Competing Mechanisms in a Common Value Environment



juillet 2000, vol. 68, n°4, pp.799-837

Départements : Finance

Consider strategic risk-neutral traders competing in schedules to supply liquidity to a risk-averse agent who is privately informed about the value of the asset and his hedging needs. Imperfect competition in this common value environment is analyzed as a multi-principal game in which liquidity suppliers offer trading mechanisms in a decentralized way. Each liquidity supplier behaves as a monopolist facing a residual demand curve resulting from the maximizing behavior of the informed agent and the trading mechanisms offered by his competitors. There exists a unique equilibrium in convex schedules. It is symmetric and differentiable and exhibits typical features of market-power: Equilibrium trading volume is lower than ex ante efficiency would require. Liquidity suppliers charge positive mark-ups and make positive expected profits, but these profits decrease with the number of competitors. In the limit, as this number goes to infinity, ask (resp. bid) prices converge towards the upper (resp. lower) tail expectations obtained in Glosten (1994) and expected profits are zero

Core Competencies R&D Management and Partnerships'


European Management Journal

octobre 2000, vol. 18, n°5, pp.476-487

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Core Competencies, R&D, Strategic Management, High-tech

Constantly focused on the role of competencies and resources, firms' strategic management teams are becoming increasingly interested in discovering an effective way of managing the competencies that they possess. In high-tech sectors, these competencies have a direct impact on the firm's future competitive positioning. In other sectors, technological competencies will determine the renewal of product lines. This article examines how firms manage their proprietary research and development programmes and how they succeed in establishing a co-operative relationship with their environment. Our background research includes forty interviews conducted in both the US and Europe

Creating Competencies Through Collaboration: -The Case of EUREKA R&D Consortia

B. QUÉLIN, C. Mothe

European Management Journal

décembre 2000, vol. 18, n°6, pp.590-604

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Mots clés : Competence, Technological resources, R&D; Consortium, Co-operation

This article discusses the originality of European EUREKA consortia. Formed at the initiative of member firms, these consortia generally adopt a decentralised structure. Their main purpose is to conduct applied research, with the ultimate goal of exploiting its commercial opportunities. The consortia strive to ensure collaboration among firms in different countries, and at times, from different industries. Examining the management of R&D consortia, this article focuses primarily on the creation of new knowledge and competencies and on the benefits that member firms can reap from collaboration. Based on 20 interviews with project managers, the article brings to light two main observations: (1) the leader's positioning is a determining factor, and (2) a perfect balance between the firm's technological development and the consortium's strategic orientation facilitates the acquisition of competencies

Creative Destruction and Organization Change

D. THESMAR, M. Thoenig

Quarterly Journal of Economics

novembre 2000

Départements : Finance

Firms' organizational choices are influenced by external conditions such as the instability of the product market. In order to address this issue in a macroeconomic perspective, we embed the firm's choice of organizational structure in a model of growth through creative destruction, which induces endogenous market volatility. We find that an increasing supply of skill or globalization may increase the rate of creative destruction, the skill premium, and the skilled wages, and it may depress the unskilled wages. We use an original data set to test the empirical relevance of our theory

Darwinian selection does not eliminate irrational traders


European Economic Review

mars 2000, vol. 44, n°3, pp.469-490

Départements : Finance

Mots clés : Darwinian selectionEvolutionary dynamicsIrrationalityFinancial marketsStochastic algorithms

This paper offers a counter-argument to Friedman's (In: Essays in Positive Economics, University of Chicago Press, Chicago, 1953) claim that irrational agents are bound to be eliminated by market forces. Consider a financial market where some traders irrationally over- or under-estimate the dividend flow. We show that this irrationality can enhance their bargaining power, so that these agents can obtain larger gains from trade than rational agents. We analyze the stochastic evolutionary dynamics of the fraction of agents who are irrational, and show that they may well survive in the long term

Decision Aids and Compensatory Information Processing


Journal of Behavioral Decision Making

2000, vol. 13, n°1, pp.91-106

Départements : Information Systems and Operations Management, GREGHEC (CNRS)

Mots clés : decision support;decision strategy;effort–accuracy trade-offs

This paper examines the role of computer-based decision aids in reducing cognitive effort and therefore influencing strategy selection. It extends and complements the work reported in the behavioral decision theory literature on the role of effort and accuracy in choice tasks. The central proposition of the research is that if a decision aid makes a strategy that should lead to a more accurate outcome at least as easy to employ as a simpler, but less accurate, heuristic, then the use of a decision aid should induce that more accurate strategy and as a consequence improve decision quality. Otherwise, a decision aid may only influence decision-making efficiency. This occurs because decision makers use a decision aid in such a way as to minimize their overall level of effort expenditure. Results from a laboratory experiment support this proposition. When a more accurate normative strategy is made less effortful to use, it is used. This result is consistent with the findings of our prior studies, but more clearly demonstrates that decision aids can induce the use of normatively oriented strategies. The key to inducing these strategies is to make the normative strategy easier to execute than competing alternative strategies

Dispersion as Cross-Sectional Correlation

B. SOLNIK, J. Roulet

Financial Analysts Journal

janvier-février 2000, vol. 56, n°1, pp.54-61

Départements : Finance

We introduce the concept of cross-sectional dispersion of stock market returns as an alternative to the time-series approach to estimating the global correlation level of equity markets. Our objective is to derive a simple, instantaneous measure of the general level of global market correlation. Our cross-sectional method of estimating global correlation is dynamic and, using cross-sectional data, gives instantaneous information on the trend of global correlation. The traditional time-series method requires a long period of observations, and overlapping data have to be used to study the change in correlation. Both methods yield similar estimates for a “long” period, however, so a combination of the cross-sectional and time-series approaches should be of practical use to global asset managers

Does Optimization Imply Rationality?



2000, vol. 124, pp.73-111

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

The relations between rationality and optimization have been widely discussed in the wake of Herbert Simon's work, with the common conclusion that the rationality concept does not imply the optimization principle. The paper is partly concerned with adding evidence for this view, but its main, more challenging objective is to question the converse implication from optimization to rationality, which is accepted even by bounded rationality theorists. We discuss three topics in succession: (1) rationally defensible cyclical choices, (2) the revealed preference theory of optimization, and (3) the infinite regress of optimization. We conclude that (1) and (2) provide evidence only for the weak thesis that rationality does not imply optimization. But (3) is seen to deliver a significant argument for the strong thesis that optimization does not imply rationality

Enactment, Sensemaking, and Decision-Making: Redesign Processes in the 1976 Reorganization of U.S. Intelligence


Journal of Management Studies

mars 2000, vol. 2, n°37, pp.213-234

Départements : Stratégie et Politique d’Entreprise

Environmental Harm and Financial Responsibility

E. Feess, U. HEGE

Geneva Papers for Risk and Insurance: Issues and Practice

2000, vol. 25, n°2, pp.203-217

Départements : Finance