1,721,032 research outputs found
Informational rents in interbank competition
No full textThe present paper develops a two-period, simple model of interbank competition based on the idea that banks can partially control the behaviour of borrowers. The control effort by one bank over its customers is not observable by competitor banks. It is shown that the equilibrium behaviour of banks is characterised by a distorted incentive to exert the control effort. A second implication of the model is that unexpected tightening of the interest rate policy by the Central Bank increases the banks' liabilities and thereby influences their loan policy. It is also shown that the returns from control are lower if banks expect that the economy be hit by a negative shockCet article devéloppe un modéle á deux périodes de concurrence interbanquaire reposant sur l'idée que celles-ci peuvent contrôler, de maniére partielle, le comportement des emprunteurs. Le niveau de contrôle effectué par une banque sur ces client n'est pas observable par son concurrent. Il est montré que le comportement des banques, à l'équilibre, est caractérisé par de mauvaises incitations à exercer l'effort de contrôle. Une deuxiéme implication du modele est qu'un durcissement innattendu de la politique monétaire de la Banque Centrale accroit les dettes des banques et done influence leur politique de pret. II est aussi montré que la rentabilité des contrôles est plus faible si les banques sont dans l'attente d'un choc négatif sur l'économie. The present paper develops a two-period, simple model of interbank competition based on the idea that banks can partially control the behaviour of borrowers. The control effort by one bank over its customers is not observable by competitor banks. It is shown that the equilibrium behaviour of banks is characterised by a distorted incentive to exert the control effort. A second implication of the model is that unexpected tightening of the interest rate policy by the Central Bank increases the banks' liabilities and thereby influences their loan policy. It is also shown that the returns from control are lower if banks expect that the economy be hit by a negative shoc
Fusions et acquisitions dans l'industrie europeene
No full textIn recent years, both the number and the size of mergers and takeovers have risen considerably in
European countries. What are their objectives ? What are their effects on the firms themselves, on
growth and on employment ? This paper attempts to answer such questions, to the best of our ability,
given that relevant data are not always readily available. First, a quantitative picture of recent
developments is provided, which serves to emphasize the specificity of currently observed moves,
relative to what had happened earlier. The most commonly invoked motives for mergers and takeovers
are then reviewed. Such moves would serve to displace inefficient management, for the benefit of
shareholders, and to achieve economies of scale, most notably with respect to R & D. A number of case
studies and a short survey of the existing literature suggest that the new organisation resulting from the
merger is not always regarded by financial markets as potentially more profitable than the existing firms
; that mergers may be induced by defensive motives, such as the desire to maintain a dominant position
in a market, in the prospect of enhanced competition — rather than to increase productivity ; that the
management of buying firms does not always perform better than that of the targets, etc. Since the
results of these general studies do not allow us to reach any definite conclusion in favour of either the
optimistic or the pessimistic views with respect to the overall consequences of mergers and takeovers,
we turn to some specific industries (steel and chemicals) and to the particular case of a new memberstate
of the European Community, namely Spain. The complexity of industrial organisations and that of
market structures are such as to prevent the development of a general theory of mergers and
takeover
Monopoly incentives for cost-reducing R&d
No full textIt is here shown that there exist cost innovations for which a monopolist has a higher incentive to invest than a social planner. This unveils the limits of the claim, based on Arrow (1959), that a monopoly always has a lower incentive to innovate than a social planner and therefore than socially desirable. Contrary to previous results, the comparison of incentives may also depend upon the demand function. Finally, only under a restricted domain of analysis, a rule for comparing the monopoly and the social planner incentives is derive
Monopoly, decreasing returns,and incentives to cost-reducing R&D
Full text linkThe present paper shows that it is possible to de ne cost innova-
tions for which a monopolist has a higher incentive to invest than a
social planner. This unveils the limits of the general claim, based on
Arrow (1959), that a monopoly has a lower incentive to innovate than
a social planner and therefore than socially desirable. In particular,
exceptions to the rule are shown to arise only under decreasing returns.
Further, it follows from the analysis, that the direction of the inequal-
ity in the comparison of incentives to invest also depends upon the
shape of the demand function. Finally, only under a restricted domain
of analysis, a rule for determining whether a monopoly has lower or
higher incentives to invest than a social planner is derive
Adverse Selection and the Middleman
No full textThe question analyzed in this paper is whether a market that otherwise experiences an Akerlofian "lemons impasse" can function if a middleman organizes trade. It is found that the middleman's intervention can prove successful even if neither signals nor quality screening methods exist that could help him to assess the good's qualities. The result is obtained under the hypothesis that the middleman randomizes his price offers to the sellers of the units to be intermediated. Copyright 1989 by The London School of Economics and Political Scienc
Intermediation can replace certification
No full textWe consider a market in which consumers do not have perfect information about products qualities. Producers can perfectly reveal that a good is of high quality through certification which entails socially wasteful costs. Firms can choose whether to sell through an intermediary or to sell independently (vertical integration). We show that multi-brand retailing, which leads to a redistribution of profits but not to social costs, can fully or partially replace certification by signaling product quality. Renting the image of a competing high-quality brand is shown to be an outcome which can be sustained through intermediatio
Bidimensional vertical differentiation
No full textIn markets where product quality is important, more than one characteristic is usually necessary for producers to define product quality. Standard theory maintains that: (i) in a duopoly there will be a quality leader no matter wether the product can incorporate one or two vertical attributes; (ii) differentiation pertains only to one attribute. By contrast, in our set-up, there are also equilibria where the quality leader is better in two attributes, and others where there is cross leadership, namely a situation where each firm designs a product to dominate the other in one characteristic. Applications to Minimum Quality Standards and tax (subsidy) on quality products are sketched, showing spill-over effects from one to the other quality dimension
Self-customization and price competition
Full text linkNew technologies increasingly provide firms with abilities to design self-customizable products, that can be redeveloped by end-users at their own expenses. The decision to market only a standard product or also a self-customizable one is a strategic one; we analyze this decision in a duopoly with product differentiation. In our model adding a customizable product cannibalizes part of own demand but also allows exploitation of a distinct segment of consumers who attach high value to customizability; it also diverts demand from the rival firm. Firms use second degree price discrimination, attaching a different price to the different products. We find the conditions leading to both firms introducing the self-customizable product, both refraining from it, and to asymmetric equilibria. Our results indicate that self-customization appears in equilibrium; it is profit improving; it can be used by only one or both firms according to the value of the market for customizability. It also leads to lower prices. An increase in consumers’ ability to self-customize reduces profits, while a higher cost of self-customization increases profits. Finally a first-mover advantage arises in offering a self-customizable product
Subjective price search and price competition
No full textIn this paper we study price rivalry between two firms facing a population of imperfectly informed buyers. The two sellers are geographically dispersed and consumers search for the lowest price. The competitive process either suffers from cyclical instability or stabilises at that price at which no buyer searches
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