The optimal behaviour of firms facing stochastic costs

This paper aims at assessing the optimal behavior of a firm facing stochastic costs of production. In an imperfectly competitive setting, we evaluate to what extent a firm may decide to locate part of its production in other markets different from which it is actually settled. This decision is taken in a stochastic environment. Portfolio theory is used to derive the optimal solution for the intertemporal profit maximization problem. In such a framework, splitting production between different locations may be optimal when a firm is able to charge different prices in the different local markets.

Leadership and overcoming coordination failure with asymmetric costs

We study how the heterogeneity of agents affects the extent to which changes in financial incentives can pull a group out of a situation of coordination failure. We focus on the connections between cost asymmetries and leadership. Experimental subjects interact in groups of four in a series of weak-link games. The treatment variable is the distribution of high and low effort cost across subjects. We present data for one, two and three low-cost subjects as well as control sessions with symmetric costs. The overall pattern of coordination improvement is common across treatments. Early coordination improvements depend on the distribution of high and low effort costs across subjects, but these differences disappear with time. We find that initial leadership in overcoming coordination failure is not driven by low-cost subjects but by subjects with the most frequent cost. This conformity effect can be due to a kind of group identity or to the cognitive simplicity of acting with identical others.

Is sociality driven by the costs of dispersal or the benefits of philopatry? A role for kin-discrimination mechanisms.

The role of ecological constraints in promoting sociality is currently much debated. Using a direct-fitness approach, we show this role to depend on the kin-discrimination mechanisms underlying social interactions. Altruism cannot evolve under spatially based discrimination, unless ecological constraints prevent complete dispersal. Increasing constraints enhances both the proportion of philopatric (and thereby altruistic) individuals and the level of altruistic investments conceded in pairwise interactions. Familiarity-based discrimination, by contrast, allows philopatry and altruism to evolve at significant levels even in the absence of ecological constraints. Increasing constraints further enhances the proportion of philopatric (and thereby altruistic) individuals but not the level of altruism conceded. Ecological constraints are thus more likely to affect social evolution in species in which restricted cognitive abilities, large group size, and/or limited period of associative learning force investments to be made on the basis of spatial cues.

Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities

This paper examines the impact of urban sprawl, a phenomenon of particular interest in Spain, which is currently experiencing this process of rapid, low-density urban expansion. Many adverse consequences are attributed to urban sprawl (e.g., traffic congestion, air pollution and social segregation), though here we are concerned primarily with the rising costs of providing local public services. Our initial aim is to develop an accurate measure of urban sprawl so that we might empirically test its impact on municipal budgets. Then, we undertake an empirical analysis using a cross-sectional data set of 2,500 Spanish municipalities for the year 2003 and a piecewise linear function to account for the potentially nonlinear relationship between sprawl and local costs. The estimations derived from the expenditure equations for both aggregate and six disaggregated spending categories indicate that low-density development patterns lead to greater provision costs of local public services.

Why the EU does not Have an Independent Competition Agency: French Interests and Transaction Costs in Early European Integration

A major achievement of new institutionalism in economics and political science is the formalisation of the idea that certain policies are more efficient when administered by a politically independent organisation. Based on this insight, several policy actors and scholars criticise the European Community for relying too much on a multi-task, collegial, and politicised organisation, the European Commission. This raises important questions, some constitutional (who should be able to change the corresponding procedural rules?) and some political-economic (is Europe truly committed to free and competitive markets?). Though acknowledging the relevance of legal and normative arguments, this paper contributes to the debate with a positive political-scientific perspective. Based on the view that institutional equilibria raise the question of equilibrium institutions, it shows that collegiality was (a) an equilibrium institution during the Paris negotiations of 1950-51; and (b) an institutional equilibrium for the following 50 years. The conclusion points to some recent changes in the way that European competition policy is implemented, and discusses how these affect the “constitutional” principle of collegial European governance.

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.

Who Ultimately Bears the Burden of Greater Non-Wage Labour costs?

We investigate the effect of a rise in non-wage labour costs (NWLC) on real anufacturing labour costs in OECD countries, taking into account the degree of coordination in the wage bargaining process. We find that, in countries in which wage bargaining is not highly coordinated, 55% of an increase in NWLC appears to be shifted to workers in the long run, whereas in countries operating under a highly coordinated bargaining regime, full shifting occurs. Overall, our results suggest that high NWLC can be associated with a high equilibrium unemployment rate, but only in those OECD countries that do not have highly coordinated wage bargaining.

Transaction Costs and Institutions

This paper proposes a simple framework for understanding endogenous transaction costs - their composition, size and implications. In a model of diversification against risk, we distinguish between investments in institutions that facilitate exchange and the costs of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk averse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction costs are exogenous, including the implications for taxation and measurement issues.

Distinct neurophysiological mechanisms mediate mixing costs and switch costs.

Using event-related potentials (ERPs), we investigated the neural response associated with preparing to switch from one task to another. We used a cued task-switching paradigm in which the interval between the cue and the imperative stimulus was varied. The difference between response time (RT) to trials on which the task switched and trials on which the task repeated (switch cost) decreased as the interval between cue and target (CTI) was increased, demonstrating that subjects used the CTI to prepare for the forthcoming task. However, the RT on repeated-task trials in blocks during which the task could switch (mixed-task blocks) were never as short as RTs during single-task blocks (mixing cost). This replicates previous research. The ERPs in response to the cue were compared across three conditions: single-task trials, switch trials, and repeat trials. ERP topographic differences were found between single-task trials and mixed-task (switch and repeat) trials at approximately 160 and approximately 310 msec after the cue, indicative of changes in the underlying neural generator configuration as a basis for the mixing cost. In contrast, there were no topographic differences evident between switch and repeat trials during the CTI. Rather, the response of statistically indistinguishable generator configurations was stronger at approximately 310 msec on switch than on repeat trials. By separating differences in ERP topography from differences in response strength, these results suggest that a reappraisal of previous research is appropriate.

Trade Costs, International Competition and Selection: The Effects of Unionisation on Market Size

Within a two-country model of international trade in which heterogeneous firms face firm-specific unions, we study the effects of different forms of trade liberalisation on market structure and competitive selection in the presence of inter-country asymmetries in size and labour market institutions. For given levels of trade openness, an increase in a country’s relative unions’ strength reduces the average productivity of its domestic producers but increases that of its exporters. Whilst an unfavourable union power differential, by increasing wages, weakens a country’s firms’ competitive position, the higher wages reinforce standard market access mechanisms to give rise to aggregate income effects. When the initial levels of trade openness are sufficiently low, this ‘expansionary’ aggregate effect can attract industry in the country with stronger unions and also result in an increase in the extensive margin of exports. For sufficiently large inter-country differences in the bargaining power of unions, trade liberalization can then result in a pro-variety effect, with an increase in the total availability of varieties to consumers in both countries, regardless of there being inter-country differences in size.

FDI, Trade Costs and Regional Asymmetries

We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. First, we establish the natural geography of the region, which is given by the equilibrium distribution of industrial activity in the absence of taxes or subsidies. We then examine the implications for corporate taxes when the countries compete with each other to attract firms. We find that, even when all countries are the same size, the centrality of the hub gives it an advantage in tax setting, such that its equilibrium tax can be larger than that of the spokes and yet it still attracts a disproportionate share of industry. Thus geographic advantage in tax competition has a second dimension, centrality in addition to size.

Indirect costs of parasitism are shaped by variation in the type of immune challenge and food availability

Parasites can inflict indirect fitness costs to their hosts by eliciting costly immune responses. These costs depend on the type and amount of immunostimulants presented to the host immune system but also on the amount of resources available to fuel host immune responses. Here, we investigated how the relative costs of two different types of immune challenge are modulated by variation in food availability. We injected nestling tawny owls (Strix aluco) with either 10 mu g of phytohaemagglutinin (PHA) or 20 mu g of lipopolysaccharide (LPS), and subsequently raised them under two different food regimes (food-restricted vs. ad libitum). After controlling for food consumption, we found that LPS-injected nestlings lost more body mass than PHA-injected ones only when food-restricted. We also found that body mass gain of owlets fed ad libitum decreased with the intensity of the skin swelling response against LPS, but not PHA. These experimental and correlative results suggest that nestling tawny owls suffered greater immune costs when treated with LPS than PHA, and that variation in the costs of two different types of immune challenge can be exacerbated under conditions of low food availability. Our study highlights the importance of taking into consideration the interplay between host immunity and nutrition in the study of indirect costs of parasitism.

Transaction Costs and Institutions: Investments in Exchange

This paper proposes a simple model for understanding transaction costs for their composition, size and policy implications. We distinguish between investments in institutions that facilitate exchange and the cost of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk averse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction costs are exogenous, including the implications for taxation and measurement issues.

The costs of parasitism and anti-parasitic defense in the common vole

Résumé : Les relations entre un parasite et son hôte sont avant tout marquées par le coût pour l'hôte que représente la ponction de ressources au profit du parasite et ses conséquences sur les traits d'histoires de vie de l'hôte. Pour contenir la réduction de leur valeur reproductive, les hôtes ont acquis au cours de l'évolution des mécanismes soit de lutte contre les parasites, soit de réallocations des ressources. Curieusement les effets des ectoparasites sur la biologie de mammifères ont été peu étudiés. Dans une première expérience à long terme, nous avons examiné sous un angle intégratif si les puces Nosopsyllus fasciatus affectent certains paramètres physiologiques des campagnols des champs Microtus arvalis. Nous avons également testé si les puces peuvent réduire la longévité et si oui, si ce pourrait être dû à une accélération de la sénescence. Ensuite nous avons testé si la simple activation répétée du système immunitaire comme lors d'une infestation chronique pouvait aussi réduire la longévité. Dans une dernière expérience, nous avons d'abord testé si l'infestation par des puces de jeunes campagnols au stade néonatal (21 jours) pouvait modifier leur développement et leur phénotype adulte. Puis nous avons testé si la modification du phénotype adulte est une réponse prédite et potentiellement adaptative pour minimiser les effets des puces à l'âge adulte. Nos résultats montrent que l'infestation par des puces réduit la croissance subadulte, induit une forte anémie et une immunodépression, et augmente le métabolisme de repos. De plus les puces réduisent la longévité et la taille des testicules, réduisant fortement le succès reproducteur potentiel des individus parasités. La taille finale, c'est-à-dire le développement pré-adulte, détermine en grande part la longévité. La réduction de longévité ne devrait pas être due à l'investissement au profit du système immunitaire car l'activation chronique seule du système immunitaire ne réduit pas la longévité. L'infestation néonatale retarde légèrement le développement mais surtout modifie l'hématocrite et réduit les performances locomotrices des campagnols plus de 3 mois après l'infestation. Les effets immédiats du parasitisme sur la physiologie semblent bien supérieurs comparés aux effets à long terme. Nous n'avons pas d'éléments permettant d'affirmer que le parasitisme néonatal prépare les campagnols à faire face aux puces à l'âge adulte. Au contraire, le parasitisme néonatal interagit sur le parasitisme adulte pour augmenter le métabolisme de repos. Cette thèse offre une vision intégrative des mécanismes par lesquels les puces peuvent affecter la valeur reproductive de leurs hôtes. De façon générale, ces résultats 35 montrent l'importance des puces comme force de sélection chez les campagnols. Il est indispensable de prendre en compte les ectoparasites dans l'étude de l'écologie et des dynamiques de populations chez les mammifères. Summary : The relationship between a parasite and its host is fundamentally marked by the costs for host of the withdrawals of resources by parasite and the subsequent reduction in host life-history traits. Hosts have evolved a number of strategies to reduce these costs, either by fighting against the parasite directly or by reallocating resources to reduce costs on lifetime reproductive value. The effects of ectoparasites on burrowing mammals have been scarcely studied. In a first long-term experiment, we examined how fleas Nosopsyllus fasciatus affect physiological levels of the common vole, Microtus arvalis. We also examined whether fleas reduce longevity and if so, if it is due to an early senescence pattern. Then we tested if experimental activation of the immune system by repeated injections of an antigen could result in a shorter longevity. In the last experiment, we tested if short-lasting neonatal parasitism can have long-term effects on phenotype, and if these effects could induce a predictive response to reduce damages when parasitized at the adult stage. We found that parasitism by flea reduced subadult growth, induced anaemia and immunodepression, and increased energy consumption even when resting. Moreover fleas reduce longevity and testes size associated to splenomegaly, suggesting an overall reduction in fitness but we did not find any pattern of accelerated senescence explaining the early death of parasitized voles compared to non-parasitzed. The cost of mounting an immune response throughout life does not impair longevity, suggesting that it is the cost of parasitism that limits the longevity and not the immune investment. Neonatal infestation by fleas has long-term effects on physiology and reduces motor activity more than 3 months after infestation. The modification of physiology due to long-term effects seems weak compared to the immediate effects of adult infestation. We found no evidence that neonatal parasitism prepares voles to mount a predictive adaptive response in order to reduce effects of fleas on fitness components. On the contrary, neonatal parasitism seems to worsen the effect of adult parasitism. This thesis offers an integrative view of mechanisms by which fleas affect their host at the individual level. Overall, our results demonstrate the importance of fleas as a selective force in voles. These results highlight the importance of ectoparasitism in ecology of micromarnrnals and suggest a role in the dynamic of host populations.

An axiomatic justification of mediation in bankruptcy problems.

This paper provides a natural way of reaching an agreement between two prominent proposals in a bankruptcy problem. Particularly, using the fact that such problems can be faced from two different points of views, awards and losses, we justify the average of any pair of dual bankruptcy rules through the definition a double recursive process. Finally, by considering three posible sets of equity principles that a particular society may agree on, we retrieve the average of old and well known bankruptcy rules, the Constrained Equal Awards and the Constrained Equal Losses rules, Piniles’ rule and its dual rule, and the Constrained Egalitarian rule and its dual rule. Keywords: Bankruptcy problems, Midpoint, Bounds, Duality, Recursivity. JEL classification: C71, D63, D71.