nep-mic New Economics Papers
on Microeconomics
Issue of 2018‒01‒08
twenty-six papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. On Time-Consistent Collective Choice with Heterogeneous Quasi- Hyperbolic Discounting By Jean-Pierre Drugeon; Bertrand Wigniolle
  2. Repeated Implementation with Overlapping Generations of Agents By Azacis, Helmuts
  3. Externality Assessments, Welfare Judgments, and Mechanism Design By Daske, Thomas
  4. Social Preference Under Twofold Uncertainty By Mongin, Philippe; Pivato, Marcus
  5. A Tight Sufficient Condition for Recursive Formulation of Dynamic Implementation Problems By Mengus, Eric; Lukyanov, George
  6. Multiple-aggregate games By Alex Dickson
  7. On Private Communication in Competing Mechanism Games By Andrea Attar; Eloisa Campioni; Gwenaël Piaser
  8. Optimal Voting Rules under Participation Constraints By Antonin Macé; Rafael Treibich
  9. Equilibrium of a production economy with noncompact attainable allocations set By Senda Ounaies; Jean-Marc Bonnisseau; Souhail Chebbi
  10. Assessment Voting in Large Electorates By Hans Gersbach; Akaki Mamageishvili; Oriol Tejada
  11. Optimal Equilibria for Time-Inconsistent Stopping Problems in Continuous Time By Yu-Jui Huang; Zhou Zhou
  12. Multiproduct Intermediaries and Optimal Product Range By Rhodes, Andrew; Watanabe, Makoto; Zhou, Jidong
  13. A general model of price competition with soft capacity constraints By Marie-Laure Cabon-Dhersin; Nicolas Drouhin
  14. Regulation and altruism By Izabela Jelovac; Samuel Nzale
  15. Dynamic competition in deceptive markets By JOHNEN, Johannes
  16. Enveloped choice functions and path-independent rationality By Gleb Koshevoy; Ernesto Savaglio
  17. Salience and Online Sales: The Role of Brand Image Concerns By Markus Dertwinkel-Kalt; Mats Köster
  18. Robust expected utility maximization with medial limits By Daniel Bartl; Patrick Cheridito; Michael Kupper
  19. From Cashews to Nudges: The Evolution of Behavioral Economics By Thaler, Richard H.
  20. Games for cautious players: the equilibrium in secure strategies By ISKAKOV, Mikhail; ISKAKOV, Alexey; d'ASPREMONT, Claude
  21. Bilateral Investment in a Delegated Common Agency By Guillem Roig
  22. Zero-sum stopping games with asymmetric information By Gensbittel, Fabien; Grün, Christine
  23. Behavioral Inattention By Xavier Gabaix
  24. Multinational Banks and Supranational Supervision By Colliard, Jean-Edouard; Calzolari, Giacomo; Loranth, Gyongyi
  25. Concept of dynamic memory in economics By Valentina V. Tarasova; Vasily E. Tarasov
  26. Come Together: Firm Boundaries and Delegation By Laura Alfaro; Nicholas Bloom; Paola Conconi; Harald Fadinger; Patrick Legros; Andrew F. Newman; Raffaella Sadun; John Van Reenen

  1. By: Jean-Pierre Drugeon (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Bertrand Wigniolle (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: A general setup is considered where agents are characterised by quasi-hyperbolic discounting and by heterogeneous bias for the present and heterogenous discounting parameters. Consumptions are moreover subject to a standard feasibility constraint. A collective utility function is defined as a function of the intertemporal utilities of the selves of the different agents, the elementary unit being thus the self of a given period for a given agent. The analysis is further specialized to time-independent collective utility functions. Such a framework generating a tension between Pareto-optimality and time-consistency for the optimal allocations, two approaches are suggested in order to tackle this issue. The first one imposes restrictions on the collective utility function that ensure the timeconsistency of the optimal decisions. The second one builds from an a priori time-inconsistent collective utility function. The benevolent planner is then to be considered as a sequence of successive incarnations, any of these incarnations being endowed with its own objective. The associated optimal policy is the equilibrium of a game between the successive incarnations of the planner when the players follow Markovian strategies. The results obtained for both solution concepts are compared through an example that also shows how they can be recovered through a competitive equilibrium.
    Keywords: Heterogeneities,hyperbolic discounting,collective choice
    Date: 2017–12
  2. By: Azacis, Helmuts (Cardiff Business School)
    Abstract: We study repeated implementation in a model with overlapping ge- nerations of agents. It is assumed that the preferences of agents do not change during their lifetime. A social choice function selects an alternative in each period as a function of the preferences of agents who are alive in that period. We show that any social choice function satisfying mild necessary conditions is repeatedly implementable in subgame perfect equilibrium if there are at least three agents and they live sufficiently long.
    Keywords: Repeated Implementation, Subgame Perfect Implementa- tion, Overlapping Generations, Necessary and Sufficient Conditions
    JEL: C72 C73 D71 D82
    Date: 2017–12
  3. By: Daske, Thomas
    Abstract: How agents assess the (in-)tangible externalities that others might impose on them can strongly influence strategic interaction. This study explores mechanism design for agents whose externality assessments and private payoffs, exclusive of externalities, are all subject to asymmetric information; utility is quasi-linear and transferable. An allocation rule will be called strongly Bayesian implementable if it is Bayesian implementable for arbitrary type distributions. Under reasonable assumptions, the following result is established: A Paretian allocation rule is strongly Bayesian implementable through budget-balanced transfers if and only if it maximizes the sum of private payoffs exclusive of externalities. The corresponding mechanism is necessarily externality-robust in that it leaves agents' externality assessments strategically inoperative. The result emphasizes the critical incentive-theoretical role of the welfare judgment inherent to social choice. Strong Bayesian implementation of a welfare judgment inconsistent with externality-ignoring utilitarianism violates budget balance and thus entails incentive costs.
    Keywords: (behavioral) mechanism design,externalities,robust implementation,social welfare,bargaining
    JEL: C70 C72 D62 D63 D82
    Date: 2017
  4. By: Mongin, Philippe; Pivato, Marcus
    Abstract: We investigate the conflict between the ex ante and ex post criteria of social welfare in a novel axiomatic framework of individual and social decisions, which distinguishes between a subjective and an objective source of uncertainty. This framework permits us to endow the individuals and society not only with ex ante and ex post preferences, as is classically done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that amounts to extending the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is our preferred one. This solution combines the ex post criterion with an objective interim Pareto principle, which avoids the pitfalls of the ex ante Pareto principle, and especially the problem of "spurious unanimity" discussed in the literature. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute common individual probability values only to the objective source of uncertainty.
    Keywords: Ex ante social welfare; Ex post social welfare; Objective versus subjective uncertainty; Pareto principle; Separability; Harsanyi social aggregation theorem; Spurious unanimity
    JEL: D70 D81
    Date: 2016–06–08
  5. By: Mengus, Eric; Lukyanov, George
    Abstract: This note explores conditions that admit recursive representation for a class of dynamic mechanism design problems. We derive a tight sufficient condition, called the common state property (CSP), which ensures that temporary incentive constraints guarantee implementability, and so allows to characterize the principal's problem recursively. The condition imposes no restrictions on agent's preferences and only concerns the properties of the evolution of private information.
    Keywords: First order approach; Dynamic mechanism design
    JEL: D30 D80 D82
    Date: 2016–06–09
  6. By: Alex Dickson (Department of Economics, University of Strathclyde)
    Abstract: Consider an environment in which individuals are organised into groups, they contribute to the collective action of their group, and are influenced by the collective actions of other groups; there are externalities between groups that are transmitted through the aggregation of groups’ actions. The theory of ‘aggregative games’ has been successfully applied to study games in which players’ payoffs depend only on their own strategy and a single aggregation of all players’ strategies, but the setting just described features multiple aggregations of actions—one for each group—in which the nature of the intra-group strategic interaction may be very different to the inter-group strategic interaction. The aim of this contribution is to establish a framework within which to consider such ‘multiple aggregate games’; present a method to analyse the existence and properties of Nash equilibria; and to discuss some applications of the theory to demonstrate how useful the technique is for analysing strategic interactions involving individuals in groups.
    Keywords: aggregative game, group interaction, contests, public goods, bilateral oligopoly
    JEL: C72 D01 D72 H41 L13
    Date: 2017–02
  7. By: Andrea Attar (Toulouse School of Economics and CEIS & DEF University of Rome Tor Vergata); Eloisa Campioni (CEIS & DEF, University of Rome "Tor Vergata"); Gwenaël Piaser (Ipag Business School Paris)
    Abstract: We study competing mechanism games in which principals simultaneously design contracts to deal with several agents. We show that principals can profit from privately communicating with agents by generating incomplete information in the continuation game they play. Specifically, we construct an example of a complete information game in which none of the (multiple) equilibria in Yamashita (2010) survives against unilateral deviations to mechanisms involving private communication. This also contrasts with the robustness result established by Han (2007). The role of private communication we document may call for extending the standard construction of Epstein and Peters (1999) to incorporate this additional element.
    Date: 2017–12–16
  8. By: Antonin Macé (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille); Rafael Treibich (University of Southern Denmark)
    Abstract: We study the design of voting rules for international unions when countries’ participation is voluntary. While efficiency recommends weighting countries proportionally to their stakes, we show that accounting for participation constraints entails overweighting some countries, those for which the incentive to participate is the lowest. When decisions are not enforceable, cooperation requires the satisfaction of more stringent constraints, that may be mitigated by granting a veto power to some countries. The model has important implications for the problem of apportionment, the allocation of voting weights to countries of differing populations, where it provides a rationale for setting a minimum representation for small countries.
    Keywords: international unions,constitutional design,veto,participation constraints
    Date: 2017–11
  9. By: Senda Ounaies (Centre d'Economie de la Sorbonne & Department of Mathematics - University El Manar Tunis); Jean-Marc Bonnisseau (Centre d'Economie de la Sorbonne - Paris School of Economics); Souhail Chebbi (Department of Mathematics - King Saud University)
    Abstract: In this paper, we consider a production economy with an unbounded attainable set where the consumers may have non-complete non-transitive preferences. To get the existence of an equilibrium, we provide an asymptotic property on preferences for the attainable consumptions and we use a combination of nonlinear optimization and fixed point theorem on truncated economies together with an asymptotic argument. We show that this condition holds true if the set of attainable allocations is compact or, when preferences are representable by utility functions, if the set of attainable individually rational utility levels is compact. This assumption generalizes the CPP condition of Allouch (2002) and covers the example of Page et al. (2000) when the attainable utility levels set is not compact. So we extend the previous existence results with non compact attainable sets in two ways by adding a production sector and considering general preferences
    Keywords: production economy; non compact attainable allocations; quasi-equilibrium; nonlinear optimization
    Date: 2016–08
  10. By: Hans Gersbach; Akaki Mamageishvili; Oriol Tejada
    Abstract: We analyze Assessment Voting, a new two-round voting procedure that can be applied to binary decisions in democratic societies. In the first round, a randomly-selected number of citizens cast their vote on one of the two alternatives at hand, thereby irrevocably exercising their right to vote. In the second round, after the results of the first round have been published, the remaining citizens decide whether to vote for one alternative or to ab- stain. The votes from both rounds are aggregated, and the final outcome is obtained by applying the majority rule, with ties being broken by fair randomization. Within a costly voting framework, we show that large elec- torates will choose the preferred alternative of the majority with high prob- ability, and that average costs will be low. This result is in contrast with the literature on one-round voting, which predicts either higher voting costs (when voting is compulsory) or decisions that often do not represent the preferences of the majority (when voting is voluntary).
    Date: 2017–12
  11. By: Yu-Jui Huang; Zhou Zhou
    Abstract: For an infinite-horizon continuous-time optimal stopping problem under non-exponential discounting, we look for an optimal equilibrium, which generates larger values than any other equilibrium does on the entire state space. When the discount function is log sub-additive and the state process is one-dimensional, an optimal equilibrium is constructed in a specific form, under appropriate regularity and integrability conditions. While there may exist other optimal equilibria, we show that they can differ from the constructed one in very limited ways. This in particular leads to a sufficient condition for the uniqueness of optimal equilibria, up to some closedness condition. To illustrate our theoretic results, comprehensive analysis is carried out for three specific stopping problems. For each one of them, an optimal equilibrium is characterized through an explicit formula.
    Date: 2017–12
  12. By: Rhodes, Andrew; Watanabe, Makoto; Zhou, Jidong
    Abstract: This paper develops a framework for studying the optimal product range choice of a multiproduct intermediary when consumers demand multiple products. In the optimal product selection, the intermediary uses exclusively stocked high-value products to increase store tra¢ c, and at the same time earns pro?t mainly from non-exclusively stocked products which are relatively cheap to buy from upstream suppliers. By doing this the intermediary can earn strictly positive pro?t, including in situations where it does not improve e¢ ciency in selling products. A linkage between product selection and product demand features such as size and shape is established. It is also shown that relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively.
    Keywords: intermediaries; product range; multiproduct demand; search; exclusive contracts
    JEL: D83 L42 L81
    Date: 2017–10
  13. By: Marie-Laure Cabon-Dhersin (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - URN - Université de Rouen Normandie - NU - Normandie Université); Nicolas Drouhin (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique)
    Abstract: We propose a general model of oligopoly with firms relying on a two factor production function. In a first stage, firms choose a certain fixed factor level (capacity). In the second stage, firms compete on price, and adjust the variable factor to satisfy all the demand. When the factors are substitutable, the capacity constraint is " soft " , implying a convex cost function in the second stage. We show that there is a unique equilibrium prediction in pure strategies, whatever the returns to scale, characterized by a price that increases with the number of firms up to a threshold. The main propositions are established under the general assumption that the production function is quasi-concave but the paper provides a general methodology allowing the model to be solved numerically for special parametrical forms.
    Keywords: price competition,tacit collusion,convex cost,capacity con- straint,limit pricing strategy,returns to scale
    Date: 2017–10–24
  14. By: Izabela Jelovac (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Samuel Nzale (AMU - Aix Marseille Université)
    Abstract: We study optimal contracts in a regulator-agent setting with joint production, altruistic and selfish agents, and uneasy outcome measurement. Such a setting represents sectors of activities such as education and health care provision. The agents and the regulator jointly produce an outcome for which they all care to some extent that is varying from agent to agent. Some agents, the altruistic ones, care more than the regulator does while others, the selfish agents, care less. Moral hazard is present due to the agent's effort that is not contractible. Adverse selection is present too since the regulator cannot a priori distinguish between altruistic and selfish agents. Contracts consist of a simple transfer from the regulator to the agents together with the regulator's input in the joint production. We show that a screening contract is not optimal when we face both moral hazard and adverse selection.
    Keywords: altruism, moral hazard, adverse selection, regulator-agent joint production
    Date: 2017–10–17
  15. By: JOHNEN, Johannes (CORE, Université catholique de Louvain)
    Abstract: In many deceptive markets, firms design contracts to exploit mistakes of naive consumers. These contracts also attract less profitable sophisticated consumers. I study such markets when firms compete repeatedly and gather usage data about their customers which is informative about the likelihood of a customer being sophisticated. I show in a benchmark model that firms do not benefit from private information in this setting when all consumers are rational. I find that in sharp contrast to a model with only rational consumers, this customer information mitigates competition and is of great value to its owner despite intense competition. I discuss several implications of the value of customer information on naiveté. Private information on customers’ sophistication induces profits that are bell-shaped in the share of naive consumers. Firms prefer an even mix of both customer types. I also show that if firms can educate (some) naives about hidden fees, competition is already mitigated when firms compete for customers with initially symmetric information. I analyze a policy that discloses customer information to all firms and thereby increases consumer surplus. I discuss how the UK governments’ midata program might induce crucial aspects of this policy, and illustrate the obustness of results through several extensions.
    Keywords: Consumer mistakes, deceptive products, shrouded attributes, big data, targeted pricing, consumer data, add-on pricing, price discrimination, industry dynamics
    JEL: C22 C58
    Date: 2017–12–20
  16. By: Gleb Koshevoy; Ernesto Savaglio
    Abstract: We analyse the rationality of a Decision Maker (DM) who chooses from lists of sets of alternatives. We show that the DM's choice behaviour, rep-resented by a choice function f dened on such lists, can be `improved' bya two-step procedure. We rst construct the list-envelop of f that is the union of all choice sets induced by f on every possible partition (lists) of a set of alternatives. Then, we take among the list-envelop choice functionsthose that are Plott functions (see [4]) and characterize such a family by using a suitable property, allowing a DM to disregard alternatives that are worthless for the choice process. Then, using a rule that breaks the ties that could occur in every choice set, we characterize the set of Plott functions that has a prescribed shelling (see (5) below) of the choice sets. Finally, we study the 'relational system' that satises some compelling properties and rationalizes the class of choice functions studied in the present work.
    Keywords: Envelop Choice Function, Plott function, Sequential Rationality, Path-independency, Shuffle of Linear Orders
    JEL: D01
    Date: 2017–12
  17. By: Markus Dertwinkel-Kalt; Mats Köster
    Abstract: We provide a novel intuition for the observation that many brand manufacturers have restricted their retailers’ ability to resell brand products online. Our approach builds on models of salience according to which price disparities across distribution channels guide a consumer’s attention toward prices and lower her appreciation for quality. Thus, absent vertical restraints, one out of two distortions - a quality or a participation distortion - can arise in equilibrium. The quality distortion occurs if the manufacturer provides either an inefficiently low quality under price salience or an inefficiently high quality in order to prevent price salience. The participation distortion arises as offline sales might be entirely abandoned in order to prevent prices from becoming salient. Both distortions are ruled out if vertical restraints are imposed. As opposed to the current EU legislation that considers a range of vertical restraints as being hardcore restrictions of competition per se, we show that these constraints can be socially desirable if salience effects are taken into account.
    Keywords: salience, online sales, antitrust, vertical restraints, distribution channels
    JEL: D21 K21 L42
    Date: 2017
  18. By: Daniel Bartl; Patrick Cheridito; Michael Kupper
    Abstract: We study a robust expected utility maximization problem with random endowment in discrete time. We give conditions under which an optimal strategy exists and derive a dual representation of the optimal utility. Our approach is based on medial limits, a functional version of Choquet's capacitability theorem and a general representation result for monotone convex functionals. The novelty is that it works in cases where robustness is described by a general family of probability measures that do not have to be dominated or time-consistent.
    Date: 2017–12
  19. By: Thaler, Richard H. (University of Chicago)
    Abstract: Richard H. Thaler delivered his Prize Lecture on 8 December 20167 at the Aula Magna, Stockholm University.
    Keywords: Behavioral economics;
    JEL: D03 D90 G02
    Date: 2017–12–08
  20. By: ISKAKOV, Mikhail; ISKAKOV, Alexey; d'ASPREMONT, Claude (Université catholique de Louvain, CORE, Belgium)
    Abstract: A non-cooperative solution, the Equilibrium in Secure Strategies (EinSS), is defined that extends the Nash equilibrium in pure strategies when it does not exist and is meant to solve games where players are "cautious", i.e. looking for secure positions and avoiding threats. This concept abstracts and unifies various ad hoc solutions already formulated in various applied economic games that have been discussed extensively in the literature. It complements usefully mixed strategy Nash equilibria that are usually not explicit and difficult to interpret in these games. Like the Nash equilibrium, the EinSS is a static concept, and the basic requirement of excluding at equilibrium some deviations remains. But it also appeals to dynamic intuitions, tolerating at equilibrium the possibility of some deviations, which would be blocked by counter-deviations punishing the deviator. This is in line with the "objection-counter- objection" rationale first introduced in cooperative games. A general existence theorem is provided and then applied to the price-setting game in Hotelling location model, to Tullock's rent-seeking contests and to Bertrand-Edgeworth duopoly. Finally competition in the insurance market game is re-examined and the Rothchild-Stiglitz- Wilson contract shown to be an EinSS even when the Nash equilibrium breaks down.
    Keywords: Noncooperative games, Equilibrium existence, Discontinuous games, Equilibrium in secure strategies, Hotelling model, Tullock contest, Insurance market, Bertrand-Edgeworth duopoly
    JEL: C72 D03 D43 D72 L12 L13
    Date: 2016–10–21
  21. By: Guillem Roig
    Abstract: I study a bilateral investment game where a buyer privately trades with several suppliers who compete by offering menus of non-exclusive contracts. When market trading is structured so that competition among suppliers is the most intense, the hold-up problem disappears for an extensive range of the investment costs. The investment of the supplier does not affect its bargaining position, and both the supplier and the buyer have the right incentives to invest. In any other equilibria, the efficient investment is not implemented: the reallocation of bargaining power as a result of investment distorts the incentives to invest efficiently. However, because under some parameters of the model investment decisions are strategic complements welfare is maximised for an intermediate level of competition.
    Keywords: Bilateral Investment; Hold-up; Non-Exclusive Contracts; Competition.
    JEL: D44 L11
    Date: 2017–12–01
  22. By: Gensbittel, Fabien; Grün, Christine
    Abstract: We study a model of two-player, zero-sum, stopping games with asymmetric information. We assume that the payoff depends on two continuous-time Markov chains (X, Y), where X is only observed by player 1 and Y only by player 2, implying that the players have access to stopping times with respect to different filtrations. We show the existence of a value in mixed stopping times and provide a variational characterization for the value as a function of the initial distribution of the Markov chains. We also prove a verification theorem for optimal stopping rules which allows to construct optimal stopping times. Finally we use our results to solve explicitly two generic examples.
    Date: 2017–11
  23. By: Xavier Gabaix
    Abstract: Inattention is a central, unifying theme for much of behavioral economics. It permeates such disparate fields as microeconomics, macroeconomics, finance, public economics, and industrial organization. It enables us to think in a rather consistent way about behavioral biases, speculate about their origins, and trace out their implications for market outcomes. This survey first discusses the most basic models of attention, using a fairly unified framework. Then, it discusses the methods used to measure attention, which present a number of challenges on which much progress has been done. It then examines the various theories of attention, both behavioral and more Bayesian. It finally discusses some applications. For instance, inattention offers a way to write a behavioral version of basic microeconomics, as in consumer theory, producer theory, and Arrow-Debreu. A last section is devoted to open questions in the attention literature. This chapter is a pedagogical guide to the literature on attention. Derivations are self-contained.
    JEL: D03 D11 D51 G02 H2
    Date: 2017–12
  24. By: Colliard, Jean-Edouard; Calzolari, Giacomo; Loranth, Gyongyi
    Abstract: We study the supervision of multinational banks (MNBs), allowing for either national or supranational supervision. National supervision leads to insufficient monitoring of MNBs due to a coordination problem between supervisors. Supranational supervision can solve this problem and increase monitoring. However, this change has the unintended consequence of affecting the MNB's choice of foreign representation. MNBs may expand abroad using branches rather than subsidiaries, or abandon foreign expansion altogether. These changes completely neutralize the more intense monitoring that would otherwise occur with supranational supervision. Our paper provides insight into how the national boundaries of bank supervision interact with multinational banks.
    Keywords: Cross-Border Banks; Multinational banks; Supervision; Monitoring; Regulation; Banking Union
    JEL: F23 G21 G28 L51
    Date: 2017–01–10
  25. By: Valentina V. Tarasova; Vasily E. Tarasov
    Abstract: In this paper we discuss a concept of dynamic memory and an application of fractional calculus to describe the dynamic memory. The concept of memory is considered from the standpoint of economic models in the framework of continuous time approach based on fractional calculus. We also describe some general restrictions that can be imposed on the structure and properties of dynamic memory. These restrictions include the following three principles: (a) the principle of fading memory; (b) the principle of memory homogeneity on time (the principle of non-aging memory); (c) the principle of memory reversibility (the principle of memory recovery). Examples of different memory functions are suggested by using the fractional calculus. To illustrate an application of the concept of dynamic memory in economics we consider a generalization of the Harrod-Domar model, where the power-law memory is taken into account.
    Date: 2017–12
  26. By: Laura Alfaro (Harvard Business School, Business, Government and the International Economy Unit); Nicholas Bloom (Stanford University); Paola Conconi (ECARES, Université Libre de Bruxelles); Harald Fadinger (University of Mannheim); Patrick Legros (ECARES, Université Libre de Bruxelles); Andrew F. Newman (Boston University); Raffaella Sadun (Harvard Business School, Strategy Unit); John Van Reenen (Massachusetts Institute of Technology)
    Abstract: Little is known theoretically, and even less empirically, about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers or keep them centralized. We test the predictions of this model using a novel dataset that combines measures of vertical integration and delegation for a large set of firms operating in many countries and industries. In line with the model's predictions, we find that integration and delegation co-vary positively, and that producers are more likely to integrate suppliers in input sectors with greater productivity variation.
    Keywords: Vertical integration, delegation, real options.
    Date: 2017–12

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