nep-mic New Economics Papers
on Microeconomics
Issue of 2005‒06‒19
four papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Firm Level Implications of Early Stage Venture Capital Investment - An Empiri cal Investigation By Max Keilbach; Dirk Engel
  2. Discrimination against Newcomers: Impacts of the German Emission Trading Regime on the Electricity Sector By Bode, Sven; Hübl, Lothar; Schaffner, Joey; Twelemann, Sven
  3. Pricing of a Chooser Flexible Cap and its Calibration By Daisuke Ito; Masamitsu Ohnishi; Yusuke Osaki
  4. Reward Programs and Entry Deterrence By Lester M.K. Kwong

  1. By: Max Keilbach; Dirk Engel
    Abstract: The paper analyses the impact of venture capital finance on growth and innovation activities of young German firms. Among other variables, our panel of firm data includes data on venture capital funding and patent applications. With statistical matching procedures we draw an adequate control group of non­venture funded but otherwise comparable firms. The analysis confirms other findings that venture funded firms in Germany have higher number of patent applications than those in the control group. However, they do so already before the venture capitalists engagement. After this engagement, the number of patent applications does not differ significantly from that of the control group, however the venture funded firms display significantly larger growthrates. We conclude that the higher innovation output of venture funded firms is mainly driven by the selection process made by the venture capitalist.
    Keywords: Firm Demography, Firm Start­Ups, Firm Growth, Venture Capital, Patented Inventions, Microeconometric Evaluation Methods
    JEL: L21 D21 D92 C14 C33
  2. By: Bode, Sven; Hübl, Lothar; Schaffner, Joey; Twelemann, Sven
    Abstract: The EU Directive 2003/87/EC for the introduction of a European emission trading system has left the task of allocating the emission allowances mainly to the member states. In Germany the details of the allocation method are laid down in the Allocation Act (ZuG 2007). One central element of the Allocation Act is the so called transfer-rule, which is intended to provide incentives for the replacement of emission intensive installations and thus to achieve environmental benefits. This paper takes a closer look at the transfer-rule's ecological impacts and competitive effects in the field of electricity generation. The analysis suggests that the investment incentives provided by the transfer-rule are limited and uncertain, while at the same time the overall amount of emissions from participants of the trading scheme will not be reduced. Instead the transfer-rule causes windfall profits for incumbent generators and leads to a significant distortion of competition. This cannot be justified by environmental benefits, as has been done by the German government and the European Commission.
    Keywords: Emission Trading, Competition, Electricity
    JEL: L49 L94 Q28 Q48
    Date: 2005–06
  3. By: Daisuke Ito (Sumitomo Mitsui Bank); Masamitsu Ohnishi (Graduate School of Economics, Osaka University; Daiwa Securities Chair, Graduate School of Economics, Kyoto University); Yusuke Osaki (Graduate School of Economics, Osaka University)
    Abstract: In this paper, we deal with no-arbitrage pricing problems of a chooser flexible cap (floor) written on an underlying LIBOR. The chooser flexible cap (floor) allows a right for a buyer to exercise a limited and pre-determined number of the interim period caplets (floorlets) in a multiple-period cap (floor) agreement. Assuming a common diffusion short rate dynamics, e.g., Hull-White model, we propose a dynamic programming approach for their risk neutral evaluation. This framework is suited to a calibration from an observed initial yield curve and market price data of discount bonds, caplets, and floorlets.
    Keywords: chooser exible cap, LIBOR, dynamic programming, Hull-White model, calibration.
    JEL: G13 G15 G21
    Date: 2004–10
  4. By: Lester M.K. Kwong (Department of Economics, Brock University)
    Abstract: This paper seeks to endogenize consumer switching costs by considering simple reward programs in the form of a price discount on future purchases for current consumers to a firm. In a two period model with a more cost efficient potential entrant, we show that for sufficiently low entry costs, the introduction of a reward program by an incumbent is never optimal. For intermediate values of the entry cost, there exists a bounded interval of rewards under which entry can be successfully deterred. Nevertheless, the desirability for the incumbent to preclude entry is solely contingent on the relative cost efficiency of the entrant.
    Keywords: Reward and Loyalty programs, Barrier to Entry, Entry deterrence, Switching Costs
    JEL: D4 L13
    Date: 2004–08

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