A simple access pricing rule to achieve the Ramsey outcome for interconnected networks

This paper considers a general and informationally efficient approach to determine the optimal access pricing rule for interconnected networks. It shows that there exists a simple rule that achieves the Ramsey outcome as the unique equilibrium when networks compete in linear prices without network-based price discrimination. The approach is informationally efficient in the sense that the regulator is required to know only the marginal cost structure, i.e. the marginal cost of making and terminating a call. The approach is general in that access prices can depend not only on the marginal costs but also on the retail prices, which can be observed by consumers and therefore by the regulator as well. In particular, I consider the set of linear access pricing rules which includes any fixed access price, the Efficient Component Pricing Rule (ECPR) and the Modified ECPR as special cases. I show that in this set, there is a unique rule that implements the Ramsey outcome as the unique equilibrium independently of the underlying demand conditions.

The transmission of US shocks to Latin America

I study whether and how US shocks are transmitted to eight Latin American countries. US shocks are identified using sign restrictions and treated as exogenous with respect to Latin American economies. Posterior estimates for individual and average effects are constructed. US monetary shocks produce significant fluctuations in Latin America, but real demand and supply shocks do not. Floaters and currency boarders display similar output but different inflation and interest rate responses. The financial channel plays a crucial role in the transmission. US disturbances explain important portions of the variability of LatinAmerican macrovariables, producing continental cyclical fluctuations and, in two episodes, destabilizing nominal exchange rate effects. Policy implications are discussed.

Pitfalls in the modeling of forward-looking price setting and investment decisions

The present paper makes progress in explaining the role of capital for inflation and output dynamics. We followWoodford (2003, Ch. 5) in assuming Calvo pricing combined with a convex capital adjustment cost at the firm level. Our main result is that capital accumulation affects inflation dynamics primarily through its impact on the marginal cost. This mechanism is much simpler than the one implied by the analysis in Woodford's text. The reason is that his analysis suffers from a conceptual mistake, as we show. The latter obscures the economic mechanism through which capital affects inflation and output dynamics in the Calvo model, as discussed in Woodford (2004).

Asset pricing implications of benchmarking: A two-factor CAPM

In this paper we consider the equilibrium effects of an institutionalinvestor whose performance is benchmarked to an index. In a partialequilibrium setting, the objective of the institutional investor is modeledas the maximization of expected utility (an increasing and concave function,in order to accommodate risk aversion) of final wealth minus a benchmark.In equilibrium this optimal strategy gives rise to the two-beta CAPM inBrennan (1993): together with the market beta a new risk-factor (that wecall active management risk) is brought into the analysis. This new betais deffined as the normalized (to the benchmark's variance) covariancebetween the asset excess return and the excess return of the market overthe benchmark index. Different to Brennan, the empirical test supports themodel's predictions. The cross-section return on the active management riskis positive and signifficant especially after 1990, when institutionalinvestors have become the representative agent of the market.

Asset pricing with idiosyncratic risk and overlapping generations

A number of existing studies have concluded that risk sharing allocations supported by competitive, incomplete markets equilibria are quantitatively close to first-best. Equilibrium asset prices in these models have been difficult to distinguish from those associated with a complete markets model, the counterfactual features of which have been widely documented. This paper asks if life cycle considerations, in conjunction with persistent idiosyncratic shocks which become more volatile during aggregate downturns, can reconcile the quantitative properties of the competitive asset pricing framework with those of observed asset returns. We begin by arguing that data from the Panel Study on Income Dynamics support the plausibility of such a shock process. Our estimates suggest a high degree of persistence as well as a substantial increase in idiosyncratic conditional volatility coincident with periods of low growth in U.S. GNP. When these factors are incorporated in a stationary overlapping generations framework, the implications for the returns on risky assets are substantial. Plausible parameterizations of our economy are able to generate Sharpe ratios which match those observed in U.S. data. Our economy cannot, however, account for the level of variability of stock returns, owing in large part to the specification of its production technology.

Optimal information transmission in organizations: Search and congestion

We propose a stylized model of a problem-solving organization whoseinternal communication structure is given by a fixed network. Problemsarrive randomly anywhere in this network and must find their way to theirrespective specialized solvers by relying on local information alone.The organization handles multiple problems simultaneously. For this reason,the process may be subject to congestion. We provide a characterization ofthe threshold of collapse of the network and of the stock of foatingproblems (or average delay) that prevails below that threshold. We buildupon this characterization to address a design problem: the determinationof what kind of network architecture optimizes performance for any givenproblem arrival rate. We conclude that, for low arrival rates, the optimalnetwork is very polarized (i.e. star-like or centralized ), whereas it islargely homogenous (or decentralized ) for high arrival rates. We also showthat, if an auxiliary assumption holds, the transition between these twoopposite structures is sharp and they are the only ones to ever qualify asoptimal.

The impact of generic reference pricing interventions in the statin market

The objective of this study was to evaluate the intended and unintended impact on pharmaceutical use and sales of three public financing reforms applied to the prescription of statins: a Spanish generic reference pricing (RP) system for lovastatin and simvastatin, and two competing policies introduced by the Andalusian Public Health Service (APHS) for all statins, first a maximum consumer price (MCP) and then a so called quality prescribing incentive for general practitioners (MCP plus PI).This study is designed as an observational, retrospective, interrupted time series analysis with comparison series (APHS and the rest of Spain) of 46 monthly drug use and sales ratios from January 2001 to October 2004 for each active ingredient in the group of statins.RP has been effective at reducing the volume of sales growth of the off-patent statins, yet its overall impact on sales of all statins has been relatively modest. The quantity and volume of sales impact heavily depends on regulatory RP details such as when the system is introduced, how often it is updated, and how the reference price is calculated.

On the robustness of least-squares Monte Carlo (LSM) for pricing American derivatives

This paper analyses the robustness of Least-Squares Monte Carlo, a techniquerecently proposed by Longstaff and Schwartz (2001) for pricing Americanoptions. This method is based on least-squares regressions in which theexplanatory variables are certain polynomial functions. We analyze theimpact of different basis functions on option prices. Numerical resultsfor American put options provide evidence that a) this approach is veryrobust to the choice of different alternative polynomials and b) few basisfunctions are required. However, these conclusions are not reached whenanalyzing more complex derivatives.

A retail benchmarking approach to efficient two-way access pricing

We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: for instance, we show that both static and dynamic e±ciency can be achieved at the same time.

The pricing of academic journals: A two-sided market perspective

More and more academic journals adopt an open-access policy, by which articlesare accessible free of charge, while publication costs are recovered through authorfees. We study the consequences of this open access policy on a journal s qualitystandard. If the journal s objective was to maximize social welfare, open accesswould be optimal as long as the positive externalities generated by its diffusionexceed the marginal cost of distribution. However, we show that if an open accessjournal has a different objective (such as maximizing readers payoffs, the impactof the journal or its profit), it tends to choose a quality standard below the sociallyefficient level.

Is bank debt special for the transmission of monetary policy? Evidence from the stock market

We combine existing balance sheet and stock market data with two new datasets to studywhether, how much, and why bank lending to firms matters for the transmission of monetarypolicy. The first new dataset enables us to quantify the bank dependence of firms precisely,as the ratio of bank debt to total assets. We show that a two standard deviation increase inthe bank dependence of a firm makes its stock price about 25% more responsive to monetarypolicy shocks. We explore the channels through which this effect occurs, and find that thestock prices of bank-dependent firms that borrow from financially weaker banks display astronger sensitivity to monetary policy shocks. This finding is consistent with the banklending channel, a theory according to which the strength of bank balance sheets mattersfor monetary policy transmission. We construct a new database of hedging activities andshow that the stock prices of bank-dependent firms that hedge against interest rate riskdisplay a lower sensitivity to monetary policy shocks. This finding is consistent with aninterest rate pass-through channel that operates via the direct transmission of policy ratesto lending rates associated with the widespread use of floating-rates in bank loans and creditline agreements.

Analysis by optical absorption and transmission electron microscopy of the strain inhomogeneities in InGaAs/InP strained layers

Optical absorption spectra and transmission electron microscopy (TEM) observations on InGaAs/InP layers under compressive strain are reported. From the band¿gap energy dispersion, the magnitude of the strain inhomogeneities. Is quantified and its microscopic origin is analyzed in view of the layer microstructure. TEM observations reveal a dislocation network at the layer interface the density of which correlates with ¿¿. It is concluded that local variations of dislocation density are responsible for the inhomogeneous strain field together with another mechanism that dominates when the dislocation density is very low.

Micro-Raman study of stress distribution in local isolation structures and correlation with transmission electron microscopy

Stress in local isolation structures is studied by micro‐Raman spectroscopy. The results are correlated with predictions of an analytical model for the stress distribution and with cross‐sectional transmission electron microscopy observations. The measurements are performed on structures on which the Si3N4 oxidation mask is still present. The influence of the pitch of the periodic local isolation pattern, consisting of parallel lines, the thickness of the mask, and the length of the bird"s beak on the stress distribution are studied. It is found that compressive stress is present in the Si substrate under the center of the oxidation mask lines, with a magnitude dependent on the width of the lines. Large tensile stress is concentrated under the bird"s beak and is found to increase with decreasing length of the bird"s beak and with increasing thickness of the Si3N4 film.

Financial Integration, Trade Openness and International Transmission

[cat] Com afecten l’obertura comercial i financera a la volatilitat macroeconòmica? La literatura existent, tant empírica com teòrica, no ha assolit encara un consens. Aquest article usa un model microfonamentat de dos països simètrics amb entrada endògena d’empreses per estudiar-ho. L’anàlisis es du a terme per tres règims econòmics diferents amb diferents nivells d’integració internacional: una economia tancada, una autarquia financera i una integració plena. Es consideren diversos nivells d’obertura comercial, en forma de biaix domèstic de la demanda i l’economia pot patir pertorbacions en la productivitat del treball i en innovació. El model conclou que la incertesa macroeconòmica, representada principalment per la volatilitat del consum, la producció i la relació real d’intercanvi internacional, depèn del grau d’obertura i del tipus de pertorbació.

Price transmission and market power analysis in the Spanish seafood market chain

[cat] Espanya és un dels principals mercats de productes pesquers d’Europa i del món. El consum de productes pesquers ha estat tradicionalment molt important a Espanya, el 2005 es varen consumir 36,7 kg per persona (MAPA, diversos anys). Malgrat això, el mercat i cóm interactuen els diversos nivells de la cadena de comercialització han gaudit de poca atenció. En aquest estudi, utilitzant dades setmanals, s’analitza per als dotze principals productes pesquers, l’elasticitat en la transmissió de preus al llarg de la cadena de comercialització a Espanya (llotja, mercat central i detallista). Finalment s’investiga la presència d’assimetria en la transmissió de preus entre aquests nivells de mercat. Els resultats obtinguts tenen importants implicacions a l’hora d’analitzar la demanda, poder de mercat i marges al llarg del mercat per als productes pesquers.