Fuqua School's Victor Bennett: The Many Sides of Competition

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Consumers love competition -- the lower prices, the better service it brings. Winners all around.

Victor Bennett, too, favors competition, but his research is showing there’s more than one side to the issue. Competition can, he says, “encourage firms to engage in corrupt or unethical activities.”

A new professor of strategy in the Fuqua School of Business, Bennett’s research focuses on how firms respond to competition. That includes both responding through external actions like price or quality changes, and internal actions like changing staffing, compensation, or the amount of autonomy staff have. He joined the Fuqua faculty this semester from the University of Southern California. 

One recent study Bennett did in conjunction with colleagues at UCLA, Harvard and Washington University looked at how competition affected the behavior of car mechanics doing state inspections.  The study showed that the more competition, the more lenient the mechanic is, letting cars pass that normally would require additional work.

“Increased competition is associated with greater inspection leniency, a service quality attribute that customers value but is illegal and socially costly,” the study said.

Bennett has been asking provocative questions since his undergraduate days at Stanford University, where his honors thesis was advised by Nobel Laureate Kenneth Arrow.  He received his doctorate from the University of California-Berkeley’s Haas School of Business.

Other research by Bennett looked at how competition in the controversial ticket resale market did provide positives for a variety of actors – customers, artists and venues.

Bennett found that when tickets could be resold online, prices rose for the most popular artists but fell for less popular acts. Promoters reacted by putting artists in venues they were more likely to sell out.

"It's not that it's good for the biggest artists and bad for smaller artists," Bennett said. "It's really about the match between the artist and the venue." 

The introduction of secondary markets gave concertgoers the option to resell tickets, which Bennett said increases their willingness to pay up front.

"You've got artists who are apoplectic about their tickets being resold, but if you know as a fan that you could resell a ticket, that's going to make that ticket worth more to you," Bennett said.

They found that after Craigslist entered a market, regardless of its size or location, prices went up for shows that were likely to sell out, and fell for shows that weren't.

"It only helps if you sell out," he said. "For shows that don't sell out, those guys on the secondary market will sell them for below face value, just because they want to make something."

The researchers found a similar effect whenever StubHub, the eBay-owned ticket resale site, opened in cities. The study was not based on the StubHub data because the company targeted cities where it could make money. But the findings were the same — prices for the most popular artists rose higher in cities after the resale market launched there, with the effect being most pronounced in areas with the most internet usage.

Bennett, who previously worked at Google and has several patents related to music classification and detecting click fraud, is teaching the core course “Fundamentals of Strategy” at Fuqua this semester.

Outside of Duke, he is also the administrator of the Manuel Bennett Art Trust and a board member of a non-profit “incubator” for musicians, Zoo Labs, that is trying to help musicians develop new business models for funding their art.