce in 2017 and 2018. They calculated that approximately 770,000 gig workers did not receive information returns because of changes in third-party reporting practices by online platforms. As a result, they estimated that about $560 million in profits went unreported on federal income tax filings.

The findings could have implications as policymakers continue to modify information-reporting requirements for freelancers and gig workers. Emilie Jackson, assistant professor of economics at Michigan State University and a co-author of the study, noted that evidence on how these changes influence taxpayer behaviour remains limited. With recent rule changes meaning millions more freelancers may no longer be subject to 1099 reporting, the researchers say their findings provide insight into how reporting thresholds could affect tax compliance and federal revenues in the years ahead.

More information: Andrew Garin et al, The impact of third-party reporting on tax compliance: Evidence from gig workers, Journal of Public Economics. DOI: 10.1016/j.jpubeco.2026.105697

Journal information: Journal of Public Economics Provided by Carnegie Mellon University

Cost Savings From Company Mergers Don’t Always Benefit Consumers, Study Finds

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Merging companies may become cheaper and more efficient to operate, but those savings do not necessarily translate into lower prices for consumers, according to new research. In some cases, shoppers may even end up paying more after a merger, suggesting that greater corporate efficiency does not automatically produce benefits for customers.

The study examined the 2019 merger of the consumer healthcare businesses of pharmaceutical giants GSK and Pfizer. Researchers from Loughborough University, the University of East Anglia (UEA), the Philippine Competition Commission, the University of the Philippines and E.CA Economics analysed how the deal affected the market. Their findings were published in the Southern Economic Journal.

Researchers focused on prices for over-the-counter cough and cold medicines in the Philippines before and after the merger. GSK and Pfizer had predicted that combining their consumer healthcare operations would eventually generate annual savings of around £500 million. The researchers found evidence that the merger did create genuine efficiencies, particularly for products previously supplied by Pfizer.

The estimated cost of supplying Pfizer products fell by 9.43% following the merger, while their prices declined by 6.57%. However, the benefits were not seen across the entire market. GSK product prices increased by an estimated 3.25%, while Sanofi, a major international competitor, raised its prices by 8.55%. Prices from lower-cost local manufacturer Unilab remained broadly unchanged.

Lead author Professor Farasat Bokhari of Loughborough University explained that companies seeking approval for mergers often argue that combining their operations will create efficiencies. A larger company, for example, may be able to manufacture, distribute or sell products at a lower cost. These savings can potentially offset some of the negative effects caused by reducing the number of competing businesses in a market.

However, the researchers said the findings demonstrate that the relationship between efficiency and consumer prices can be more complicated. Professor Sean Ennis of UEA’s Norwich Business School said the study confirmed efficiencies for one of the merging companies, an area that has not been widely studied. Still, those efficiencies ultimately did not produce lower prices across all products in the market.

The researchers also found evidence consistent with greater coordination between GSK/Pfizer and Sanofi following the merger. Bokhari stressed that this does not mean the companies explicitly agreed to set prices. Instead, when fewer independent competitors remain in a market, companies may find it easier to coordinate their pricing behaviour without making an explicit agreement, potentially resulting in higher prices than would be expected under stronger competition.

The findings could have important implications for competition authorities considering future mergers between large companies. The researchers argue that regulators should examine more than whether a proposed merger can reduce operating costs or create efficiencies. They should also assess whether reduced competition could make coordination between remaining companies more likely, potentially preventing cost savings from reaching consumers or even contributing to higher prices.

More information: Farasat Bokhari et al, Merger Efficiency and Coordinated Effects: Nothing to Sneeze at? Evidence From Cough and Cold Medicines in the Philippines, Southern Economic Journal. DOI: 10.1002/soej.70063

Journal information: Southern Economic Journal Provided by University of East Anglia

Tariffs Had an Unexpected Effect on U.S. Whiskey Prices

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A new study has found an unexpected consequence of the Trump-era trade wars: cheaper American whiskey across much of the United States. However, consumers in the major whiskey-producing states of Kentucky and Tennessee experienced the opposite effect, with prices for locally produced whiskey actually increasing.

In 2018, the Trump administration introduced a series of tariffs that triggered trade disputes with several major trading partners. In response, Mexico, the European Union, Canada and China imposed substantial retaliatory tariffs on whiskey produced in the United States. These measures reduced overseas demand for American whiskey and created new challenges for domestic producers.

“Distilled spirits are an interesting sector because consumers have significant preferences, which can influence pricing on a market-to-market basis,” said Carly Burd, co-author of the study and an assistant professor of accounting at North Carolina State University’s Poole College of Management. Because whiskey accounted for the vast majority of U.S. liquor exports before 2018, the researchers wanted to understand how producers responded when foreign sales suddenly declined.

The researchers analysed sales data from 8,674 stores throughout 2018, examining prices for 2,514 different whiskey products, each sold in 750-millilitre bottles. Altogether, the dataset covered approximately 11.4 million whiskey sales, allowing the team to examine how prices changed across different parts of the country following the introduction of the retaliatory tariffs.

To identify the effects of the tariffs, the researchers compared price changes for American whiskey before and after the export tariffs were introduced with changes in the prices of imported whiskey over the same period. Imported products served as a control group because they were not subject to the U.S. export tariffs imposed by trading partners in 2018.

Overall, American whiskey producers responded to declining exports by lowering domestic prices in an effort to encourage sales at home. However, Kentucky and Tennessee were notable exceptions. Producers increased prices for locally made whiskey in these states, which together account for the vast majority of American whiskey production. The researchers suggest consumers there may have been willing to pay more for products associated with their local whiskey-making traditions.

The results showed that whiskey prices generally remained unchanged or increased slightly in states where demand was already relatively strong. Prices declined elsewhere. One factor influencing producers’ response was the nature of whiskey production itself. Because whiskey must be aged before it can be sold, producers cannot quickly reduce production when overseas demand unexpectedly falls, leaving them with limited options for adjusting supply.

Instead, producers appear to have relied on flexible pricing strategies to respond to changing market conditions. The researchers said the findings demonstrate how political tensions, trade disputes and changes in taxation can create challenges for domestic businesses while prompting them to adapt their pricing strategies. The study also highlights how the effects of international trade policy can differ considerably within a country, with consumers in some regions benefiting from lower prices while those in major production centres may end up paying more.

More information: Carlyle S. Burd et al, Domestic Product Market Impacts of Politically Motivated Foreign Tariffs, The Accounting Review. DOI: 10.2308/TAR-2024-0708

Journal information: The Accounting Review Provided by North Carolina State University

Workplace First Impressions Can Influence Hiring and Promotions Within Seconds

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Making a good impression at work may depend less on polishing a résumé and more on strengthening communication skills. A large analysis of more than 200 studies found that workplace first impressions are shaped primarily by how people communicate, both verbally and nonverbally. At the same time, substantive information such as experience and qualifications plays a smaller role.

These impressions can form in less than a minute, yet their influence may last for weeks or even months. Researchers found that early perceptions can be associated with important workplace decisions and relationships, including hiring, performance evaluations, mentorship opportunities, promotions and whether colleagues want to work with or seek advice from someone.

The analysis identified three main factors that shape first impressions: communication style, physical appearance and “content cues”, meaning the substance of what a person says or writes. Surprisingly, content cues were the weakest predictors. “The single most shocking finding of this study is that content cues were the weakest predictors of first impressions,” said Brian Swider, Ph.D., a professor of business at the University of Florida and co-author of the study.

Swider explained that information contained in a résumé, comments from others and even the substance of what someone says during an initial interaction may have less influence than communication and appearance. Swider and colleagues at the University of Florida’s Warrington College of Business, along with T. Brad Harris of HEC Paris, published their findings on August 3 in Personnel Psychology.

The researchers combined 204 independent samples from 145 studies examining first impressions in workplace settings. By bringing together findings across different occupations, countries, education levels and research designs, the meta-analysis allowed the team to identify patterns that appeared consistently across a wide range of workplace situations rather than relying on a single experiment or setting.

The findings suggest that people generally form a broad positive or negative impression of another person instead of separately evaluating characteristics such as competence, warmth or trustworthiness. Once established, this overall impression may influence how later information about that individual is interpreted. “People want to think that they are making really high-level analytical decisions based on effectively evaluating evidence,” Swider said. Still, research on first impressions suggests that quick judgments continue to play an important role.

Those initial judgments can also be surprisingly durable. Although their influence gradually weakened over time, first impressions remained associated with how people viewed one another weeks later. According to Swider, an impression formed within the first few minutes of meeting someone can remain strongly related to how that person is perceived more than a month later. The findings linked first impressions with both achievement-related outcomes, including hiring and performance evaluations, and relationship-related outcomes in the workplace.

For employers, the findings highlight the difficulty of preventing subjective impressions from affecting important decisions. While organisations cannot stop people from forming rapid judgments, the researchers suggest their influence can be reduced through structured interviews and evaluations and by involving multiple people in decision-making. The study does not prove that first impressions directly cause later workplace outcomes, and their influence varies by situation and over time. For employees facing interviews, meeting a new manager or entering other high-stakes situations, however, Swider recommends focusing on controllable factors and making the strongest first impression possible.

More information: Junhui Yang et al, First Impressions at Work: A Meta-Analytic Review, Personnel Psychology. DOI: 10.1111/peps.70037

Journal information: Personnel Psychology Provided by University of Florida

Women Compete Equally for Top Positions and Win More Often, New Research Shows

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Previous research on gender and competition has often relied on laboratory tasks in which participants decide whether to compete for a fixed reward or withdraw. These short, controlled experiments have generally found that women are less likely than men to enter competitions. However, Andrej Angelovski, Associate Professor in Economics at Xi’an Jiaotong-Liverpool University (XJTLU), says such experiments represent a very particular type of competitive environment.

To examine competitiveness differently, Angelovski and co-authors Jordi Brandts from the Barcelona School of Economics and Werner Güth from the Max Planck Institute for Research on Collective Goods used an auction-style experiment. Rather than simply asking whether participants wanted to compete, the researchers measured how much they were willing to sacrifice to secure a desired job, offering a different way to capture the intensity of competition.

Over 32 rounds, participants bid for positions offering different salaries using Experimental Currency Units (ECU), later converted into euros. A bid represented the maximum amount of resources—such as effort, training or time—a participant was willing to sacrifice from the salary to obtain a position. Winners paid the second-highest bid in their group, while those who did not secure a position received a default payment of 50 ECU.

Participants competed in either “flat” companies, where salary differences between lower and higher positions were relatively small, or “steep” companies, where the gaps were much larger. Initially, groups of four competed for positions within their own company. Later, groups merged into markets of eight, allowing participants to compete for any available position.

The results challenge the conventional view that women are less competitive than men. Women competed just as strongly as men and, in some circumstances, even more aggressively. Both men and women generally underbid for the highest positions and showed a preference for middle-ranking jobs, with few significant gender differences. However, in flatter organisations, women accounted for most of the highest bids for top positions. “Now that we’ve changed how we study competition, we find the typical results no longer hold,” Angelovski says.

The study also uncovered a surprising cost associated with reaching the top. Although the highest positions offered the largest salaries, competition was so intense that successful bidders often sacrificed nearly all of the additional financial benefit. After accounting for the cost of winning, those securing top positions could end up no better off—and sometimes worse off—than participants who obtained middle-ranking jobs. Women were disproportionately represented among these top-position winners.

This finding was particularly striking because neither income nor social recognition fully explained the intense competition. Winners of middle-ranking positions consistently earned more than the 50 ECU benchmark, whereas winners of top positions did not. The experiment also removed the status normally associated with reaching the top because participants were not publicly identified as winners. Despite this, some participants remained willing to make substantial sacrifices for the highest positions.

The researchers stress that the experiment examines the “supply side”—people’s willingness to compete—rather than discrimination, institutional barriers or other factors affecting who ultimately reaches senior positions. The findings therefore challenge the idea that a lack of competitive ambition can explain women’s underrepresentation at the top. As Angelovski puts it, gender differences in senior positions are “not because women do not want to get there.”

More information: Andrej Angelovski et al, Bidding for better jobs: an experiment on gender differences in competitiveness without a real-effort task, Theory and Decision. DOI: 10.1007/s11238-026-10132-9

Journal information: Theory and Decision Provided by Xi’an Jiaotong-Liverpool University

From Pizza to Products: Rethinking Delivery Services Across Industries

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What can a pizza shop teach us about the dramatic shifts taking place in consumer marketing? Quite a lot. New research on pizza delivery suggests that consumer impatience has become a powerful force in purchasing decisions—so powerful that delivery speed can sometimes outweigh location, price, and quality. Although the study focused on pizza, its findings have important implications for business-to-consumer firms across many industries.

Published in the INFORMS journal Marketing Science, the study examined how faster delivery influences consumer choice and competition. The researchers found that impatience, or consumers’ desire to receive products quickly, reduces comparison shopping and substitution among sellers. It can also soften price competition and allow lower-quality providers to remain viable in the market.

These findings challenge the conventional assumption that faster delivery gives consumers more choices and intensifies competition. Instead, delivery speed can actually fragment markets by encouraging consumers to choose whichever seller can reach them fastest rather than searching more broadly for better prices or higher quality.

The researchers analysed nearly 98,000 pizza-delivery orders placed by more than 6,800 consumers across 51 independently owned pizzerias in a major Northern Italian city between 2010 and 2011. The study was conducted by Chaewon Seol and Federico Rossi of Purdue University, Sara Valentini of Bocconi University, and Elisa Montaguti of the University of Bologna.

The results reveal just how much consumers value their time. For the median consumer, a 50% reduction in delivery time was worth more than 20% of the order price. This willingness to pay for speed can significantly limit competition because consumers may favour the fastest seller rather than comparing prices, quality, or other alternatives.

However, major technological improvements in delivery can change this pattern. When delivery times fall substantially across the market, proximity becomes less important. Higher-quality businesses can then reach customers who previously might have chosen a nearby, lower-quality competitor simply because it offered faster delivery. As a result, higher-quality firms gain market share while some lower- and mid-quality providers exit.

The research also highlights opportunities for online platforms to monetise consumers’ impatience. The researchers found that offering a premium service with delivery that is 10% faster, for an additional fee equal to 10% of the basic menu price, could increase platform profits by 18.7%. For platforms and marketing decision-makers, delivery speed therefore represents more than an operational issue—it can become an important element of pricing and competitive strategy.

While pizza provided the setting for this research, the implications extend far beyond foodservice. From groceries and household products to clothing and other online purchases, businesses increasingly compete not only on price and quality but also on how quickly they can put products into customers’ hands. The study suggests that consumer impatience can reshape how people compare sellers, how businesses compete, and which firms succeed. In an increasingly delivery-driven economy, understanding the value consumers place on speed may be essential to understanding the future of consumer marketing.

More information: Chaewon Seol et al, Consumer Impatience, Technological Innovation, and Market Structure, Marketing Science. DOI: 10.1287/mksc.2024.0885

Journal information: Marketing Science Provided by Institute for Operations Research and the Management Sciences

Good News, Better Returns? How People Interpret Stock Market Opportunities

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A study involving the Cluster of Excellence ECONtribute at the Universities of Bonn and Cologne suggests that people often interpret stock market opportunities differently from what standard financial models predict. This pattern is found not only among retail investors but also among financial professionals. The study, “Mental Models of the Stock Market,” was published in the Quarterly Journal of Economics.

Consider a company announcing that it expects to reduce its production costs by 20 per cent. Even if the announcement was made four weeks ago, many investors may still see it as a reason to buy the company’s shares. They assume that lower costs will lead to higher future profits and, in turn, better investment returns.

Standard financial models, however, suggest otherwise. Stock prices generally react quickly to new information. By the time four weeks have passed, positive news about lower production costs should already be reflected in the company’s share price. Investors buying the stock later would therefore be paying a higher price and should not expect additional returns simply because of the earlier announcement.

“When a company announces some good news, many people take this primarily to mean the company’s earnings prospects have improved,” explains Johannes Wohlfart, professor at the University of Cologne and a member of ECONtribute. What investors may overlook is that other market participants have received the same information and that the share price may already have adjusted accordingly.

To examine how people think about such situations, Wohlfart and fellow economists Peter Andre of Goethe University Frankfurt and Philipp Schirmer of the University of Bonn surveyed more than 7,000 people in the United States and Germany. Participants included members of the general public, retail investors, financial advisers, fund managers and financial market researchers.

Participants were presented with two scenarios involving company announcements that were already four weeks old. In one scenario, a company announced a reduction in production costs, representing positive news. In the other, the company announced that it was maintaining a supplier partnership, which was considered neutral news. Participants were then asked how they expected these announcements to affect future stock returns.

The findings revealed substantial differences in how participants interpreted the same information. After receiving the positive news, 60 per cent of the German general public and 74 per cent of German retail investors still expected higher future returns. Similar expectations were reported by 58 per cent of fund managers and 63 per cent of financial advisers. In contrast, 67 per cent of financial market researchers expected the old news not to affect future returns.

The researchers suggest that these differences reflect contrasting “mental models” of how the stock market works. Financial market researchers tend to consider both a company’s future profits and its current share price, consistent with the idea that markets rapidly incorporate new information. Retail investors, by comparison, often focus more heavily on future earnings while overlooking the price they must pay for the shares. As Schirmer explains, investors may correctly recognise that a company could become more profitable but fail to consider that its share price has already risen in response to that expectation.

More information: Peter Andre et al, Mental Models of the Stock Market, The Quarterly Journal of Economics. DOI: 10.1093/qje/qjag039

Journal information: The Quarterly Journal of Economics Provided by University of Cologne

Negotiation Is More Common in Everyday Life Than Previously Thought, Study Finds

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The study Daily Negotiation and Its Effects on Short-term Pleasantness and Longer-term Well-being, led by Katherine Qianwen Sun of UCLA Anderson School of Management, alongside Martin Schweinsberg of ESMT Berlin, Matteo Di Stasi of CUNEF Universidad, and Jordi Quoidbach of ESADE Business School, was published in the peer-reviewed journal Negotiation and Conflict Management Research. Using an app-based experience-sampling method, the researchers followed 302 participants for one week, collecting 5,286 observations about their moods and whether their most recent social interactions involved negotiation.

The findings challenge several assumptions about how negotiation is understood, studied, and taught. Most notably, negotiation appears to be far more common in everyday life than previous research has suggested. More than 30 percent of participants’ social interactions involved at least one negotiation process, including reaching an agreement, making a joint decision, resolving a disagreement, persuading someone, bargaining, or mediating between others.

The study also shows that everyday negotiation looks quite different from its conventional portrayal. Classic bargaining—the exchange of offers and concessions most closely associated with negotiation—accounted for only 2.7 percent of interactions. By comparison, reaching an agreement was nearly four times as common, occurring in 10.4 percent of interactions.

These results suggest that everyday negotiation is less about competitive, zero-sum bargaining and more about agreement-seeking and joint decision-making. Negotiation is therefore not limited to formal situations involving contracts, salaries, or major purchases, but is embedded in the routine interactions through which people coordinate their needs, preferences, and decisions.

Negotiation was also not confined to the workplace. Although it was most prevalent among coworkers, occurring in 54 percent of those interactions, it was also common in personal relationships. Around 30 percent of interactions with friends, family members, and romantic partners involved some form of negotiation, demonstrating how broadly negotiation extends across social life.

The researchers also examined how negotiation relates to mood and well-being. Interactions involving negotiation were associated with a measurable decline in participants’ momentary mood. However, people who negotiated more frequently also reported higher levels of general well-being, suggesting a possible relationship between a greater willingness to negotiate and longer-term well-being.

The study found no significant differences in negotiation frequency by gender or age, challenging common stereotypes, including the assumption that women negotiate less frequently than men. “Negotiation has a reputation as something confined to boardrooms and big-ticket purchases,” says Martin Schweinsberg, professor at ESMT. “But our data shows that people are negotiating constantly. Negotiation is woven into the ordinary give-and-take of daily life.”

The authors emphasise that the relationship between negotiation frequency and well-being is correlational rather than causal. People with higher baseline well-being may be more inclined to negotiate. They therefore call for longitudinal and intervention-based research to determine whether negotiation contributes directly to well-being, as well as further studies examining what people negotiate about and the outcomes they achieve.

More information: Katherine Qianwen Sun et al, Daily Negotiation and Its Effects on Short-term Pleasantness and Longer-term Well-being, Negotiation and Conflict Management Research. DOI: 10.34891/nsmm-y845

Journal information: Negotiation and Conflict Management Research Provided by ESMT Berlin