Essays on entrepreneurship and innovation

Magdeburg, Univ., Fak. für Wirtschaftswiss., Diss., 2011

Four essays on capital regulation of banks

Magdeburg, Univ., Fak. für Wirtschaftswiss., Diss., 2013

Darwiniana: essays and reviews pertaining to Darwinism. By Asa Gray ...

[1888 printing]

Leniency programs, antitrust enforcement and multimarket contact : three essays in industrial organization

The Layout of My Thesis This thesis contains three chapters in Industrial Organization that build on the work outlined above. The first two chapters combine leniency programs with multimarket contact and provide a thorough analysis of the potential effects of Amnesty Plus and Penalty Plus. The third chapter puts the whole discussion on leniency programs into perspective by examining other enforcement tools available to an antitrust authority. The main argument in that last chapter is that a specific instrument can only be as effective as the policy in which it is embedded. It is therefore important for an antitrust authority to know how it best accompanies the introduction or modification of a policy instrument that helps deterrence. INTRODUCTION Chapter 1 examines the efféct of Amnesty Plus and Penalty Plus on the incentives of firms to report cartel activities. The main question is whether the inclusion of these policies in a leniency program undermine the effectiveness of the latter by discouraging the firms to apply for amnesty. The model is static and focus on the ex post incentives of firms to desist from collusion. The results suggest that, because Amnesty Plus and Penalty Plus encourage the reporting of a second cartel after a first detection, a firm, anticipating this, may be reluctant to seek leniency and to report in the first place. However, the effect may also go in the opposite direction, and Amnesty Plus and Penalty Plus may encourage the simultaneous reporting of two cartels. Chapter 2 takes this idea further to the stage of cartel formation. This chapter provides a complete characterization of the potential anticompetitive and procompetitive effects of Amnesty Plus in a infinitely repeated game framework when the firms use their multimarket contact to harshen punishment. I suggest a clear-cut policy rule that prevents potential adverse effects and thereby show that, if policy makers follow this rule, a leniency program with Amnesty Plus performs better than one without. Chapter 3 characterizes the socially optimal enforcement effort of an antitrust authority and shows how this effort changes with the introduction or modification of specific policy instruments. The intuition is that the policy instrument may increase the marginal benefit of conducting investigations. If this effect is strong enough, a more rigorous detection policy becomes socially desirable.

Three essays on the psychology of investment and financial markets

Préface My thesis consists of three essays where I consider equilibrium asset prices and investment strategies when the market is likely to experience crashes and possibly sharp windfalls. Although each part is written as an independent and self contained article, the papers share a common behavioral approach in representing investors preferences regarding to extremal returns. Investors utility is defined over their relative performance rather than over their final wealth position, a method first proposed by Markowitz (1952b) and by Kahneman and Tversky (1979), that I extend to incorporate preferences over extremal outcomes. With the failure of the traditional expected utility models in reproducing the observed stylized features of financial markets, the Prospect theory of Kahneman and Tversky (1979) offered the first significant alternative to the expected utility paradigm by considering that people focus on gains and losses rather than on final positions. Under this setting, Barberis, Huang, and Santos (2000) and McQueen and Vorkink (2004) were able to build a representative agent optimization model which solution reproduced some of the observed risk premium and excess volatility. The research in behavioral finance is relatively new and its potential still to explore. The three essays composing my thesis propose to use and extend this setting to study investors behavior and investment strategies in a market where crashes and sharp windfalls are likely to occur. In the first paper, the preferences of a representative agent, relative to time varying positive and negative extremal thresholds are modelled and estimated. A new utility function that conciliates between expected utility maximization and tail-related performance measures is proposed. The model estimation shows that the representative agent preferences reveals a significant level of crash aversion and lottery-pursuit. Assuming a single risky asset economy the proposed specification is able to reproduce some of the distributional features exhibited by financial return series. The second part proposes and illustrates a preference-based asset allocation model taking into account investors crash aversion. Using the skewed t distribution, optimal allocations are characterized as a resulting tradeoff between the distribution four moments. The specification highlights the preference for odd moments and the aversion for even moments. Qualitatively, optimal portfolios are analyzed in terms of firm characteristics and in a setting that reflects real-time asset allocation, a systematic over-performance is obtained compared to the aggregate stock market. Finally, in my third article, dynamic option-based investment strategies are derived and illustrated for investors presenting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions allows corresponding terminal wealth profiles to be expressed as options on the stochastic discount factor contingent on the loss aversion level. Therefore dynamic strategies reduce to the replicating portfolio using exchange traded and well selected options, and the risky stock.

Three essays on bankruptcy risk

Abstract Market prices of corporate bond spreads and of credit default swap (CDS) rates do not match each other. In this paper, we argue that the liquidity premium, the cheapest-to-deliver (CTD) option and actual market segmentation explain the pricing differences. Using the European transaction data from Reuters and Bloomberg, we estimate the liquidity premium that is time- varying and firm-specific. We show that when time-dependent liquidity premiums are considered, corporate bond spreads and CDS rates behave in a much closer way than previous studies have shown. We find that high equity volatility drives pricing differences that can be explained by the CTD option.

Three Essays on the Formation and Impact of Economic Policy

Introduction In my thesis I argue that economic policy is all about economics and politics. Consequently, analysing and understanding economic policy ideally has at least two parts. The economics part, which is centered around the expected impact of a specific policy on the real economy both in terms of efficiency and equity. The insights of this part point into which direction the fine-tuning of economic policies should go. However, fine-tuning of economic policies will be most likely subject to political constraints. That is why, in the politics part, a much better understanding can be gained by taking into account how the incentives of politicians and special interest groups as well as the role played by different institutional features affect the formation of economic policies. The first part and chapter of my thesis concentrates on the efficiency-related impact of economic policies: how does corporate income taxation in general, and corporate income tax progressivity in specific, affect the creation of new firms? Reduced progressivity and flat-rate taxes are in vogue. By 2009, 22 countries are operating flat-rate income tax systems, as do 7 US states and 14 Swiss cantons (for corporate income only). Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. In joint work, Marius Brülhart and I explore the implications of changes in these three parameters on entrepreneurial activity, measured by counts of firm births in a panel of Swiss municipalities. Our results show that lower average tax rates and reduced complexity of the tax code promote firm births. Controlling for these effects, reduced progressivity inhibits firm births. Our reading of these results is that tax progressivity has an insurance effect that facilitates entrepreneurial risk taking. The positive effects of lower tax levels and reduced complexity are estimated to be significantly stronger than the negative effect of reduced progressivity. To the extent that firm births reflect desirable entrepreneurial dynamism, it is not the flattening of tax schedules that is key to successful tax reforms, but the lowering of average tax burdens and the simplification of tax codes. Flatness per se is of secondary importance and even appears to be detrimental to firm births. The second part of my thesis, which corresponds to the second and third chapter, concentrates on how economic policies are formed. By the nature of the analysis, these two chapters draw on a broader literature than the first chapter. Both economists and political scientists have done extensive research on how economic policies are formed. Thereby, researchers in both disciplines have recognised the importance of special interest groups trying to influence policy-making through various channels. In general, economists base their analysis on a formal and microeconomically founded approach, while abstracting from institutional details. In contrast, political scientists' frameworks are generally richer in terms of institutional features but lack the theoretical rigour of economists' approaches. I start from the economist's point of view. However, I try to borrow as much as possible from the findings of political science to gain a better understanding of how economic policies are formed in reality. In the second chapter, I take a theoretical approach and focus on the institutional policy framework to explore how interactions between different political institutions affect the outcome of trade policy in presence of special interest groups' lobbying. Standard political economy theory treats the government as a single institutional actor which sets tariffs by trading off social welfare against contributions from special interest groups seeking industry-specific protection from imports. However, these models lack important (institutional) features of reality. That is why, in my model, I split up the government into a legislative and executive branch which can both be lobbied by special interest groups. Furthermore, the legislative has the option to delegate its trade policy authority to the executive. I allow the executive to compensate the legislative in exchange for delegation. Despite ample anecdotal evidence, bargaining over delegation of trade policy authority has not yet been formally modelled in the literature. I show that delegation has an impact on policy formation in that it leads to lower equilibrium tariffs compared to a standard model without delegation. I also show that delegation will only take place if the lobby is not strong enough to prevent it. Furthermore, the option to delegate increases the bargaining power of the legislative at the expense of the lobbies. Therefore, the findings of this model can shed a light on why the U.S. Congress often practices delegation to the executive. In the final chapter of my thesis, my coauthor, Antonio Fidalgo, and I take a narrower approach and focus on the individual politician level of policy-making to explore how connections to private firms and networks within parliament affect individual politicians' decision-making. Theories in the spirit of the model of the second chapter show how campaign contributions from lobbies to politicians can influence economic policies. There exists an abundant empirical literature that analyses ties between firms and politicians based on campaign contributions. However, the evidence on the impact of campaign contributions is mixed, at best. In our paper, we analyse an alternative channel of influence in the shape of personal connections between politicians and firms through board membership. We identify a direct effect of board membership on individual politicians' voting behaviour and an indirect leverage effect when politicians with board connections influence non-connected peers. We assess the importance of these two effects using a vote in the Swiss parliament on a government bailout of the national airline, Swissair, in 2001, which serves as a natural experiment. We find that both the direct effect of connections to firms and the indirect leverage effect had a strong and positive impact on the probability that a politician supported the government bailout.

Three essays on leadership

ABSTRACT Samuel Bendahan, John Antonakis, Christian Zehnder, and François Pralong The relationship between power and immoral decisions has been discussed extensively by scientists and philosophers alike. Although the exercise of power is ubiquitous in social hierarchies, direct evidence on the impact of power on decision making is scarce. We use laboratory experiments to study whether more power leads to corruption. We manipulate power in the context of leader decision-making authority involving monetary stakes. Prior to the experiment, we also gathered extensive data on psychological and endocrinological individual differences. We find that an increase of power caused leaders to be more likely to engage in destructive, selfish behaviour, although the same subjects did not behave in this manner before their level of power was increased. We also show how individual differences affect the initial level of destructive behaviour and the corruption process. WHAT'S RIGHT FOR THE LEFT MAY NOT BE RIGHT FOR THE RIGHT: VALUE CONGRUENCE AND CHARISMA IN POLITICAL LEADERSHIP Samuel Bendahan ABSTRACT Value congruence between leaders and followers is important not only for follower commitment but also as part of the attributions followers make of leaders. I theorized that transformational leadership, which often is referred to as being value driven and having strong moral foundations, has differential effects depending on the values of the follower and whether these values are congruent with what the leader espouses. I designed an experiment to analyze how the political values of followers and leaders can influence followers' attributions regarding leaders. Within the context of political leadership, I found that transformational leaders were seen as more prototypical. Value congruence predicted prototypicality, which was strongly related to follower intentions to vote for the leader. Furthermore, followers with left-wing political values were more influenced by prototypical leaders than were followers with right-wing political values, presumably because of moral overtones of both left-wing ideology and transformational leadership. JUDGING LEADERSHIP POTENTIAL IN AN INTERVIEW: MODERATING EFFECT OF INTERVIEWER INTELLIGENCE ON INTERVIEWER COGNITIVE BUSYNESS, CANDIDATE PERFORMANCE-CUES EFFECTS, AND CANDIDATE ETHNICITY Samuel Bendahan, Philippe Jacquart, and John Antonakis ABSTRACT A large body of literature suggests that interviewers do not accurately rate candidates when using unstructured interviews and evaluation procedures that affect pre-interview expectations; however, the process by which these biases are produced is not well understood. We theorized several reasons for the sub-par performance of the unstructured interview. These factors, which we manipulated in the context of a videotaped interview of a candidate applying for a leadership position, include evaluator cognitive load, pre-interview performance cues regarding the candidate, and the ethnicity of the candidate. We also controlled for the intelligence of the evaluator. We found a significant four-way interaction between the manipulated factors and evaluators' cognitive abilities. The effects of the manipulated factors were all significantly less for evaluators who were high on general intelligence.

Laser scanning-based recognition of rotational movements on a deep seated gravitational instability: The Cinque Torri case (North-Eastern Italian Alps)

The Cinque Torri group (Cortina d'Ampezzo, Italy) is an articulated system of unstable carbonatic rock monoliths located in a very important tourism area and therefore characterized by a significant risk. The instability phenomena involved represent an example of lateral spreading developed over a larger deep seated gravitational slope deformation (DSGSD) area. After the recent fall of a monolith of more than 10 000 m3, a scientific study was initiated to monitor the more unstable sectors and to characterize the past movements as a fundamental tool for predicting future movements and hazard assessment. To achieve greater insight on the ongoing lateral spreading process, a method for a quantitative analysis of rotational movements associated with the lateral spreading has been developed, applied and validated. The method is based on: i) detailed geometrical characterization of the area by means of laser scanner techniques; ii) recognition of the discontinuity sets and definition of a reference frame for each set, iii) correlation between the obtained reference frames related to a specific sector and a stable external reference frame, and iv) determination of the 3D rotations in terms of Euler angles to describe the present settlement of the Cinque Torri system with respect to the surrounding stable areas. In this way, significant information on the processes involved in the fragmentation and spreading of a former dolomitic plateau into different rock cliffs has been gained. The method is suitable to be applied to similar case studies.