The Handmade Effect: A Model of Conscious Shopping in an Industrialised Economy

Although online marketplaces for handmade products persist, little theoretical research has been undertaken to explain why firms choose a handmade strategy. In this paper, I develop a model that can explain the persistence through a handmade effect on the consumer side. I show that when consumers are willing to pay a sufficiently high handmade premium, the firm chooses production by hand over superior machine production. When the firm is part of a duopoly, the existence of consumers who care about the conditions under which a product is manufactured can explain the firms’ specialisation and, thus, the observed co-existence of handmade and machine-made products in the economy. Such specialisation is efficient, and can be robust to collusion. The presence of shoppers who are uncertain about the appropriate behaviour may enable the monopolist to use a handmade strategy to signal a social norm of conscious consumption.

Reverse Privatization as a Reaction to the Competitive Environment: Evidence from Solid Waste Collection in Germany

After earlier waves of privatization, local governments have increasingly taken back control of local service provisions in some sectors and countries and instead started providing those services themselves (reverse privatization). Using a unique panel dataset on the mode of service provision for solid waste collection for German municipalities that cover the years 2003, 2009, and 2015, we investigate the motives for reverse privatization. Our results show that—in deciding whether to insource or not—municipalities react to the cost advantages of private suppliers as well as to the competitive environment and municipal activity: there is more switching to insourcing in concentrated markets and in markets with horizontally or vertically related public services. Local interest groups influence this decision as well.