Felix Schleef

The majority of franchise firms employ a dual distribution strategy: a share of the outlets are owned and operated by franchisees, which are entrepreneurs bound to the franchise firm by contractual agreement, while the rest are owned by the franchise firm outright and operated by employed managers. This organizational form choice has potential consequences for firm performance, investment and consumer welfare, since economic theory suggests that employed managers have lower incentives to exert effort compared to franchisees. A large literature explores potential factors that may affect this organizational form decision. However, little has been written about the effect of product market competition on organizational form choice. I study this question empirically using data on fast-food chains in Germany. Reduced-form regressions reveal that a larger number of competitors positively correlates with outlets being manager-operated. To address the concern that unobserved market profitability may both affect the number of competitors and the organizational form decision, I employ a profit inequality approach that allows me to account for unobservable market characteristics. The results from the profit inequality approach corroborate that franchise firms rely more on employed managers in markets where there are many competitors.

• Reject & Resubmit, Management Science

This paper studies the impact of quality disclosures on buyers' ratings using data from an online recommender system. Disclosures may alter expectations on sellers' quality and affect buyers' rating behavior. In particular, if buyers' utility depends on their expectations, a positive disclosure of quality such as an award may lead to buyers' disappointment with a negative influence on their ratings. We identify the disappointment effect in moviegoers' ratings originated from the rise in expectations due to movies' nominations for the Academy of Motion Picture Arts and Sciences awards. We control for the selection of moviegoers who watch and rate movies before or after nominations with a non-parametric matching technique. After nominations, ratings for nominated movies significantly drop relative to ratings for movies that were not nominated. Disappointment reduces the rating premium of nominated movies by more than five percent in the next thirty days after the nomination.

Regulators are increasingly getting concerned with the power of large online platforms to bias consumer recommendations. In light of these concerns, I study the option of giving consumers control over the recommender algorithm as a potential avenue for regulation. In an online experiment, I let subjects make choices from lists, akin to an e-commerce shopping experience. The list is generated either by an algorithm that is optimizing consumer utility, or by an algorithm that includes both consumer utility and platform profit as part of its objective. My aim is to understand how subjects make choices in this abstract setting, whether recommender algorithms influence their choices, and how subjects perceive differences between recommender algorithms.