A Perpetual Race to Stay Ahead


Review of Economic Studies

octobre 2004, vol. 71, n°249, pp.1065-1089

Départements : Finance

This paper presents a model of dynamic competition between two firms that repeatedly engage in an innovative activity. The state of competition--measured by the difference between the number of innovations introduced by the firms--evolves stochastically according to their effort level. The structure of Markov perfect equilibria is identified. It is generally not true that competition is fiercest when firms are closest. Rather, firms invest under two distinct circumstances: while sufficiently ahead, to outstrip their rival and secure a durable leadership; while behind, to regain leadership and prevent the situation from worsening to the point where their rival outstrips them.

Are intellectual property rights unfair?


Labour Economics

février 2004, vol. 11, n°1, pp.129-144

Départements : Finance

If redistribution is distortionary, and if the income of skilled workers is due to knowledge-intensive activities and depends positively on intellectual property, a social planner which cares about income distribution may in principle want to use a reduction in intellectual property rights (IPRs) rather than redistributive transfers. On the one hand, such a reduction reduces static inefficiency. On the other hand, standard redistribution also reduces the level of R and D because it distorts occupational choice. We study this possibility in the context of a model with horizontal innovation, where the government, in addition to taxes and transfers, controls the fraction of innovations that are granted patents. The model predicts that standard redistribution always dominates limitations to IPRs

Changes in the Functional Structure of Firms and the Demand for Skill

E. Maurin, D. THESMAR

Journal of Labor Economics

juillet 2004, vol. 22, n°3

Départements : Finance, GREGHEC (CNRS)

We analyze recent changes in the occupational structure of French manufacturing firms. Firms employ a greater proportion of engineers working on the design and marketing of new products and a lower proportion of high-skill experts working in administration-related activities. Firms have also reduced the share of production-related activities at both the levels of high-skill and low-skill workers. We develop a labor demand model that shows the role played by technological change. New technologies make it possible to allocate more human resources to the activities that are the most difficult to program in advance

Coase and hotelling: A meeting of the minds

J. HÖRNER, M Kamien

Journal of Political Economy

juin 2004, vol. 112, n°3, pp.718-723

Départements : Finance

In this paper we tie together the two literatures of durable goods monopoly and exhaustible resource pricing. We show that the inter-temporal no-arbitrage condition that arises if the durable good mo-nopolist seller can commit to a price path mirrors the intertemporal no-arbitrage condition if the monopsonist buyer of an exhaustible resource can commit to a price path. The intuition is that the durable good monopolist initially announces high future prices to get high-valuation buyers to buy early and subsequently lowers the price to attract additional buyers. On the other hand, the monopsonist buyer of the exhaustible resource initially announces low future prices to encourage sellers to supply their units early and subsequently, as the stock of the resource declines, raises the price to call forth additional supply. As the period of commitment shrinks to zero, the durable good's price drops to its marginal cost and the exhaustible resource's price jumps to its choke level, all in a twinkling of the eye, as Coase hypothesized.

Collective vs Individual sale of TV rights in league sports

F. PALOMINO, J. Sakovics, S. Falconieri

Journal of the European Economic Association

septembre 2004, vol. 2, n°5, pp.833-862

Départements : Finance

In many countries, the collective sale of television rights by sports leagues has been challenged by the antitrust authorities. In several cases, however, the leagues won in court, on the ground that sport is not a standard good. In this paper, we investigate the conditions under which the sale of television rights collectively by sports leagues, rather than individually by teams, is preferred from a social welfare point of view. We find that collective sale is socially preferable when (a) leagues are small and relatively homogeneous in terms of clout and (b) teams get little performance-related revenues

Competition for Listings

T. FOUCAULT, C. Parlour

RAND Journal of Economics

été 2004, vol. 35, n°2, pp.329-355

Départements : Finance, GREGHEC (CNRS)

We develop a model in which stock exchanges compete for IPO listings. They choose the listing fees paid by entrepreneurs wishing to go public and control the trading costs incurred by investors. All entrepreneurs prefer lower trading costs but differ in how much they value a decrease in trading costs. Hence, in equilibrium, competing exchanges can obtain positive expected profits by choosing different trading costs and different listing fees. The model has testable implications on the cross-sectional characteristics of IPOs on different-quality exchanges and the relationship between the level of trading costs and listing fees.

De l'impact de la microstructure d'un marché de permis de polluer sur la politique environnementale

S. LOVO, V. van Steenberghe, M. Germain

Annales d'Economie et de Statistiques

2004, n°74, pp.177-208

Départements : Finance, GREGHEC (CNRS)

Cet article discute de l'effet de la présence d'une microstructure de type "marché gouverné par les prix" sur un marché de permis de polluer. On montre qu'une telle microstructure a un impact sur le fonctionnement du marché et sur le nombre total de permis à allouer par l'agence environnementale lorsque (i) un seul teneur de marché est présent et (ii) l'agence et le(s) teneur(s) de marché ne connaissent la fonction de production des pollueurs qu'avec incertitude

Efficient Consumption Set under Recursive Utility and Unknown Beliefs

A. LAZRAK, F. Zapatero

Journal of Monetary Economics

2004, vol. 40, pp.207-226

Départements : Finance

Financial Innovation, Market Participation and Asset Prices

L. E. CALVET, M. Gonzalez-Eiras, P. Sodini

Journal of Financial and Quantitative Analysis

septembre 2004, vol. 39, n°3, pp.431-459

Départements : Finance, GREGHEC (CNRS)

This paper investigates the pricing effects of financial innovation in an economy with endogenous participation and heterogeneous income risks. The introduction of non-redundant assets endogenously modifies the participation set, reduces the covariance between dividends and participants' consumption and thus leads to lower risk premia. In multisector economies, financial innovation spreads across markets through the diversified portfolio of new entrants, and has rich effects on the cross-section of expected returns. The price changes can also lead some investors to leave the markets and give rise to non-degenerate forms of participation turnover. The model is consistent with several features of financial markets over the past few decades: substantial innovation, higher participation, significant turnover in investor composition, improved risk management practices, a slight increase in real interest rates, and a reduction in risk premia

Financing Decisions of Firms and Central Bank Policy


Journal of International Money and Finance

novembre-décembre 2004, vol. 23, n°7-8, pp.1187-1207

Départements : Economie et Sciences de la décision, GREGHEC (CNRS), Finance

Mots clés : Foreign borrowing, Central bank, Asian crisis

This paper aims to explain why unhedged foreign borrowing by South East Asian corporations rose sharply during the few years prior to the crisis despite little change in fundamentals. We show that decisions of firms and decisions of the central bank are complementary. Consequently, a small shock to fundamentals may have a large and permanent impact on the equilibrium composition of firms’ borrowing