Board Overlap, Seat Accumulation and Share Prices

We examine the board overlap among firms listed in Switzerland. Collusion, managerial entrenchment, and financial participation cannot explain it. The overlap appears to be induced by banks and by the accumulation of seats by the most popular directors. We also document that seat accumulation is negatively related to firm value, possibly because of the conflicts of interest that multiple directorships induce and the time constraints directors face. Contrary to popular beliefs, however, the directors of traded firms do not generally hold more than one mandate in other traded firms. They do hold multiple seats in non-traded firms.

Daily monetary impulses and security prices

This paper uses Swiss data to study the real long-run effects of monetary policy. Daily unexpected changes in the monetary base are found to be negatively correlated with security price changes. This result is unaffected when, implicitly following Geske and Roll (1983), we try to measure the autonomous component of monetary policy by taking into account a reaction function of monetary policy to changes in real variables.

Static replications with traffic light options

It is well known that sufficiently regular, one-dimensional payoff functions have an explicit static hedge by bonds, forward contracts, and options in a continuum of strikes. An easy and natural extension of the corresponding representation leads to static hedges based on the same instruments along with traffic light options, which have recently been introduced in the market. It is well known that the second strike derivative of non-discounted prices of vanilla options is related to the risk-neutral density of the underlying asset price in the corresponding absolutely continuous settings. Similar statements hold for traffic light options in sufficiently regular, bivariate settings.

Three essays on prices and selection

Competitive Market Segmentation Abstract In a two-firm model where each firm sells a high-quality and a low-quality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that the customers' valuation of quality is identical across firms. Once we relax this assumption, competition across qualities leads to second-degree price discrimination. We find that markups on low-quality products are higher if consuming a low-quality product involves a firm-specific disutility. Likewise, markups on high-quality products are higher if consuming a high-quality product creates a firm-specific surplus. Selection upon Wage Posting Abstract We discuss a model of a job market where firms announce salaries. Thereupon, they decide through the evaluation of a productivity test whether to hire applicants. Candidates for a job are locked in once they have applied at a given employer. Hence, such a market exhibits a specific form of the bargain-then-ripoff principle. With a single firm, the outcome is efficient. Under competition, what might be called "positive selection" leads to market failure. Thus our model provides a rationale for very small employment probabilities in some sectors. Exclusivity Clauses: Enhancing Competition, Raising Prices Abstract In a setting where retailers and suppliers compete for each other by offering binding contracts, exclusivity clauses serve as a competitive device. As a result of these clauses, firms addressed by contracts only accept the most favorable deal. Thus the contract-issuing parties have to squeeze their final customers and transfer the surplus within the vertical supply chain. We elaborate to what extent the resulting allocation depends on the sequence of play and discuss the implications of a ban on exclusivity clauses.

Minimum carbon payment along an aridity gradient for dryland afforestation in non annex I countries with stochastic weather and prices

Recent findings demonstrate that trees in deserts are efficient carbon sinks. It remains however unknown whether the Clean Development Mechanism will accelerate the planting of trees in Non Annex I dryland countries. We estimated the price of carbon at which a farmer would be indifferent between his customary activity and the planting of trees to trade carbon credits, along an aridity gradient. Carbon yields were simulated by means of the CO2FIX v3.1 model for Pinus halepensis with its respective yield classes along the gradient (Arid – 100mm to Dry Sub Humid conditions – 900mm). Wheat and pasture yields were predicted on somewhat similar nitrogen-based quadratic models, using 30 years of weather data to simulate moisture stress. Stochastic production, input and output prices were afterwards simulated on a Monte Carlo matrix. Results show that, despite the high levels of carbon uptake, carbon trading by afforesting is unprofitable anywhere along the gradient. Indeed, the price of carbon would have to raise unrealistically high, and the certification costs would have to drop significantly, to make the Clean Development Mechanism worthwhile for non annex I dryland countries farmers. From a government agency's point of view the Clean Development Mechanism is attractive. However, such agencies will find it difficult to demonstrate “additionality”, even if the rule may be somewhat flexible. Based on these findings, we will further discuss why the Clean Development Mechanism, a supposedly pro-poor instrument, fails to assist farmers in Non Annex I dryland countries living at minimum subsistence level.

The Impact of Human Asset Specificity on the Sourcing of Application Services

The question concerning the circumstances under which it is advantageous for a company to outsource certain information systems functions has been a controversial issue for the last decade. While opponents emphasize the risks of outsourcing based on the loss of strategic potentials and increased transaction costs, proponents emphasize the strategic benefits of outsourcing and high potentials of cost-savings. This paper brings together both views by examining the conditions under which both the strategic potentials as well as savings in production and transaction costs of developing and maintaining software applications can better be achieved in-house as opposed to by an external vendor. We develop a theoretical framework from three complementary theories and test it empirically based on a mail survey of 139 German companies. The results show that insourcing is more cost efficient and advantageous in creating strategic benefits through IS if the provision of application services requires a high amount of firm specific human assets. These relationships, however, are partially moderated by differences in the trustworthiness and intrinsic motivation of internal versus external IS professionals. Moreover, capital shares with an external vendor can lower the risk of high transaction costs as well the risk of loosing the strategic opportunities of an IS.