Capital structure, risk and asymmetric information : theory and evidence

This paper proposes a principal-agent model between banks and firms with risk and asymmetric information. A mixed form of finance to firms is assumed. The capital structure of firms is a relevant cause for the final aggregate level of investment in the economy. In the model analyzed, there may be a separating equilibrium, which is not economically efficient, because aggregate investments fall short of the first-best level. Based on European firm-level data, an empirical model is presented which validates the result of the relevance of the capital structure of firms. The relative magnitude of equity in the capital structure makes a real difference to the profits obtained by firms in the economy.

Critical pedagogy theory and the family business

In contemporary times family business research has been dominated by three theoretical perspectives; principal-agent theory, stewardship theory, and resource-based view theory (Siebels 2012) but at the same time scholars argue that what still needs further attention is how underlying processes and phenomena can be explained (Melin, Nordqvist & Sharma  2014). In order to understand themes such as repression or relations of asymmetry the suggestion in this chapter is to move towards a critical stance of thinking which involves problematizing the obvious issues in family firms (Alvesson & Deetz 2000) and moreover allowing the critical perspective to destabilize assumptions made within earlier research (Freire, 1974). By discussing critical theory in general but foremost the Freirean  (1970, 1974) critical pedagogy specifically, the arguments in the chapter revolves around how critical pedagogy can open up for a more novel view on family business. The purpose is via critical pedagogy discuss family business from a limited situation perspective, and to argue for a Freirean (1970) dialogue as means of developing a critical consciousness for family members in the family business context. The chapter concludes with some recommendations on platforms or common grounds in which dialogue and raising of consciousness can occur in which the concept can open up possibilities for interesting learning transfer and bring multidimensional knowledge into the family firm.

A Markovian model market-Akerlof`s lemons and the asymmetry of information

In this work we study an agent based model to investigate the role of asymmetric information degrees for market evolution. This model is quite simple and may be treated analytically since the consumers evaluate the quality of a certain good taking into account only the quality of the last good purchased plus her perceptive capacity beta. As a consequence, the system evolves according to a stationary Markov chain. The value of a good offered by the firms increases along with quality according to an exponent alpha, which is a measure of the technology. It incorporates all the technological capacity of the production systems such as education, scientific development and techniques that change the productivity rates. The technological level plays an important role to explain how the asymmetry of information may affect the market evolution in this model. We observe that, for high technological levels, the market can detect adverse selection. The model allows us to compute the maximum asymmetric information degree before the market collapses. Below this critical point the market evolves during a limited period of time and then dies out completely. When beta is closer to 1 (symmetric information), the market becomes more profitable for high quality goods, although high and low quality markets coexist. The maximum asymmetric information level is a consequence of an ergodicity breakdown in the process of quality evaluation. (C) 2011 Elsevier B.V. All rights reserved.

A reforma administrativa da Nova Zel??ndia nos anos 80-90: controle estrat??gico, efici??ncia gerencial e accountability

O artigo discute o processo de reforma administrativa implementada na Nova Zel??ndia a partir de 1984, com a chegada do Partido Trabalhista ao poder, abordando seus principais desdobramentos nos anos 90. Parte de uma apresenta????o do modelo administrativo em vigor na Nova Zel??ndia antes das reformas empreendidas em 1984, delimitando dessa forma o quadro referencial para comparar a situa????o anterior com a atual, de maneira que proporcione uma avalia????o sobre os impactos das medidas empreendidas. Em seguida, apresenta uma descri????o dos objetivos e princ??pios norteadores da reforma tais como, separa????o das fun????es comerciais das n??o-comerciais; separa????o entre as fun????es administrativas e de assessoria; princ??pio do ???quem usa paga???, user pays; transpar??ncia na concess??o de subs??dios; neutralidade competitiva, descentraliza????o e aumento do poder discricion??rio do administrador; melhoramento da accountability, entre outros. A seguir, s??o apresentadas as principais medidas empreendidas pelo governo trabalhista entre 1984 e 1990, dando ??nfase ?? metodologia adotada para a implementa????o e accountability dos contratos de gest??o firmados entre os executivos- chefe e os ministros. Posteriormente, o autor apresenta as modifica????es introduzidas nas regras de contrata????o de pessoal no servi??o p??blico neozeland??s e, de um modo mais geral, na pol??tica de recursos humanos. Finalmente, ?? tra??ado um perfil da situa????o atual da Nova Zel??ndia, bem como ?? feita a apresenta????o sucinta daqueles que o autor considera como sendo os ???suportes conceituais da reforma???: o movimento gerencialista, a teoria do Public Choice e a teoria Principal-Agente.

Estudo da exposição profissional a formaldeído em laboratórios hospitalares de anatomia patológica

RESUMO - A exposição a formaldeído é reconhecidamente um dos mais importantes factores de risco presente nos laboratórios hospitalares de anatomia patológica. Neste contexto ocupacional, o formaldeído é utilizado em solução, designada comummente por formol. Trata-se de uma solução comercial de formaldeído, normalmente diluída a 10%, sendo pouco onerosa e, por esse motivo, a eleita para os trabalhos de rotina em anatomia patológica. A solução é utilizada como fixador e conservante do material biológico, pelo que as peças anatómicas a serem processadas são previamente impregnadas. No que concerne aos efeitos para a saúde do formaldeído, os efeitos locais parecem apresentar um papel mais importante comparativamente com os efeitos sistémicos, devido à sua reactividade e rápido metabolismo nas células da pele, tracto gastrointestinal e pulmões. Da mesma forma, a localização das lesões correspondem principalmente às zonas expostas às doses mais elevadas deste agente químico, ou seja, o desenvolvimento dos efeitos tóxicos dependerá mais da intensidade da dose externa do que da duração da exposição. O efeito do formaldeído no organismo humano mais facilmente detectável é a acção irritante, transitória e reversível sobre as mucosas dos olhos e aparelho respiratório superior (naso e orofaringe), o que acontece em geral para exposições frequentes e superiores a 1 ppm. Doses elevadas são citotóxicas e podem conduzir a degenerescência e necrose das mucosas e epitélios. No que concerne aos efeitos cancerígenos, a primeira avaliação efectuada pela International Agency for Research on Cancer data de 1981, actualizada em 1982, 1987, 1995 e 2004, considerando-o como um agente cancerígeno do grupo 2A (provavelmente carcinogénico). No entanto, a mais recente avaliação, em 2006, considera o formaldeído no Grupo 1 (agente carcinogénico) com base na evidência de que a exposição a este agente é susceptível de causar cancro nasofaríngeo em humanos. Constituiu objectivo principal deste estudo caracterizar a exposição profissional a formaldeído nos laboratórios hospitalares de anatomia patológica Portugueses. Pretendeu-se, ainda, descrever os fenómenos ambientais da contaminação ambiental por formaldeído e explorar eventuais associações entre variáveis. Considerou-se uma amostra de 10 laboratórios hospitalares de anatomia patológica, avaliada a exposição dos três grupos profissionais por comparação com os dois referenciais de exposição e, ainda, conhecidos os valores de concentração máxima em 83 actividades. Foram aplicados simultaneamente dois métodos distintos de avaliação ambiental: um dos métodos (Método 1) fez uso de um equipamento de leitura directa com o princípio de medição por Photo Ionization Detection, com uma lâmpada de 11,7 eV e, simultaneamente, realizou-se o registo da actividade. Este método disponibilizou dados para o referencial de exposição da concentração máxima; o outro método (Método 2) traduziu-se na aplicação do método NIOSH 2541, implicando o uso de bombas de amostragem eléctricas de baixo caudal e posterior processamento analítico das amostras por cromatografia gasosa. Este método, por sua vez, facultou dados para o referencial de exposição da concentração média ponderada. As estratégias de medição de cada um dos métodos e a definição dos grupos de exposição existentes neste contexto ocupacional, designadamente os Técnicos de Anatomia Patológica, os Médicos Anatomo-Patologistas e os Auxiliares, foram possíveis através da informação disponibilizada pelas técnicas de observação da actividade da análise (ergonómica) do trabalho. Estudaram-se diversas variáveis independentes, nomeadamente a temperatura ambiente e a humidade relativa, a solução de formaldeído utilizada, as condições de ventilação existentes e o número médio de peças processadas por dia em cada laboratório. Para a recolha de informação sobre estas variáveis foi preenchida, durante a permanência nos laboratórios estudados, uma Grelha de Observação e Registo. Como variáveis dependentes seleccionaram-se três indicadores de contaminação ambiental, designadamente o valor médio das concentrações superiores a 0,3 ppm em cada laboratório, a Concentração Média Ponderada obtida para cada grupo de exposição e o Índice do Tempo de Regeneração de cada laboratório. Os indicadores foram calculados e definidos através dos dados obtidos pelos dois métodos de avaliação ambiental aplicados. Baseada no delineado pela Universidade de Queensland, foi ainda aplicada uma metodologia de avaliação do risco de cancro nasofaríngeo nas 83 actividades estudadas de modo a definir níveis semi-quantitativos de estimação do risco. Para o nível de Gravidade considerou-se a informação disponível em literatura científica que define eventos biológicos adversos, relacionados com o modo de acção do agente químico e os associa com concentrações ambientais de formaldeído. Para o nível da Probabilidade utilizou-se a informação disponibilizada pela análise (ergonómica) de trabalho que permitiu conhecer a frequência de realização de cada uma das actividades estudadas. A aplicação simultânea dos dois métodos de avaliação ambiental resultou na obtenção de resultados distintos, mas não contraditórios, no que concerne à avaliação da exposição profissional a formaldeído. Para as actividades estudadas (n=83) verificou-se que cerca de 93% dos valores são superiores ao valor limite de exposição definido para a concentração máxima (VLE-CM=0,3 ppm). O “exame macroscópico” foi a actividade mais estudada e onde se verificou a maior prevalência de resultados superiores ao valor limite (92,8%). O valor médio mais elevado da concentração máxima (2,04 ppm) verificou-se no grupo de exposição dos Técnicos de Anatomia Patológica. No entanto, a maior amplitude de resultados observou-se no grupo dos Médicos Anatomo-Patologistas (0,21 ppm a 5,02 ppm). No que respeita ao referencial da Concentração Média Ponderada, todos os valores obtidos nos 10 laboratórios estudados para os três grupos de exposição foram inferiores ao valor limite de exposição definido pela Occupational Safety and Health Administration (TLV-TWA=0,75 ppm). Verificou-se associação estatisticamente significativa entre o número médio de peças processadas por laboratório e dois dos três indicadores de contaminação ambiental utilizados, designadamente o valor médio das concentrações superiores a 0,3 ppm (p=0,009) e o Índice do Tempo de Regeneração (p=0,001). Relativamente à temperatura ambiente não se observou associação estatisticamente significativa com nenhum dos indicadores de contaminação ambiental utilizados. A humidade relativa apresentou uma associação estatisticamente significativa apenas com o indicador de contaminação ambiental da Concentração Média Ponderada de dois grupos de exposição, nomeadamente com os Médicos Anatomo-Patologistas (p=0,02) e os Técnicos de Anatomia Patológica (p=0,04). A aplicação da metodologia de avaliação do risco nas 83 actividades estudadas permitiu verificar que, em cerca de dois terços (35%), o risco foi classificado como (pelo menos) elevado e, ainda, constatar que 70% dos laboratórios apresentou pelo menos 1 actividade com a classificação de risco elevado. Da aplicação dos dois métodos de avaliação ambiental e das informações obtidas para os dois referenciais de exposição pode concluir-se que o referencial mais adequado é a Concentração Máxima por estar associado ao modo de actuação do agente químico. Acresce, ainda, que um método de avaliação ambiental, como o Método 1, que permite o estudo das concentrações de formaldeído e simultaneamente a realização do registo da actividade, disponibiliza informações pertinentes para a intervenção preventiva da exposição por permitir identificar as actividades com a exposição mais elevada, bem como as variáveis que a condicionam. As peças anatómicas apresentaram-se como a principal fonte de contaminação ambiental por formaldeído neste contexto ocupacional. Aspecto de particular interesse, na medida que a actividade desenvolvida neste contexto ocupacional e, em particular na sala de entradas, é centrada no processamento das peças anatómicas. Dado não se perspectivar a curto prazo a eliminação do formaldeído, devido ao grande número de actividades que envolvem ainda a utilização da sua solução comercial (formol), pode concluir-se que a exposição a este agente neste contexto ocupacional específico é preocupante, carecendo de uma intervenção rápida com o objectivo de minimizar a exposição e prevenir os potenciais efeitos para a saúde dos trabalhadores expostos. ---------------- ABSTRACT - Exposure to formaldehyde is recognized as one of the most important risk factors present in anatomy and pathology laboratories from hospital settings. In this occupational setting, formaldehyde is used in solution, typically diluted to 10%, and is an inexpensive product. Because of that, is used in routine work in anatomy and pathology laboratories. The solution is applied as a fixative and preservative of biological material. Regarding formaldehyde health effects, local effects appear to have a more important role compared with systemic effects, due to his reactivity and rapid metabolism in skin, gastrointestinal tract and lungs cells. Likewise, lesions location correspond mainly to areas exposed to higher doses and toxic effects development depend more on external dose intensity than exposure duration. Human body formaldehyde effect more easily detectable is the irritating action, transient and reversible on eyes and upper respiratory tract (nasal and throat) membranes, which happen in general for frequent exposure to concentrations higher than 1 ppm. High doses are cytotoxic and can lead to degeneration, and also to mucous membranes and epithelia necrosis. With regard to carcinogenic effects, first assessment performed by International Agency for Research on Cancer in 1981, updated in 1982, 1987, 1995 and 2004, classified formaldehyde in Group 2A (probably carcinogenic). However, most recent evaluation in 2006, classifies formaldehyde carcinogenic (Group 1), based on evidence that exposure to this agent is likely to cause nasopharyngeal cancer in humans. This study principal objective was to characterize occupational exposure to formaldehyde in anatomy and pathology hospital laboratories, as well to describe formaldehyde environmental contamination phenomena and explore possible associations between variables. It was considered a sample of 10 hospital pathology laboratories, assessed exposure of three professional groups for comparison with two exposure metrics, and also knows ceiling concentrations in 83 activities. Were applied, simultaneously, two different environmental assessment methods: one method (Method 1) using direct reading equipment that perform measure by Photo Ionization Detection, with 11,7 eV lamps and, simultaneously, make activity description and film. This method provided data for ceiling concentrations for each activity study (TLV-C). In the other applied method (Method 2), air sampling and formaldehyde analysis were performed according to NIOSH method (2541). This method provided data average exposure concentration (TLV-TWA). Measuring and sampling strategies of each methods and exposure groups definition (Technicians, Pathologists and Assistants) was possible by information provided by activities (ergonomic) analysis. Several independent variables were studied, including temperature and relative humidity, formaldehyde solution used, ventilation conditions, and also anatomic pieces mean value processed per day in each laboratory. To register information about these variables was completed an Observation and Registration Grid. Three environmental contamination indicators were selected has dependent variables namely: mean value from concentrations exceeding 0,3 ppm in each laboratory, weighted average concentration obtained for each exposure group, as well each laboratory Time Regeneration Index. These indicators were calculated and determined through data obtained by the two environmental assessment methods. Based on Queensland University proposal, was also applied a methodology for assessing nasopharyngeal cancer risk in 83 activities studied in order to obtain risk levels (semi-quantitative estimation). For Severity level was considered available information in scientific literature that defines biological adverse events related to the chemical agent action mode, and associated with environment formaldehyde concentrations. For Probability level was used information provided by (ergonomic) work analysis that helped identifies activity frequency. Environmental assessment methods provide different results, but not contradictory, regarding formaldehyde occupational exposure evaluation. In the studied activities (n=83), about 93% of the values were above exposure limit value set for ceiling concentration in Portugal (VLE-CM = 0,3 ppm). "Macroscopic exam" was the most studied activity, and obtained the higher prevalence of results superior than 0,3 ppm (92,8%). The highest ceiling concentration mean value (2,04 ppm) was obtain in Technicians exposure group, but a result wider range was observed in Pathologists group (0,21 ppm to 5,02 ppm). Concerning Method 2, results from the three exposure groups, were all lower than limit value set by Occupational Safety and Health Administration (TLV-TWA=0,75ppm). There was a statistically significant association between anatomic pieces mean value processed by each laboratory per day, and two of the three environmental contamination indicators used, namely average concentrations exceeding 0,3 ppm (p=0,009) and Time Regeneration Index (p=0,001). Temperature was not statistically associated with any environmental contamination used indicators. Relative humidity had a statistically significant association only with one environmental contamination indicator, namely weighted average concentration, particularly with Pathologists group (p=0,02) and Technicians group (p=0,04). Risk assessment performed in the 83 studied activities showed that around two thirds (35%) were classified as (at least) high, and also noted that 70% of laboratories had at least 1 activity with high risk rating. The two environmental assessment methods application, as well information obtained from two exposure metrics, allowed to conclude that most appropriate exposure metric is ceiling concentration, because is associated with formaldehyde action mode. Moreover, an environmental method, like Method 1, which allows study formaldehyde concentrations and relates them with activity, provides relevant information for preventive information, since identifies the activity with higher exposure, as well variables that promote exposure. Anatomic pieces represent formaldehyde contamination main source in this occupational setting, and this is of particular interest because all activities are focused on anatomic pieces processing. Since there is no prospect, in short term, for formaldehyde use elimination due to large number of activities that still involve solution use, it can be concluded that exposure to this agent, in this particular occupational setting, is preoccupant, requiring an rapid intervention in order to minimize exposure and prevent potential health effects in exposed workers.

Optimal technology policy: subsidies versus monitoring

We analyze the optimal technology policy to solve a free-riding problem between the members of a RJV. We assume that when intervening the Government suffers an additional adverse selection problem because it is not able to distinguish the value of the potential innovation. Although subsidies and monitoring may be equivalent policy tools to solve firms' free-riding problem, they imply different social losses if the Government is not able to perfectly distinguish the value of the potential innovation. The supremacy of monitoring tools over subsidies is proved to depend on which type of information the Government is able to obtain about firms' R&D performance.

General equilibrium with asymmetric information: a dual approach

We study markets where the characteristics or decisions of certain agents are relevant but not known to their trading partners. Assuming exclusive transactions, the environment is described as a continuum economy with indivisible commodities. We characterize incentive efficient allocations as solutions to linear programming problems and appeal to duality theory to demonstrate the generic existence of external effects in these markets. Because under certain conditions such effects may generate non-convexities, randomization emerges as a theoretic possibility. In characterizing market equilibria we show that, consistently with the personalized nature of transactions, prices are generally non-linear in the underlying consumption. On the other hand, external effects may have critical implications for market efficiency. With adverse selection, in fact, cross-subsidization across agents with different private information may be necessary for optimality, and so, the market need not even achieve an incentive efficient allocation. In contrast, for the case of a single commodity, we find that when informational asymmetries arise after the trading period (e.g. moral hazard; ex post hidden types) external effects are fully internalized at a market equilibrium.

Choice of Contracts in the British National Health Service: An Empirical Study

Following major reforms of the British National Health Service (NHS) in 1990, the roles of purchasing and providing health services were separated, with the relationship between purchasers and providers governed by contracts. Using a mixed multinomial logit analysis, we show how this policy shift led to a selection of contracts that is consistent with the predictions of a simple model, based on contract theory, in which the characteristics of the health services being purchased and of the contracting parties influence the choice of contract form. The paper thus provides evidence in support of the practical relevance of theory in understanding health care market reform.

Contagious Illiquidity I: Contagion through Time

This paper is an investigation into the dynamics of asset markets with adverse selection a la Akerlof (1970). The particular question asked is: can market failure at some later date precipitate market failure at an earlier date? The answer is yes: there can be "contagious illiquidity" from the future back to the present. The mechanism works as follows. If the market is expected to break down in the future, then agents holding assets they know to be lemons (assets with low returns) will be forced to hold them for longer - they cannot quickly resell them. As a result, the effective difference in payoff between a lemon and a good asset is greater. But it is known from the static Akerlof model that the greater the payoff differential between lemons and non-lemons, the more likely is the market to break down. Hence market failure in the future is more likely to lead to market failure today. Conversely, if the market is not anticipated to break down in the future, assets can be readily sold and hence an agent discovering that his or her asset is a lemon can quickly jettison it. In effect, there is little difference in payoff between a lemon and a good asset. The logic of the static Akerlof model then runs the other way: the small payoff differential is unlikely to lead to market breakdown today. The conclusion of the paper is that the nature of today's market - liquid or illiquid - hinges critically on the nature of tomorrow's market, which in turn depends on the next day's, and so on. The tail wags the dog.

Partner Selection into Policy Relevant Field Experiments

This study investigates the issue of self-selection of stakeholders into participation and collaboration in policy-relevant experiments. We document and test the implications of self-selection in the context of randomised policy experiment we conducted in primary schools in the UK. The main questions we ask are (1) is there evidence of selection on key observable characteristics likely to matter for the outcome of interest and (2) does selection matter for the estimates of treatment eff ects. The experimental work consists in testing the e ffects of an intervention aimed at encouraging children to make more healthy choices at lunch. We recruited schools through local authorities and randomised schools across two incentive treatments and a control group. We document the selection taking place both at the level of local authorities and at the school level. Overall we nd mild evidence of selection on key observables such as obesity levels and socio-economic characteristics. We find evidence of selection along indicators of involvement in healthy lifestyle programmes at the school level, but the magnitude is small. Moreover, We do not find signifi cant di erences in the treatment e ffects of the experiment between variables which, albeit to a mild degree, are correlated with selection into the experiment. To our knowledge, this is the rst study providing direct evidence on the magnitude of self-selection in fi eld experiments.

La gripe A desde la teoría de la elección racional: propuestas para la toma de decisiones de políticas preventivas

This article is a reflection on the social uncertainty caused by Influenza A and on the consequences that it can have on decision making in health promotion policies. We use concepts and metaphors of the Rational Choice Theory, among them, the “ingratitude effect” or the “distrust effect”, as we analyse how these can become obstacles for the efficiency of prevention policies. Then, we focus on the information asymmetry of the principal-agent relationship, and we propose measures to diminish the “moral risk” that they cause. We finish by advancing some proposals for designing lines and strategies of action in health promotion policies.

Sharing competences in strategic alliances: a case study of the Cosan and Shell biofuel venture

In a competitive world, the way a firm establishes its organizational arrangements may determine the enhancement of its core competences and the possibility of reaching new markets. Firms that find their skills to be applicable in just one type of market encounter constraints in expanding their markets, and through alliances may find a competitive form of value capture. Hybrid forms of organization appear primarily as an alternative to capturing value and managing joint assets when the market and hierarchy modes do not present any yields for the firm's competitiveness. As a result, this form may present other challenging issues, such as the allocation of rights and principal-agent problems. The biofuel market has presented a strong pattern of changes over the last 10 years. New intra-firm arrangements have appeared as a path to participate or survive among global competition. Given the need for capital to achieve better results, there has been a consistent movement of mergers and acquisitions in the Biofuel sector, especially since the 2008 financial crisis. In 2011 there were five major groups in Brazil with a grinding capacity of more than 15 million tons per year: Raízen (joint venture formed by Cosan and Shell), Louis Dreyfus, Tereos Petrobras, ETH, and Bunge. Major oil companies have implemented the strategy of diversification as a hedge against the rising cost of oil. Using the alliance of Cosan and Shell in the Brazilian biofuel market as a case study, this paper analyses the governance mode and challenging issues raised by strategic alliances when firms aim to reach new markets through the sharing of core competences with local firms. The article is based on documentary research and interviews with Cosan's Investor Relations staff, and examines the main questions involving hybrid forms through the lens of the Transaction Cost Economics (TCE), Agency Theory, Resource Based View (RBV), and dynamic capabilities theoretical approaches. One focal point is knowledge "appropriability" and the specific assets originated by the joint venture. Once the alliance is formed, it is expected that competences will be shared and new capabilities will expand the limits of the firm. In the case studied, Cosan and Shell shared a number of strategic assets related to their competences. Raízen was formed with economizing incentives, as well to continue marshalling internal resources to enhance the company's presence in the world energy sector. Therefore, some challenges might be related to the control and monitoring agents' behavior, considering the two-part organism formed by distinctive organizational culture, tacit knowledge, and long-term incentives. The case study analyzed illustrates the hybrid arrangement as a middle form for organizing the transaction: neither in the market nor in the hierarchy mode, but rather a more flexible commitment agreement with a strategic central authority. The corporate governance devices are also a challenge, since the alignment between the parent companies in the joint ventures is far more complex. These characteristics have led to an organism with bilateral dependence, offering favorable conditions for developing dynamic capabilities. However, these conditions might rely on the partners' long-term interest in the joint venture.

Information revelation and market incompleteness

\documentstyle[portada,11pt]{article}This paper shows that the presence of private information in aneconomy can be a source of market incompleteness even when it is feasibleto issue a set of securities that completely eliminates the informationalasymmetries in equilibrium. We analyze a simple security design model in which avolume maximizing futures exchange chooses not only the characteristics ofeach individual contract but also the number of contracts. Agents have rationalexpectations and differ in information, endowments and, possibly, attitudestoward risk. The emergence of complete or incomplete markets in equilibriumdepends on whether the {\it adverse selection effect} is stronger or weakerthan the {\it Hirshleifer effect}, as new securitiesare issued and prices reveal more information. When the Hirshleifer effectdominates, the exchange chooses an incomplete set of financial contracts, andthe equilibrium price is partially revealing.

The role of title insurance under recording and registration

This article outlines a transaction cost theory of title insurance andanalyses the role it plays in countries with recording and registrationof land titles. Title insurance indemnifies real estate right holdersfor losses caused by pre-existing title defects that are unknown whenthe policy is issued. It emerged to complement the errors and omissions insurance of professionals examining title quality. Poor organizationof public records led title insurers in the USA to integrate titleexamination and settlement services. Their residual claimant statusmotivates insurers to screen, cure and avoid title defects. Firmsintroducing title insurance abroad produce little information on titlequality, however. Their policies are instead issued on a casualty basis,complementing and enforcing the professional liability of conveyancers.Future development in markets with land registration is uncertainbecause of adverse selection, competitive reactions from establishedconveyancers and the ability of larger banks to self-insure title risks.

On Rothschild-Stiglitz as competitive pooling

Dubey and Geanakoplos [2002] have developed a theory of competitive pooling, which incorporates adverse selection and signaling into general equilibrium. By recasting the Rothschild-Stiglitz model of insurance in this framework, they find that a separating equilibrium always exists and is unique.We prove that their uniqueness result is not a consequence of the framework, but rather of their definition of refined equilibria. When other types of perturbations are used, the model allows for many pooling allocations to be supported as such: in particular, this is the case for pooling allocations that Pareto dominate the separating equilibrium.