Economics Insights @ CBS

The following two articles, "Market Transparency: Who Wins and Who Loses?" by Robert Bloomfield and Maureen O'Hara and "Quote Disclosure and Price Discovery in Multipele Dealer FInancial Markets" by Mark D. Flood, Ronald Huisman, Kees G. Koedijk, and Ronald J. Mahieu are the first two experimental microstructure articles that the Review of Financial Studies (RFS) has published. We, the editors of the RFS, hope that they are not the last. Therefore I take the unconventional step of introducing the two articles.

This article analyzes how Knowledge Management (KM) is likely to affect competition in the management consulting industry. KM represents a fundamental and qualitative change in this industry's basic production technology. Because management consultants acquire information directly from their customers, for these firms, KM technology exhibits increasing returns to scale. As such, although KM clearly represents an opportunity for some consultants to build a sustainable competitive advantage, it is likely to lead to a shake-out.

To understand why e-mail negotiations break down, we investigated two distinct elements of negotiators' relationships with each other: shared membership in a social group and mutual self-disclosure. In an experiment, some participants negotiated with a member of an outgroup (a student at a competitor university), whereas others negotiated with a member of an ingroup (a student at the same university). In addition, some negotiators exchanged personal information with their counterparts, whereas others did not.