Articles

Efficient contract enforcement

T. KOEPPL, C. MONNET, E. QUINTIN

Economic Theory

janvier 2014, vol. 55, n°1


Efficient purchaser incentive when dealing with suppliers implementing continuous improvement plans

L. KERBACHE, C. VAN DELFT

International Transactions in Operational Research

juillet 2014, vol. 21, n°4, pp.673-701

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

Mots clés : Continuous improvement, Dynamic programming, Purchaser incentives, Stochastic decision process


This paper presents incentive schemes in the framework of a collaborative purchasing cost reduction process with a supplier implementing a continuous improvement plan. Using a stochastic decision process formulation, we analyze the structure of the optimal policy and characterize its numerical robustness through numerical applications solved by dynamic programming. Then, we analyze two purchaser incentive schemes observed in practice. First, we describe some theoretical properties of the policies associated with these two schemes (schemes I and II) and show that these policies exhibit nonoptimal structures. Second, we estimate the quantitative loss for typical parameter values and, in particular, we show that for certain businesses this loss is significant. Then, we propose two easy-to-implement improvements (schemes III and IV), which result in near-optimal solutions and a significant impact on purchasing cost performances

Eliciting Prospect Theory When Consequences Are Measured in Time Units: "Time Is Not Money"

Mohammed ABDELLAOUI, E. KEMEL

Management Science

juillet 2014, vol. 60, n°7, pp.1844-1859

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

Mots clés : time risk; expected utility; prospect theory; reference point; utility; probability weighting; decision weights; loss aversion

http://dx.doi.org/10.1287/mnsc.2013.1829


We elicited the prospect theory components (utility, probability weighting, and loss aversion) when consequences are expressed as the time dedicated to a specific task or activity. A similar elicitation was performed for monetary consequences to allow an across-attribute (time/money) comparison of the elicited components (at the individual level). We obtained less concave utility and smaller loss aversion for time than for money. Moreover, while the probability weighting was predominantly inverse S-shaped for both attributes, it was less sensitive to probabilities and more elevated for time than for money. This finding implies more optimism for gains and more pessimism for losses

Emergence of Power Laws in Online Communities: The Role of Social Mechanisms and Preferential Attachment

S. JOHNSON, S. FARAJ, S. KUDARAVALLI

MIS Quarterly

septembre 2014, vol. 38, n°3, pp.795-823

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

Mots clés : Online communities, scale-free, power-law distribution, preferential attachment, social exchange, reciprocity, simulation

http://misq.org/misq/downloads/download/article/1113/


Online communities bring together individuals with shared interest in joint action or sustained interaction. Power lawdistributions of user popularity appear ubiquitous in online communities but their formation mechanisms are not wellunderstood. This study tests for the formation of power law distributions via the mechanisms of preferential attachment,least efforts, direct reciprocity, and indirect reciprocity. Preferential attachment, where new entrants favor connectionswith already popular participants, is the predominant explanation suggested by prior literature. Yet, the attribution ofpreferential attachment or any other mechanism as a single unitary reason for the emergence of power law distributionsruns contrary to the social nature of online communities and does not account for diversity of participants’ motivation.Agent-based modeling is used to test if a single social mechanism alone or multiple mechanisms together can generatepower law distributions observed in online communities. Data from 28 online communities is used to calibrate, validate,and analyze the simulation. Simulated communication networks are randomly generated according to parameters foreach hypothesis. The fit of the power law distribution in the model testing subset is then compared against the fit forthese simulated networks. The major finding is that, in contrast to research in more general network settings, neitherpreferential attachment nor any other single mechanism alone generates a power law distribution. Instead, a blendedmodel of preferential attachment with other social network formation mechanisms was most consistent with power lawdistributions seen in online communities. This suggests the need to move away from stylized explanations of networkemergence that rely on single theories toward more highly socialized and multitheoretic explanations of communitydevelopment

Entry, trade costs, and international business cycles

R. N. FATTAL JAEF, J. I. LOPEZ

Journal of International Economics

novembre 2014, vol. 94, n°2, pp.224-238

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

Mots clés : International business cycle; Extensive margin; Entry; Fixed export costs


Are firm entry and fixed exporting costs relevant for understanding the international transmission of business cycles? We revisit this question using a model that includes entry, selection to exporting activity, physical capital accumulation and endogenous labor supply. We determine that once the stochastic process for exogenous productivity is calibrated to consider the endogenous dynamics in TFP created by the number of firms and the time series volatility of entry is calibrated to the data, our model yields minimal departures from the Backus et al. (1992) benchmark. The richer model shares all of the successes of the previous model in terms of the volatilities of aggregate quantities, as well as its failures, in terms of replicating patterns of international co-movement and the volatility of international relative prices

Epistemological foundations for the assessment of risks in banking and finance

G. VUILLEMEY

Journal of Economic Methodology

2014, vol. 21, n°2, pp.125-138

Départements : Finance, GREGHEC (CNRS)

Mots clés : financial crises, causal process, forecasting, research program, risk


Equilibrium Discovery and Preopening Mechanisms in an Experimental Market

B. BIAIS, C. BISIERE, S. POUGET

Management Science

mars 2014, vol. 60, n°3, pp.753-769

Départements : Finance

Mots clés : cheap talk; experimental markets; equilibrium discovery; preopening period; preplay communication

http://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.1787


We experimentally analyze how to design preopening mechanisms facilitating coordination on high equilibrium liquidity and gains from trade. We allow a call auction to be preceded by a preopening or not, preopening orders to be binding or not, and the opening time to be deterministic or random. When the preopening is nonbinding, traders place manipulative orders, reducing the credibility of preplay communication. Random market opening deters manipulation, but also hinders communication by making it costly. Gains from trade are maximized when preopening orders are binding. This enables some traders to place early limit orders, attracting further liquidity

Equilibrium Pricing and Trading Volume under Preference Uncertainty

B. BIAIS, J. HOMBERT, P. O. WEILL

Review of Economic Studies

octobre 2014, vol. 81, n°4, pp.1401-1437

Départements : Finance, GREGHEC (CNRS)

Mots clés : Information processing, Trading volume, Liquidity shock, Preference uncertainty, Equilibrium pricing


Information collection and processing in financial institutions is challenging. This can delay the observation by traders of the exact capital charges and constraints of their institution. During this delay, traders face preference uncertainty. In this context, we study optimal trading strategies and equilibrium prices in a continuous centralized market. We focus on liquidity shocks, during which preference uncertainty is likely to matter most. Preference uncertainty generates allocative inefficiency, but need not reduce prices. Progressively learning about preferences generate round–trip trades, which increase volume relative to the frictionless market. In a cross section of liquidity shocks, the initial price drop is positively correlated with total trading volume. Across traders, the number of round–trips is negatively correlated with trading profits and average inventory

Examining children's preference for phonetically manipulated brand names across two English accent groups

S. BAXTER, T. LOWREY

International Journal of Research in Marketing

mars 2014, vol. 31, n°1, pp.122-124

Départements : Marketing, GREGHEC (CNRS)


Replicating Shrum et al. (2012), we demonstrate that individuals display a preference for brand names that contain vowel sounds that connote product attributes. We also illustrate the impact of accent and phonological development on the nature and presence of phonetic symbolism respectively. With no known studies examining the role of accent, it is suggested that this research makes a unique contribution, offering an alternative perspective on current global phonetic symbolism research

Expectation Propagation for Likelihood-Free Inference

S. BARTHELME, N. CHOPIN

Journal of the American Statistical Association

mars 2014, vol. 109, n°505, pp.315-333

Départements : Economie et Sciences de la décision

Mots clés : Approximate Bayesian computation, Approximate inference, Composite likelihood, Quasi-Monte Carlo


Many models of interest in the natural and social sciences have no closed-form likelihood function, which means that they cannot be treated using the usual techniques of statistical inference. In the case where such models can be efficiently simulated, Bayesian inference is still possible thanks to the approximate Bayesian computation (ABC) algorithm. Although many refinements have been suggested, ABC inference is still far from routine. ABC is often excruciatingly slow due to very low acceptance rates. In addition, ABC requires introducing a vector of “summary statistics” s(y), the choice of which is relatively arbitrary, and often require some trial and error, making the whole process laborious for the user. We introduce in this work the EP-ABC algorithm, which is an adaptation to the likelihood-free context of the variational approximation algorithm known as expectation propagation. The main advantage of EP-ABC is that it is faster by a few orders of magnitude than standard algorithms, while producing an overall approximation error that is typically negligible. A second advantage of EP-ABC is that it replaces the usual global ABC constraint ¿s(y) - s(y¿)¿ ¿ ¿, where s(y¿) is the vector of summary statistics computed on the whole dataset, by n local constraints of the form ¿si(yi) - si(y¿i)¿ ¿ ¿ that apply separately to each data point. In particular, it is often possible to take si(yi) = yi, making it possible to do away with summary statistics entirely. In that case, EP-ABC makes it possible to approximate directly the evidence (marginal likelihood) of the model. Comparisons are performed in three real-world applications that are typical of likelihood-free inference, including one application in neuroscience that is novel, and possibly too challenging for standard ABC techniques


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