optimal leniency and the organization design of group crime abstract we study a simple law enforcement model where the organizational structure of a criminal group is endogenous and determined jointly with the amnesty granted to whistleblowers we allow criminals to choose between a horizontal partnership and a vertical hierarchical organization structure and we study how this choice affects the optimal leniency granted by a benevolent legislator whose aim is to minimize crime we show that the optimal amnesty with an endogenous organizational choice is less lenient than that granted when the policy targets vertical organizations only in the equilibrium partnerships coexist with vertical organizations

but who will monitor the monitor suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations what about the monitor s deviations to address this question i propose a contract that makes the monitor responsible for monitoring and thereby provides incentives even when the monitor s observations are not only private but costly too i also characterize exactly when such a contract can provide monitors with the right incentives to perform in doing so i emphasize virtual enforcement and suggest its implications for the theory of repeated games jel c78 d23 d82 d86

the spatial organization of multinational firms using six years of firm level data covering 224 regions of the enlarged european union we evaluate the importance to a firm of locating its activities production headquarters r d logistics and sales close together we find that after controlling for regional characteristics being closely located to a previous investment positively affects firm location choice however the impact of distance is dependent on the type of investment production or service the impact dies out faster for service activities finally we show that a surprisingly positive effect comes from locating a new production plant close to an existing production investment but in another country

developing countries and the future of the automobile industry abstract this paper reassesses the controversial view which has assumed that at some point in the future the global automobile industry having reached maturity would naturally migrate to the leading developing countries where the markets are growing more rapidly and wages are substantially lower the authors argue that the threshold facing a developing country seeking to establish a domestic automobile industry has risen because of two recent developments the rise of japan as a major automobile producer and a new wave of technological and organizational innovation this involves use of state of the art microelectronics and flexible manufacturing system as well as complete restructing of component supply resulting in considerable unit cost and lead time advantages the authors look at what these trends mean for both the oecd and the developing countries they outline the conventional view in more detail and then present an alternative analysis of the evolution of the industry new policy options for the developing countries are spotlighted

the effectiveness of leniency programs when firms choose the degree of collusion abstract an antitrust authority grants leniency pre and post investigation it chooses the probability of an investigation firms pick the degree of collusion the more they collude the higher are profits but so is the probability of detection firms thus trade off higher profits against higher expected fines if firms are sufficiently patient leniency is ineffective it may even increase collusion increasing the probability of an investigation at low levels does not increase deterrence increasing the probability of an investigation at high levels reduces collusion yet never completely with bare pre investigation leniency deterrence is better than without leniency if firms are sufficiently impatient granting leniency pre and post is better than merely pre investigation

laboratory evidence on the effectiveness of corporate leniency programs the number of cartels detected in the united states and in europe has increased considerably since the introduction of corporate leniency programs in antitrust legislation it cannot however be ruled out that this apparent success results in part from increased cartel activity we explore the effects of corporate leniency programs on pricing and cartel activity by use of an experiment we find that in the lab i fewer cartels are established when a leniency program is in place and ii cartels that do exist are less successful in charging prices above the static nash equilibrium price and have lower survival rates

competition policy and cartel size this article examines endogenous cartel formation in the presence of a competition authority competition policy is shown to make the most inclusive stable cartels less inclusive in particular small firms that might have been cartel members in the absence of a competition authority are no longer members regarding the least inclusive stable cartels competition policy can either decrease or increase their size and in the latter case the collusive price can rise

rules communication and collusion narrative evidence from the sugar institute case detailed notes on weekly meetings of the sugar refining cartel show how communication helps firms collude and so highlight the deficiencies in the current formal theory of collusion the sugar institute did not fix prices or output prices were increased by homogenizing business practices to make price cutting more transparent meetings were used to interpret and adapt the agreement coordinate on jointly profitable actions ensure unilateral actions were not misconstrued as cheating and determine whether cheating had occurred in contrast to established theories cheating did occur but sparked only limited retaliation partly due to the contractual relations with selling agents jel l13 l41 this paper reexamines the cartel problem by studying the private discussions within one cartel while we find much that is in accord with george j stigler s 1964 basic insight that firms would structure an agreement conscious of their later incentive to cheat on it we also uncover puzzles for established theory and identify elements that a richer theory should encompass especially regarding the role of communication in collusion our window into the inner workings of a cartel is a remarkable series of notes on the weekly meetings of the sugar institute this trade association was formed in december 1927 in the wake of several years of falling margins and excess capacity by 14 firms comprising nearly all the cane sugar refining capacity in the united states it operated until 1936 when the supreme court ruled its practices illegal among the top executives in regular attendance at the meetings was louis v place vice president of mccahan a midsize refinery in philadelphia place who was in charge of all activities of the company except production and raw sugar purchases wrote over 500 pages of single spaced detailed

legal principles in antitrust enforcement we study antitrust enforcement to channel price fixing incentives of cartels through setting fine schedules and detection levels fines obey legal principles punishments fit the crime proportionality bankruptcy considerations and minimum fines bankruptcy considerations limit maximum fines ensure abnormal cartel profits and impose a challenge for optimal antitrust enforcement we derive the fine schedule and detection level that are constrained optimal under legal principles and sustainability of cartel prices this fine schedule lies below the maximum fine makes collusion on lower prices more attractive than on higher prices and hence relates to marginal deterrence literature this article is protected by copyright all rights reserved

location determinants of food manufacturers in the united states 2000 2004 are nonmetropolitan counties competitive infrastructure agglomeration product and input markets fiscal attributes and labor markets of local communities influenced food manufacturing location decisions in the lower 48 united states 2000 2004 negative binomial regression and spatial clustering methods forecast food processor location patterns at the county level noncore counties are at a comparative disadvantage with respect to attracting most food processors but nonmetropolitan counties adjacent to urban areas may be attractive investment sites for footloose supply and demand oriented food manufacturers

modeling the birth and death of cartels with an application to evaluating competition policy one of the primary challenges to measuring the impact of antitrust policy on collusion is that the cartel population is unobservable we observe only the population of discovered cartels to address this challenge a model of cartel creation and dissolution is developed to endogenously derive the populations of cartels and discovered cartels it is then shown how one can infer the impact of antitrust policy on the population of cartels by measuring its impact on the population of discovered cartels in particular the change in the distribution on the duration of discovered cartels could be informative in assessing whether a new antitrust policy is reducing the latent rate of cartels

corporate leniency programs when firms have private information the push of prosecution and the pull of pre emption a corporate leniency program provides relief from government penalties to the first member of a cartel to come forward and cooperate with the authorities this study explores the incentives to apply for leniency when each cartel member has private information as to the likelihood that the competition authority will be able to convict them without a cooperating firm a firm may apply for leniency because it fears being convicted prosecution effect or because it fears another firm will apply pre emption effect policies by the competition authority to magnify concerns about pre emption and thereby induce greater use of the leniency program are also explored

does fdi in manufacturing cause fdi in business services evidence from french firm level data this paper uses a large french firm level data set to evaluate the determinants of location choices in services in a first step estimates for four broad services sectors are compared with the estimates for the manufacturing sector using a discrete choice model we find that this framework does fairly well in explaining location choices in services and that the parameter estimates for services are close to the ones for manufacturing we then investigate whether the similarity in estimated parameters is due to a complementarity between location choices in manufacturing and in services in the sense that manufacturing location choices may cause the location of services a particularly appropriate services sector for this purpose is the business services sector for which input output linkages with the manufacturing sector are particularly strong it is found that the downstream demand of french manufacturing firms has a positive effect on the location choice probabilities of french business services firms this effect is robust jel classification f 13 f 15 l80

optimal cartel pricing in the presence of an antitrust authority the dynamic behavior of a price fixing cartel is explored when it is concerned about creating suspicions that a cartel has formed consistent with preceding static theories the cartel s steady state price is decreasing in the damage multiple and the probability of detection however contrary to those theories it is independent of the level of fixed fines it is also shown that the cartel prices higher when a more competitive benchmark price is used in calculating damages

optimal corporate leniency programs this study characterizes the corporate leniency policy that minimizes the frequency with which collusion occurs though it can be optimal to provide only partial leniency plausible sufficient conditions are provided whereby the antitrust authority should waive all penalties for the first firm to come forward it is also shown that restrictions should be placed on when amnesty is awarded though it can be optimal to award amnesty even when the antitrust authority is very likely to win the case without insider testimony

plea bargaining and prosecutorial discretion a model of plea bargaining with asymmetric information is presented the prosecutor s private information consists of the strength of the case while the defendant s private information consists of h is guilt or innocence in equilibrium a fraction of cases are dismis sed because they are too likely to involve an innocent defendant in the remaining cases the prosecutor s offer of a sentence in exchange for a plea of guilty reveals the strength of the case it is shown t hat unlimited prosecutorial discretion may be socially disadvantageou s since it carries with it the requirement of sequential rationality copyright 1988 by american economic association

fines and reputational sanctions the case of cartels abstract in this article we revive an old debate in the law and economics literature the relative role of public and reputational sanctions in deterring misconduct we propose an empirical framework which accounts for public sanctions in our case cartel fines and a more direct measure of reputational sanctions harnessing recent developments in opinion mining we use the intensity and the sentiment of media exposure of misconduct as a measure of reputational effect and thus approximation of the reputational sanction as a demonstration we combine an event study approach sentiment analysis and econometric techniques on a sample of 339 listed cartel member firms prosecuted by the european commission between 1992 and 2015 our results offer evidence that in the context of cartels public and reputational sanctions act as substitutes where there is a reputational penalty increasing this penalty reduces the effect of the public sanction one the other hand in the absence of a reputational punishment the effect of the cartel fine steps in

multi market collusion with demand linkages and antitrust enforcement this paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand related markets we show that cartel prosecution can have a knock on effect bringing down a cartel in one market reduces profits and cartel stability and leads to the break up of the cartel in the adjacent market cartel prosecution can also have a waterbed effect disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets we discuss the impact of dynamic cartel formation on consumer surplus explore antitrust spillovers the optimal scope of antitrust interventions and cartel formation with local firms

communication in repeated games with imperfect private monitoring this paper examines repeated games in which each player observes a private and imperfect signal on the actions played and in which players are allowed to communicate using public messages providing incentives for players to reveal their observations generates revelation constraints that combined with signal imperfections may be a source of inefficiencies however by delaying the revelation of their observations players may economize on the cost of deterring deviations and thereby avoid these inefficiencies because a player would not want to trigger a sanction that would penalize him too revelation constraints also tend to make sanctions difficult to enforce however with at least three players detecting deviations may not require that all the players reveal their observations in that case we obtain a nash threat version of the folk theorem with two players we do not obtain a similar result nevertheless we show that an efficient outcome can almost always be approximated

the location choices of multinational firms the role of internationalisation experience and group affiliation cet article s interesse aux choix de localisation des firmes multinationales et determine dans quelle mesure ces choix dependent de l experience internationale de l investisseur et de celle de son groupe a partir de donnees francaises nous constatons que 95 des nouveaux investissements a l etranger sont precedes d exportations dans le meme pays tandis que 73 sont precedes d importations independamment des caracteristiques observables et inobservables des pays exporter vers un pays donne et dans une moindre mesure en importer accroit significativement la probabilite d investir dans ce pays l annee suivante la phase d exportation est plus systematique pour les investissements dans des pays distants et pour les primo investisseurs tandis que l experience d importation est significativement correlee aux ide dans les pays a bas revenu par ailleurs les choix de localisation ne dependent pas seulement de l experience internationale de l investisseur mais aussi de celle de son groupe les firmes tendent a investir dans les pays ou le groupe detient deja une filiale locale et sont plus enclines a investir dans des pays distants si d autres societes affiliees y exportent deja ces resultats suggerent l existence de strategies coordonnees et ou d un partage d informations entre societes affiliees

leniency programs for multimarket firms the effect of amnesty plus on cartel formation we examine the effect of amnesty plus on dynamic cartel formation in a multimarket setting the amnesty plus program has been adopted as part of the us corporate leniency policy in 1999 and is now vigorously advertised as one of the most compelling tools in generating successful cartel investigations amnesty plus is aimed at attracting amnesty applications by encouraging firms convicted in one market to report their collusive agreements in other markets we show that amnesty plus has two opposite effects on firms ability and incentives to collude which are both increasing in the fine reduction granted first amnesty plus can reduce the deterrence of cartel activities by making it easier for firms to sustain multimarket collusion through strategies involving self reporting after a first cartel detection second it can reduce the expected duration of cartels or delay their formation by increasing firms incentives to self report after a first cartel detection

the architecture of globalization a network approach to international economic integration we combine data on international trade linkages with network methods to examine the global trading system as an interdependent complex network we map the topology of the international trade network and suggest new network based measures of international economic integration at both a global system wide level and a local country level we develop network based measures that incorporate not only the volume of trade but also the influence that a country has on the international trading system these measures incorporate the structure and function of the network and may provide a more meaningful approach to globalization than current measures based on trade volumes we find that in terms of participation and influence in the network global trade is hierarchical with a core periphery structure at higher levels of trade though integration of smaller countries into the network increased considerably over the 1990s the network is strongly balkanized according to geography of trading partners but not as strongly by income or legal origin using these new measures we find that a country s position in the network has substantial implications for economic growth we therefore suggest that a network approach to international economic integration has potential for useful applications in international business finance and development

the motor industry in an enlarged eu the motor industry in the first fifteen eu makes an enormous contribution to its economic prosperity this is manifest in the scale of employment output investment international trade and technological change the enlargement of the eu will see the full integration of the auto sector in the accession countries with the activities in the west to reinforce its already massive scale the nature of optimum size and the importance of economies of scale creates a bias to bigness in vehicle manufacture hence the auto industry in the accession countries consists largely of the local operations of transnational companies as car demand is income elastic the level of sales in the accession countries is relatively small but as the economies expand the potential is enormous this together with non scaler advantages such as low wage rates has attracted considerable investment by vehicle firms in the last fifteen years into the accession countries various tariff reduction agreements have meant that integration of the east central european motor industry with western operations has pre dated the current formal enlargement of the eu the countries that have done particularly well in attracting automotive investment have been poland the czech republic and particularly slovakia the recent history of the auto sector in the accession countries has not been without its problems the collapse of the command economies saw disruption in the market and the decline of the local indigenous car makers subsequently this was more than offset by new inward investment there has been no revival of the local commercial vehicle industry and further restructuring can be expected the long term survival of the auto component sector in the accession countries will depend on how the sector responds to the competitive challenges of free trade and enlargement however there are signs that significant high value added activities such as vehicle design and development will be sustainable in east central europe the motor industry in the accession countries will face its own challenges not least the tendency of the industry to anticipate formal integration this time it will mean expansion into eastern europe hence whilst the location of vehicle plants in the accession countries challenges the traditional centres of manufacture in the west including the periphery in turn they must be alert to even newer competition elsewhere

the effect of leniency programs on endogenous collusion the objective of a leniency program is to reduce sanctions against collusion if a participant voluntarily confesses his behavior or cooperates with the public authority s investigation constructing a model in which the detection probability varies over time harrington 2008 pointed out that there are three channels through which the leniency program can affect the collusion amount furthermore he presented a sufficient condition under which the maximum leniency is optimal after extending the model by endogenizing the degree of collusion as well as equilibrium selection in the self reporting stage we revealed that the race to the courthouse effect disappears and that the maximum reduction is always optimal

strategic leniency and cartel enforcement the cornerstone of cartel enforcement in the united states and elsewhere is a commitment to the lenient prosecution of early confessors a burgeoning game theoretical literature is ambiguous regarding the impacts of leniency i develop a theoretical model of cartel behavior that provides empirical predictions and moment conditions and apply the model to the complete set of indictments and information reports issued over a 20 year span statistical tests are consistent with the notion that leniency enhances deterrence and detection capabilities the results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime jel d43 l12 l13 k21 in 1993 the department of justice doj introduced a new leniency program with the intent of destabilizing existing cartels and deterring new cartels the program commits the doj to the lenient prosecution of early confessors in particular it guarantees complete amnesty from federal prosecution to the first confessor from each cartel provided that an investigation into the confes sor s cartel is not already underway it also offers discretionary penalty reductions to conspirators who confess when an investigation is already ongoing the new leniency program has become the cornerstone of cartel enforcement efforts in the united states e g scott d hammond 2004 and recently has inspired antitrust authorities in australia canada the european union japan south korea and elsewhere to introduce similar programs oecd 2002 2003 this paper tests the efficacy of the new leniency program the results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime a burgeoning game theoretical literature is ambiguous regarding the impacts of leniency a common finding is that leniency may destabilize cartels because conspirators can simultane

diplomatic and corporate networks bridges to foreign locations firms and governments operate in broad networks in which the home government and its diplomatic service are a critical node or a referral point between firms and potential partners in foreign locations thus diplomatic relations between countries matter for the choice of foreign investment location using a network perspective we argue that the extent to which good diplomatic relations induce firms to invest in friendly host countries depends on their political connections to home governments those with stronger ties to home governments can better access and leverage intergovernmental diplomatic connections thus benefiting potentially from enhanced access to information reduced political risks and increased legitimacy such ability of politically connected firms is more useful where weak institutional impartiality in the host country inhibits neutral treatment of foreign investors empirically using overseas investment location decisions by chinese firms we find that the types of home government ties i e whether they are organizational or personal and whether those relationships are with central or local goverments and the impartiality of host institutions are both important contingencies affecting firms utilization of diplomatic relations we discuss the implications of our study to research on network theory political ties and internationalization of emerging market firms

self reporting and the design of policies for regulating stochastic pollution abstract existing environmental regulations frequently require firms to self report their compliance status to regulatory agencies using a principal agent framework i derive and compare incentive compatible regulatory policies with and without self reporting i find the firm needs to be audited less often when self reporting is required but punished more often the sign and magnitude of the gains from self reporting depend on the relative size of audit and sanction costs the accuracy of the regulator s monitoring technology and the desired level of abatement effort

the international reorganisation of auto production this paper analyzes the patterns of bilateral trade flows of auto components over the last decade by applying network analysis results show the rise of a number of emerging economies in asia and central and eastern europe as important parts suppliers but their role is still largely peripheral in fact there was a strengthening of the world s leading producers with a more hierarchical division of labor within their regions especially in europe regionalization of production declined in all of the groups of auto parts examined with the exception of electrical parts where a regional production network is emerging in asia

location choices of multinational firms in europe the role of eu cohesion policy using data on 5509 foreign subsidiaries established in 50 regions of 8 eu countries over the period 1991 1999 we estimate a mixed logit model of the location choice of multinational firms in europe in particular we focus on the role of eu cohesion policy in attracting foreign investors from both within and outside europe we find that after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices structural and cohesion funds allocated by the eu to laggard regions have indeed contributed to attracting multinationals these policies as well as other determinants play a different role in the case of european investors as opposed to non european ones

least cost energy strategies for power system expansion abstract this paper describes a theoretical framework and practical procedure for identifying least cost energy strategies for power system expansion under such a strategy the socially optimal decision is defined by a least cost combination of not only conventional supply side generating options but also conservation and renewable resource options such that the cost of providing an incremental unit of electricity from all resources is the same in addition under a least cost energy strategy the reliability of electricity supply is determined on an economically optimal basis results of an actual case study of the pacific northwest region of the usa are presented

cartel pricing dynamics in the presence of an antitrust authority cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed balancing concerns about maintaining the stability of the cartel with those of avoiding detection the cartel may either i gradually raise price to its steady state level or ii gradually raise price and then have it decline to its steady state level antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices

cartel pricing dynamics with cost variability and endogenous buyer detection this paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel buyers are assumed to become suspicious when observed prices are anomalous we find that the cartel price path is comprised of two phases during the transitional phase price is generally rising and relatively unresponsive to cost shocks during the stationary phase price responds to cost but is much less sensitive than under non collusion or simple monopoly the length of the transition phase is decreasing in the variance of cost shocks it is also shown that the cartel price path may overshoot its long run level so that price converges from above

the impact of leniency and whistle blowing programs on cartels antitrust authorities have set up leniency programs for cartel members that denounce their collusive agreements these programs help prosecute participants and can thereby deter collusion we compare the impact of reduced fines and positive rewards and argue that rewarding individuals including firm employees can deter collusion in a more effective way we discuss possible adverse effects of whistle blowing programs on firms behavior and particularly on turnover incentives to innovate and cooperation we also explore explanations for the puzzling fact that managers keep incriminating evidence and argue reward programs actually provide additional incentives for keeping such evidence

state owned mncs and host country expropriation risk the role of home state soft power and economic gunboat diplomacy expropriation risk has a binding effect on foreign direct investment fdi however state owned multinational corporations may counter the monopoly power of the host state by leveraging the political influence of their home government the magnitude of this counter force we argue may vary depending on the strength of political relations between the home and host state and the level of economic dependence of the host country on the home market we find supporting evidence of our hypotheses using chinese firm level fdi information between 2003 and 2010

transportation costs and international trade in the second era of globalization while the precise causes of postwar trade growth are not well understood declines in transport costs top the lists of usual suspects however there is remarkably little systematic evidence documenting the decline this paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time series pattern of shipping costs the ad valorem impact of ocean shipping costs is not much lower today than in the 1950s with technological advances largely trumped by adverse cost shocks in contrast air shipping costs have dropped an order of magnitude and airborne trade has grown rapidly as a result as a result international trade has also experienced a significant rise in speed

the effect of conservation programmes on electric utility earnings results of two case studies abstract this paper develops methods to measure the impact of conservation programmes on electric utility earnings the methods are applied to two case studies detroit edison represents a case where impacts are unfavourable this utility has excess capacity which is only made worse by conservation pacific gas and electric represents a case where conservation helps defer the need for new capacity even in this case programmes targeted at summer peak demand are more beneficial than those which save baseload energy conditions determining the earnings impact of conservation are complex involving regulatory factors that are specific to individual utilities

networks of value added trade global value chains gvcs require new methods for evaluating interconnections among countries which can no longer be accurately appraised by standard bilateral gross trade flows this paper uses tools of network analysis to examine the evolution of value added trade from 1995 to 2011 gvcs are very centralised and asymmetric networks with a few large economies acting as hubs which exposes them to the propagation of idiosyncratic shocks as gvcs expanded the networks of foreign value added in exports became denser more complex and intensively connected the regional dimension of gvcs is still dominant but is progressively giving place to a more global network networks of foreign value added in goods exports outpace those of services exports however foreign inputs of services are important for exports of both goods and services there is a striking rise of china as a supplier of value added while germany and the united states maintain a central role in gvcs over the whole period

accomplice witnesses and organized crime theory and evidence from italy we develop an agency model of organized crime accounting for the main trade offs involved in the introduction of an accomplice witness program we characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest our predictions are tested by using data for italy before and after the introduction of the 1991 accomplice witness program as predicted by the model and the earlier antitrust literature the program appears to have strengthened deterrence and enhanced prosecution moreover consistent with a novel prediction of our theory the evidence suggests that the program efficacy is affected by the judicial system efficiency

are leniency programs too generous i present a simple model of collusion in which the competition authority offers leniency rates contingent on the number of firms that report information the optimal leniency policy involves what i refer to as a single informant rule that is leniency should be given only when a single firm reports information the single informant rule allows to increase expected sanctions compared to the first informant rule which overall improves cartel deterrence

what determines the location choice of r d activities by multinational firms abstract we analyse 446 location decisions of r d activities by multinational firms incorporated in the european union over 1999 2006 our results suggest that on average the location probability of a representative r d foreign affiliate increased with agglomeration economies from foreign r d activities human capital proximity to centres of research excellence and the research and innovation capacity of the region further our evidence suggests that in comparison to european multinational firms the effects of patents intensity and proximity to centres of research excellence were stronger in the case of north american multinational firms while government r d expenditure intensity increased the probability of location of r d activities by european multinational firms in the region it did not have a significant effect on the probability of location of r d activities by north american multinational firms

the rise of economics in competition policy a canadian perspective competition policy in canada and elsewhere has changed remarkably over the last 50 yearsin large measure due to advances in economics in this article we trace the impact of developments in industrial organization on the three central areas of competition policy cartels single firm conduct and mergers we focus on canadian competition policy but draw comparisons with developments in the united states and europe

collusion in dynamic bertrand oligopoly with correlated private signals and communication abstract this paper studies collusion in repeated bertrand oligopoly when stochastic demand levels for the product of each firm are their private information and are positively correlated it derives general sufficient conditions for efficient collusion through communication and a simple grim trigger strategy this analysis is then applied to a model where the demand signal has multiple random components which respond differently to price deviations in this model it is shown that the above sufficient conditions hold if idiosyncratic noise terms are sufficiently small journal of economic literature classification numbers c72 d82

on optimal cartel deterrence policies abstract this paper studies audit policies designed to deter explicit cartels in the most effective way we first compare a standard random and stationary audit strategy with a simple deterministic but non stationary strategy we show that the certainty of an ulterior control may better deter collusion than the recurrent threat of a sword of damocles that would lead on average to same frequency of audit we then explore more complex non stationary strategies and show that it is theoretically possible to deter collusion in the whole economy even with a small audit budget

financial contagion on the international trade network we combine data on international trade linkages with a network approach to map the global trading system as an interdependent complex network this enables us to obtain indicators of how well connected a country is into the global trading system we use these network based measures of connectedness to explain stock market returns during recent episodes of financial crisis we find that a crisis is amplified if the epicenter country is better integrated into the trade network however target countries affected by such a shock are in turn better able to dissipate the impact if they are well integrated into the network a network approach can help explain why the mexican asian and russian financial crises were highly contagious while the crises that originated in venezuela and argentina did not have such a virulent effect we suggest that a network approach incorporating the cascading and diffusion of interdependent ripples when a shock hits a specific part of the global trade network provides us with an improved explanation of financial contagion jel f10 f36 f40 g15

privatization of the esi broadening the debate abstract the debate over the privatization of electricity in the uk has been conducted across too narrow a terrain being primarily concerned with regulation for optimality in the context of static if uncertain conditions of supply and demand insufficient account has been taken of dynamic agencies in formulating and bringing about progressive industrial change something of great importance in the light of their weakness in the uk context consequently a number of deficiencies in the uk esi have been neglected in the debate over privatization and are not liable to be rectified by it in practice

the lab and the plant offshore r d and co location with production activities the literature has highlighted that the propensity of mnes to co locate offshore r d labs with their production plants can vary substantially according to firm and industry characteristics in this paper we apply a novel two stage estimation procedure that allows us to tease out this heterogenous behavior and investigate the factors that are associated with a higher propensity to co locate production and r d activities abroad using data on 1483 greenfield international investments in r d activities made by 855 firms in 587 cities worldwide we uncover that the strength of the co location effect is indeed highly heterogenous across firms in particular it is higher among firms with less international experience and geographical dispersion of international activities as well as with a lower share of intangible assets these results are consistent with the idea that co location is a substitute for firms ability to coordinate complex and dispersed organizational structures and that firms relying relatively less on codified knowledge can use co location of offshore r d and production to facilitate knowledge transfer across activities

prosecution and leniency programs the role of bluffing in opening investigations this paper characterizes the optimal investigation and leniency policies when the competition authority is privately informed about the strength of a cartel case i show that the competition authority can then exploit firms uncertainty about the risk of conviction to obtain confessions even when the case is weak more generally i show that offering full leniency allows the competition authority to open more successful investigations what i refer to as the activism effect of leniency which overall raises both cartel desistance and cartel deterrence finally i discuss the policy implications of the model

firm location decisions regional grants and agglomeration externalities we examine whether discretionary government grants influence where domestic and multinational firms locate new plants and how the presence of agglomeration externalities interacts with these policy instruments we find that a region s existing industrial structure has an effect on the location of new entrants grants do have a small effect in attracting plants to specific geographic areas but importantly we find that firms are less responsive to government subsidies in areas where there are fewer existing plants in their industry this suggests that these subsidies are less effective in influencing firms location decisions in the face of countervailing co location benefits