technological specialization and the decline of diversified firms we document a strong decline in corporate diversification activity since the late 1970s and we develop a dynamic model that explains this pattern both qualitatively and quantitatively the key feature of the model is that synergies endogenously decline with technological specialization leading to fewer diversified firms in equilibrium the model further predicts that segments inside a conglomerate should become more related over time which is consistent with the data finally the calibrated model also matches other empirical magnitudes well output growth rate market to book ratios diversification discount frequency and returns of diversifying mergers and frequency of refocusing activity

agenda restrictions in multi issue bargaining abstract we study a bilateral multi issue bargaining procedure with complete information and endogenous agenda in the procedure proposals must be made on only one issue at a time although the proposer can choose which issue to bring to the table when bargaining frictions are small there is a large multiplicity of equilibrium agreements including ones with delay however equilibrium payoffs cannot be made arbitrarily small perpetual disagreement cannot be supported in equilibrium this multiplicity contrasts with the uniqueness found in the literature for a procedure where offers can be made in any subset of remaining issues

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

one to many bargaining when pairwise agreements are non renegotiable abstract we study a model where a central player the principal bargains bilaterally with each of several players the agents to create and share the surplus of a coalitional game it is known that if the payments that were previously agreed with each of the remaining agents are renegotiated in case any bilateral negotiation permanently breaks down then the shapley value is the unique efficient and individual rational outcome consistent with bilateral nash bargaining here we show that when instead the agreed payments cannot be renegotiated the outcome is also unique but it now coincides with the nucleolus of an associated bankruptcy problem we provide a strategic foundation for this outcome then we study how such renegotiation affects the principal s payoff according to the properties of the surplus function we find for example that renegotiation benefits the principal when agents are complements and it hurts him when they are substitutes situations with respectively increasing and decreasing marginal contributions

internal capital markets and the competition for corporate resources this article examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market unlike a bank headquarters has control rights that enable it to engage in winner picking the practice of actively shifting funds from one project to another by doing a good job in the winner picking dimension headquarters can create value even when it cannot help at all to relax overall firm wide credit constraints the model implies that internal capital markets may sometimes function more efficiently when headquarters oversees a small and focused set of projects this article analyzes the process by which internal capital markets channel limited resources to different uses inside a company in so doing it seeks to address two related sets of questions first what is the fundamental economic rationale for creating an internal capital market that is under what circumstances can it make sense to combine several technologically distinct projects under one roof and have them seek funding from corporate headquarters as opposed to setting them up as stand alone companies that each raise external financing on their own second given this rationale what is the optimal size and scope of an internal capital market should headquarters be involved in funding a large number of projects or just a few and should these projects be unrelated to one another or in similar lines of business the answers to both sets of questions flow from the insight that in a credit constrained setting where not all positive npv projects can be financed headquarters can create value by actively reallocating scarce funds across projects for example the cash flow generated by one division s activities may be taken and spent on investment in another division where the returns are higher or alternatively one division s assets may be used as collateral to raise financing that is then diverted to the other division simply put individual projects must compete for the scarce funds and headquarters job is to pick the winners and losers in this competition

a comparative analysis of current credit risk models the new bis 1998 capital requirements for market risks allows banks to use internal models to assess regulatory capital related to both general market risk and credit risk for their trading book this paper reviews the current proposed industry sponsored credit value at risk methodologies first the credit migration approach as proposed by jp morgan with creditmetrics is based on the probability of moving from one credit quality to another including default within a given time horizon second the option pricing or structural approach as initiated by kmv and which is based on the asset value model originally proposed by merton merton r 1974 journal of finance 28 449 470 in this model the default process is endogenous and relates to the capital structure of the firm default occurs when the value of the firm s assets falls below some critical level third the actuarial approach as proposed by credit suisse financial products csfp with creditrisk and which only focuses on default default for individual bonds or loans is assumed to follow an exogenous poisson process finally mckinsey proposes creditportfolioview which is a discrete time multi period model where default probabilities are conditional on the macro variables like unemployment the level of interest rates the growth rate in the economy which to a large extent drive the credit cycle in the economy 2000 elsevier science b v all rights reserved

revisiting the bright and dark sides of capital flows in business groups prior studies report that the business group structure and the associated intra group capital flows are prone to conflicts of interest between controlling shareholders and minority investors yet business group is a prevalent and stable structure around the globe particularly where capital markets are underdeveloped using data from china this paper empirically studies the trade off between the negative and positive roles played by intra group capital flows and tests the efficiency implications of such trade off we find that from the perspective of the whole group intra group capital flows are most efficient when the groups are least subject to conflicts of interest between controlling shareholders and minority shareholders and when they face strong external financing constraints

make and buy balancing bargaining power abstract we analyze the optimal procurement of labor which can be supplied either internally based on wage negotiations or acquired at terms negotiated with an external subcontractor the novel feature of our model is that the subcontractor s bargaining power is a function of the proportion of output outsourced we demonstrate analytically how multiple sourcing emerges as an organizational mechanism to balance cost advantages associated with outsourcing against a subcontractor s increased bargaining power we find that the optimal proportion of outsourcing is lower with sequential negotiations than with simultaneous negotiations if the supplier to first negotiate can foreclose subsequent negotiations

endogenous incomplete contracts a bargaining approach in this paper we argue that by modelling the contracting process as a bargaining game one can endogenize the choice between complete and incomplete contracts this point is demonstrated within a stylized model in which agents can allocate an endowment stream either via a once for all bargain over the entire stream a long term contract or through a series of bargaining rounds a short term contract within this structure short term contracts arise as equilibrium outcomes under very general conditions because a short term contract implies reduced bargaining costs for one of the agents in essence reduced transaction costs produce a short term contract jel classification l14 c78

on the role of confidentiality and deadlines in bilateral negotiations abstract the preference between public and private negotiations for a buyer who sequentially visits two sellers is examined it is shown that the buyer weakly prefers private negotiations so as to create strategic uncertainty about the trade history with substitute goods such uncertainty is valuable only when price offers have short deadlines that prevent a head to head competition with complementary goods strategic uncertainty is valuable to the extent that price coordination becomes a concern for sellers which is likely to be the case when sellers possess high bargaining powers their price offers have short deadlines and or goods are weak complements sellers strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated

multifirm unions and the incentive to adopt pattern bargaining in oligopoly abstract this paper develops a model of wage bargaining between an industry wide trade union and firms in an oligopoly and considers the circumstances under which the union prefers pattern bargaining that is negotiating contracts in a sequential manner to simultaneous bargaining with the firms the paper goes on to consider the importance of the bargaining order in pattern bargaining when the firms are asymmetric the analysis shows that the union gains by first targeting a firm which is in a relatively weak bargaining position i e impatient to settle or a firm with relatively large profits

payoff uncertainty bargaining power and the strategic sequencing of bilateral negotiations this article investigates the sequencing choice of a buyer who negotiates with the sellers of two complementary objects with uncertain payoffs the possibility of inefficient trade may generate strict sequencing preference the buyer begins with the weaker seller if the sellers have diverse bargaining powers and with the stronger one if both sellers are strong bargainers this sequencing is likely to increase the social surplus moreover the buyer may find it optimal to raise her own acquisition cost by committing to a minimum purchase price or outsourcing the first and second mover advantages for the sellers are also identified

analysis of rural residential energy consumption and corresponding carbon emissions in china the analysis of rural residential energy consumption in china from 2001 to 2008 and corresponding impacts on climate change is presented in the paper it is found that rural residential energy consumption has shown obvious transition from non commercial energy to commercial energy the percentage of biomass energy consumption dropped from 81 5 in 2001 to 70 9 in 2008 while the percentage of commercial energy increased from 17 1 to 25 1 besides other renewable energy increased very fast with annual growth rate of 19 8 correspondingly total co2 emissions from rural residential energy consumption had significant increase from 152 2 million tons in 2001 to 283 6 million tons in 2008 the annual growth rate of per capita co2 emissions was nearly 2 times faster than that of urban area the major driving force for the consumption of commercial energy was the income of rural farmers while strong rural energy policies supported the development of renewable energy to satisfy the goals of energy supply and co2 emissions reduction in rural areas it is advised to change the energy structure and improve the energy efficiency such as to generate electricity using renewable technologies and to replace coal with modern biomass energy for cooking and heating

from linear fuel switching to multiple cooking strategies a critique and alternative to the energy ladder model abstract promoting sustainable development requires evaluating the technical and policy options that will facilitate the adoption and use of energy efficient and less polluting cooking stoves and practices the transition from traditional to modern fuels and devices has been explained by the energy ladder model that suggests that with increasing affluence a progression is expected from traditional biomass fuels to more advanced and less polluting fuels in this paper we evaluate the energy ladder model utilizing data from a four year 1992 96 case study of a village in mexico and from a large scale survey from four states of mexico we show that an alternate multiple fuel model of stove and fuel management based on the observed pattern of household accumulation of energy options rather than the simple progression depicted in the traditional energy ladder scenario more accurately depicts cooking fuel use patterns in rural households the multiple fuel model integrates four factors demonstrated to be essential in household decision making under conditions of resource scarcity or uncertainty a economics of fuel and stove type and access conditions to fuels b technical characteristics of cookstoves and cooking practices c cultural preferences and d health impacts this model also allows better estimates of the expected fuelwood demand and indoor air pollution in rural households

economic and demographic determinants of household energy use in turkey this paper analyzes several economic and socio demographic factors which affect households energy choices in turkey the data is obtained from the household budget surveys hbs conducted by the turkish statistics institute tuik the multinomial logit model is used to identify households energy choices the most important finding of the study is that monthly income of households or household welfare in general has significant effect on energy choices it is also important to note that ages of persons have influence on energy choices indeed health concerns easiness in use was found as criteria referred to particularly by household heads at age 50 and over when making energy choices as far as settlements are concerned the most salient characteristic of urban dwellers vis a vis rural dwellers is their dominant preference for natural gas while rural dwellers have their choice for more conventional fuels

bargaining piecemeal or all at once perfect information rubinstein style bargaining models are used to explore questions about multiple issue bargaining is it ever sensible to offer on only a subset of the issues being bargained what is the effect of limiting offers so that they must cover all issues we conclude that in realistic settings the answer to the first question is yes and that restricting offers to those covering all issues may be harmful to one or both parties

financing a portfolio of projects this article shows that investors financing a portfolio of projects may use the depth of their financial pockets to overcome entrepreneurial incentive problems competition for scarce informed capital at the refinancing stage strengthens investors bargaining positions and yet entrepreneurs incentives may be improved because projects funded by investors with shallow pockets must have not only a positive net present value at the refinancing stage but one that is higher than that of competing portfolio projects our article may help understand provisions used in venture capital finance that limit a fund s initial capital and make it difficult to add more capital once the initial venture capital fund is raised jel g24 g31 venture capital finance takes place in an environment of severe informational asymmetries and incentive problems venture capitalists not only must assess the quality of investment proposals submitted to them for funding but once the initial funding has taken place they must also give the right incentives to the entrepreneurs and monitor the performance of the portfolio companies on an ongoing basis this article departs from most of the existing literature by explicitly recognizing that venture capitalists manage a portfolio of projects the need for portfolio management arises if the amount of capital both financial and human available to a venture capital fund is limited implying that venture capitalists must carefully choose which projects to allocate their scarce financial and human resources to 1 by staging their investments venture capitalists retain the right to deny capital infusions to particular

preferences for domestic fuel analysis with socio economic factors and rankings in kolkata india abstract the choice of domestic fuel is a matter of great concern for households and policy makers in india this paper investigates the demand for domestic fuels when households face four choices fuelwood coal kerosene and lpg the study is based on a survey of 500 households in kolkata india the demand estimates are conducted using a two stage process where the first stage investigates choice and the second the quantity used determinants of fuel demand are identified and their relative importance shown extending the study the paper also analyses the choice of the main cooking fuel in terms of the households stated rankings of six fuels for five attributes the policy discussion indicates that subsidies have less potential to reduce polluting fuels such as coal and fuelwood due to weak cross price elasticities while increased availability of lpg and potentially also increased awareness of indoor air pollution have greater prospect

rating the raters are reputation concerns powerful enough to discipline rating agencies abstract credit rating agencies cras are accused of bearing a strong responsibility for contributing to the subprime crisis by having been deliberately too lax in the ratings of some structured products in response to this accusation cras argue that such an attitude would be too dangerous for them since their reputation is at stake the objective of this article is to examine the validity of this argument within a formal model are reputation concerns sufficient to discipline rating agencies we show that the reputation argument only works when a sufficiency large fraction of the cra income comes from other sources than rating complex products by contrast when rating complex products becomes a major source of income for the cra we show that it is always too lax with a positive probability and inflates ratings with probability one when its reputation is good enough we provide some empirical support for this prediction by showing that ceteris paribus the proportion of subprime residential mortgage backed securities rmbs that were rated aaa by the three main cras indeed increased over the last eight years we analyze the policy implications of our findings and advocate for a new business model of cras that we call the platform pays model

are the energy poor also income poor evidence from india abstract the energy poverty line is defined as the threshold point at which energy consumption begins to rise with increases in household income this approach is applied to cross sectional data from a comprehensive 2005 household survey representative of both urban and rural india the objective is to determine if the energy poor are also income poor and whether and how energy policies help reduce energy poverty independent of income the findings suggest that in rural areas some 57 of households are energy poor versus 22 that are income poor but in urban areas the energy poverty rate is 28 compared to 20 that are income poor that is energy policies are expected to play some roles in mitigating energy poverty we find that reducing energy poverty requires not only support for rural electrification but also more use of modern cooking fuels such as lpg while income growth matters a combination of energy related programs can play an independent and substantial role in reducing energy poverty

cooking fuel choice in rural china results from microdata abstract unclean cooking fuel is widely used in the developing world and it is the main indication of energy poverty in rural china in this paper we investigate the situation transition and determination of fuel choice in china s rural household cooking using the large scale micro survey data of china health and retirement longitudinal study charls we find that there is a big gap in using commercial cooking fuels between rural and urban households 60 of the rural households adopt traditional biomass resource as their main fuel for cooking in 2011 while this figure is less than 5 in the urban we also identify a significant spatial divide in fuel choice in southeastern coastal areas about 40 of the rural households prefer solid fuels while this figure jumps to over 80 in northeastern areas the longitudinal data also reveal a significant transition from traditional to modern fuels from 2008 to 2012 moreover the distance to the most commonly used farmer s market education background coal price and female labor participation are all influential in determining the households choices

rent shifting and the order of negotiations abstract when two sellers negotiate terms of trade with a common buyer the order in which the negotiations occur can affect the buyer s payoff this suggests that the buyer may have preferences over which seller to negotiate with first we find that when the efficient outcome calls for the buyer to purchase from only one seller the buyer weakly prefers to negotiate first with the inefficient seller and when the efficient outcome calls for the buyer to purchase from both sellers the buyer prefers to negotiate first with the seller that has less bargaining power or offers a smaller stand alone surplus all else being equal these conclusions hold whether or not penalty clauses are feasible

multi issue bargaining with endogenous agenda abstract the first part of this paper shows that in a noncooperative bargaining model with alternating offers and time preferences the timing of issues the agenda matters even if players become arbitrarily patient this result raises the question of which agenda should come up endogenously when agents bargain over a set of unrelated issues it is found that simultaneous bargaining over packages should be a prevailing phenomenon but we also point to the possibility of multiple equilibria involving even considerable delay journal of economic literature classification number c78

low quality or high quality coal household energy choice in rural beijing abstract household low quality coal consumption contributes to severe haze pollution in china in response subsidy policies on high quality coal consumption and the adoption of new type coal stoves have been implemented using survey data in rural beijing this paper characterizes the determinants of coal consumption and switching behavior between low quality and high quality coals to this end we apply bivariate probit regression and tobit regression to evaluate the effectiveness of government policies and the influence of cognitive psychological and socioeconomic factors on coal consumption behaviors our empirical results reveal that prosociality and local environmental concern play crucial roles in household choices and consumption behaviors between two types of coals but global environmental concern does not the promotion of new type coal stoves significantly facilitates the transition from low quality to high quality coal while price subsidies on high quality coal do not influence market acceptance of high quality coal these results demonstrate the importance of cognitive psychological factors and promotion policies on coal consumption behavior overall we suggest that an education campaign or program regarding local environmental awareness prosocial values and behaviors and on new type coal stoves should be further promoted to accelerate the transition from low quality to high quality coal

south korean chaebols and value based management south korean industrial conglomerates chaebols are discussed in the context of value based management vbm recent economics and finance literature on the diversion of corporate resources from the firm to the controlling shareholders tunneling for which chaebols are notoriously known is discussed chaebols have engaged in empire building and expropriation of minority shareholders distorting the process of efficient resource allocation in south korea and became the root cause of the 1997 financial crisis we argue that the 1997 crisis should be viewed as a consequence of chaebols systematic deviation from the guiding principles of vbm we use tunneling within chaebols as an example of the need to directly address prohibition of the expropriation of minority shareholders as a primary postulate of vbm we argue that vbm should require that the value generated by the firm not be expropriated from minorities or any stakeholders by dominant shareholders we also examine moral and ethical considerations and present explanations as to why the unethical practice of tunneling has been tolerated by the south korean public we show that public opinion on tunneling is changing and that the treatment of minority shareholders by chaebols controlling families is becoming increasingly unacceptable to south koreans

ratings quality over the business cycle credit rating agencies cras have long held that reputational concerns discipline their behavior the value of reputation however depends on economic fundamentals that vary over the business cycle in a model of ratings incorporating endogenous reputation and a market environment that varies we find that ratings quality is countercyclical specifically a cra is more likely to issue less accurate ratings when fee income is high competition in the labor market for analysts is tough and securities default probabilities are low persistence in economic conditions can diminish our results while mean reversion exacerbates them the presence of naive investors reduces overall quality but quality remains countercyclical finally we demonstrate that competition among cras yields similar results

fuelwood consumption and forest degradation a household model for domestic energy substitution in rural india this paper disusses domestic en ergy supply and demand in rural india links be tween forest scarcity and household fuel collec tion are analyzed in a non separable household model focusing on substitution of non commer cial fuels from the commons and the private do main based on data from villages bordering a protected area a novel maximum entropy ap proach is used for estimation it is found that households respond to forest scarcity and in creased fuelwood collection time by substituting fuels from private sources for forest fuelwood however the magnitude of the response appears insufficient to prevent current fuelwood collection practices from causing serious forest degrada tion jel q24

did credit rating agencies make unbiased assumptions on cdos article appears in papers and proceedings of the 123rd annual meeting of the amerian economic association denver co usa 6 9 january 2011

multilateral bargaining and downstream competition we examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers in these relationships the negotiations are interdependent and bargaining externality may arise across the retailers in addition the timing by which the manufacturer negotiates with the retailers becomes important in simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation we show that simultaneous bargaining is optimal for the manufacturer when the retail prices and profitability are similar and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large as a result of ex post renegotiations the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability moreover ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition

foreign banks and credit stability in central and eastern europe a panel data analysis abstract we examine whether foreign and domestic banks in central and eastern europe react differently to business cycles and banking crises our panel dataset comprises data of more than 250 banks for the period 1993 2000 with information on bank ownership and mode of entry during crisis periods domestic banks contracted their credit base whereas greenfield foreign banks did not also home country conditions matter for foreign bank growth as there is a significant negative relationship between home country economic growth and host country credit by greenfields finally greenfield foreign banks credit growth is influenced by the health of the parent bank

demand for cooking fuels in a developing country to what extent do taste and preferences matter overreliance on biomass energy such as firewood and charcoal for cooking in developing countries has contributed to high rates of deforestation and resulted in substantial indoor pollution which has negatively impacted the health of many individuals however the effectiveness of public policies aimed at encouraging households to switch to cleaner fuels such as liquefied petroleum gas lpg and kerosene hinges on the extent to which they are mentally committed to specific fuels using data on four cooking fuels charcoal firewood lpg and kerosene from the ghana living standards survey we found strong evidence that the most preferred fuel is lpg followed by charcoal with kerosene the least preferred in addition with the exception of kerosene that has price elastic demand the price elasticities of demand for the fuel types examined are inelastic this finding suggests the so called fuel ladder is not robust

intertemporal capital budgeting abstract this paper analyzes the optimal capital budgeting mechanism when divisional managers are privately informed about the arrival of future investment projects consistent with field study evidence an optimal allocation mechanism can include a stipulation that a capital request for discretionary investment will be declined with positive probability in the period after a significant investment was made even though this is ex post suboptimal the model derives a number of empirical predictions regarding capital budgeting and the investment of financially constrained firms

tobin s q and the importance of focus in firm performance using tobin s q as a measure of performance we seek to estimate the relative importance of industry focus and share effects in determining firm performance our methods are analogous to those of richard schmalensee and like him we find that industry effects account for the majority of the explained variance however we also find that firm effects exist in the form of focus effects that is narrowly diversified firms do better than widely diversified firms we interpret this finding as consistent with profit maximization by firms with different factor endowments

energy for sustainable development a case of developing countries abstract today there are 1 4 billion people around the world that lack access to electricity some 85 of them in rural areas without additional dedicated policies by 2030 the number of people drops but only to 1 2 billion some 15 of the world s population still lack access the majority of them living in sub saharan africa the number of people relying on the traditional use of biomass is projected to rise from 2 7 billion today to 2 8 billion in 2030 addressing these inequities depends upon international recognition that the projected situation is intolerable a commitment to effect the necessary change and setting targets and indicators to monitor progress a new financial institutional and technological framework is required as is capacity building in order to dramatically scale up access to modern energy services at the local and regional levels in this paper we discussed the energy situation of the developing countries for sustainable development

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

financial protectionism first evidence we examine large public interventions in the financial sector such as bank nationalizations and search for financial protectionism a decrease in the quantity and or an increase in the price of loans that banks from one country make to borrowers resident in another we use a bank level panel data set spanning all u k resident banks between 1997q3 and 2010q1 after nationalization foreign banks reduced their fraction of british loans by about 11 and increased their effective interest rates by about 70 basis points in contrast nationalized british banks did not significantly change either their loan mix or effective interest rates

the timing of contracting with externalities abstract this paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades if instead externalities become stronger sequential negotiations might benefit the principal as they lower the agents outside options under some linearity conditions the principal s preferences with respect to different timings of contracting are opposed to their efficiency ranking

household energy choice and consumption intensity empirical evidence from bhutan abstract this paper uses data from three bhutan living standard surveys blss 2003 blss 2007 and blss 2012 to examine the trends and patterns of household energy consumption and identify and analyze the factors that influence household energy choices consumption intensity and the per capita household expenditure on energy sources in bhutan during the last decade significant numbers of bhutanese households have switched to cleaner energy sources empirical results show that a household s choice of cleaner energy sources is driven by income level and household wealth the age gender and education of the household heads access to electricity and location education and income have a differential role on the choice of clean or dirty fuel wealthier and more educated households use and rely more on clean sources of energy like electricity and liquid petroleum gas while poorer households use and rely on dirty fuel such as fuelwood and kerosene the study shows that female headed households are more likely to choose cleaner fuels and above all the availability of a clean and cost effective source of energy within proximity to the household is an important factor in the adoption of clean energy several models using a variety of alternative independent variables such as proxies for education and wealth were estimated and confirmed the robustness of the results

break up fees and bargaining power in sequential contracting abstract when a buyer negotiates in sequence with two potential sellers of a good the outcome of each negotiation depends on all three players bargaining powers assuming all parties are symmetrically informed we find that the first seller s payoff is increasing in his own and the second seller s bargaining power on the other hand the second seller s payoff is decreasing in the first seller s bargaining power and in some cases also in his own bargaining power we characterize when contracts will contain break up fees all results extend to the case of a seller negotiating in sequence with two buyers

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

when does coordination require centralization this paper compares centralized and decentralized coordination when manag ers are privately informed and communicate strategically we consider a multi divisional organization in which decisions must be adapted to local conditions but also coordinated with each other information about local conditions is dispersed and held by self interested division managers who communicate via cheap talk the only available formal mechanism is the allocation of decision rights we show that a higher need for coordination improves horizontal com

reputation and competition this paper shows how competition generates reputation building behavior in repeated interactions when the product quality observed by consumers is a noisy signal of firms effort level there are two types of firms and good firms try to distinguish themselves from bad firms although consumers get convinced that firms which are repeatedly successful in providing high quality are good firms competition endogenously generates the outside option inducing disappointed consumers to leave firms this threat of exit induces good firms to choose high effort allowing good reputations to be valuable but its uncompromising execution forces good firms out of the market jel c7 d8

a ladder within a ladder understanding the factors influencing a household s domestic use of electricity in four african countries abstract according to the energy ladder hypothesis electricity is at the top of the energy ladder of household energy use that depends primarily on wealth status income and education levels of the users however it is often observed that households with higher income wealth and education levels do not use electricity for all domestic activities such as lighting heating and cooking creating a ladder within a ladder using a comprehensive data set from the living standard measurement study from four african countries ethiopia malawi tanzania and uganda covering 17 000 households this paper investigates the factors determining a household s adoption of electricity for lighting only and for lighting and cooking the results of a multinomial logit model and an ordered probit model show that demographic characteristics a household s wealth and human capital access to markets and remoteness greatly accelerate a household s use of electricity for light and cooking which provides evidence of a ladder within a ladder

endogenously chosen boards of directors and their monitoring of the ceo author s hermalin benjamin e abstract this paper develops a model in which the effectiveness of a board s monitoring of the ceo depends on the board s independence the independence of new directors is determined through negotiations implicit or explicit between the existing directors and the ceo the ceo s bargaining position and thus influence over the board selection process depends on an updated estimate of the ceo s ability based on prior performance many empirical findings about board structure and performance arise as equilibrium phenomena in this model we also explore the implications of this model for proposed regulations of corporate governance structures please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

household energy preferences for cooking in urban ouagadougou burkina faso abstract an extensive survey on household expenditures in ouagadougou the capital of burkina faso was used to analyze the factors determining urban household energy choices using a multinomial logit model wood energy remains the preferred fuel of most urban households in the country though rational the choice is not sustainable as it portends a threat to the savanna woodlands and the economy many important policies have been adopted by public authorities to minimize household wood energy consumption and to substitute it by alternative fuel despite the magnitude of all these policies the depletion rate of the forest resource is increasing a kind of inertia is thus observed for household preferences for cooking fuel this model analyzes the sociological and economic variables of household energy preferences for cooking in ouagadougou the analyses show that the inertia of household cooking energy preferences are due to poverty factors such as low income poor household access to electricity for primary and secondary energy low house standard household size high frequency of cooking certain meals using woodfuel as cooking energy the descriptive analyses show that the domestic demand for wood energy is strongly related to household income the firewood utilization rate decreases with increasing household income in other words this fuel appears as a transition good for these households which aim for other sources of energy for cooking that are more adapted for urban consumption this implies that a price subsidy policy for liquid petroleum gas lpg and its cook stoves could significantly decrease the utilization rate of wood energy

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

ratings shopping and asset complexity a theory of ratings inflation abstract many identify inflated credit ratings as one contributor to the recent financial market turmoil we develop an equilibrium model of the market for ratings and use it to examine possible origins of and cures for ratings inflation in the model asset issuers can shop for ratings observe multiple ratings and disclose only the most favorable before auctioning their assets when assets are simple agencies ratings are similar and the incentive to ratings shop is low when assets are sufficiently complex ratings differ enough that an incentive to shop emerges thus an increase in the complexity of recently issued securities could create a systematic bias in disclosed ratings despite the fact that each ratings agency produces an unbiased estimate of the asset s true quality increasing competition among agencies would only worsen this problem switching to an investor initiated ratings system alleviates the bias but could collapse the market for information

commercial bank ownership and performance in china this study examines the determinants of bank performance based on proxy variables that assess the quality of assets profitability liquidity and overall performance using a sample of 111 chinese commercial banks over the period of 2000 2012 we find that foreign banks appear to have better asset quality and overall performance although lower profitability compared to domestic banks in contrast the state owned banks tend to be more profitable and have better liquidity position compared with other domestic banks and foreign banks at bank level equity liability ratio exerts significant influence on overall bank performance while at the macroeconomic level per capital gdp gdp growth inflation and unemployment rates appear to have a bearing on bank performance

internal versus external capital markets this paper presents a framework for analyzing the costs and benefits of internal versus external capital allocation we focus pritnarily on comparing an internal capital market with bank lending while both represent centralized forms of financing in the former case the financing is owner provided while in the latter ceise it is not we argue that the ownership aspect of internal capital allocation has three important consequences 1 it leads to more monitoring than bank lending 2 it reduces managers entrepreneurial incentives and 3 it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management

bank ratings what determines their quality this paper examines the quality of credit ratings assigned to banks by the three largest rating agencies we interpret credit ratings as relative assessments of creditworthiness and define a new ordinal metric of rating error based on banks expected default frequencies our results suggest that on average large banks receive more positive bank ratings particularly from the agency to which the bank provides substantial securitization business these competitive distortions are economically significant and contribute to perpetuate the existence of too big to fail banks we also show that overall differential risk weights recommended by the basel accords for investment grade banks bear no significant relationship to empirical default probabilities harald hau sam langfield and david marques ibanez

credit ratings and the evolution of the mortgage backed securities market gse backed mortgage backed securities mbs market lies at the heart of the 2007 2009 global financial crisis this market both fueled and was fueled by the expansion of subprime credit and the housing boom we study the role of the three primary rating agencies moody s s p and fitch in the expansion of the mbs market rating agencies play an important role in all fixed income markets in part because they have access to privileged information on securities and their issuers a privilege protected from regulations such as regulation fair disclosure reg fd the agencies however have received sharp criticism for their ratings practices in the mbs market many critics point to a potential conflict in rating agencies fees and income structure instead of being compensated by the investors who consume their product issuers pay the rating agencies the conflict of interest hypothesis thus stipulates that agencies may provide unduly favorable ratings especially to large issuers who bring and could potentially take away substantial revenues the risk of lost reputation and hence lost future profits potentially offsets the conflict of interest problem because this industry has just three dominant players loss of reputation

a theory of socialistic internal capital markets abstract we develop a model of a two division firm in which the strong division has on average higher quality investment opportunities than the weak division we show that in the presence of agency and information problems optimal effort incentives are less powerful and thus managerial effort is lower in the strong division this leads the firm to bias its project selection policy against the strong division the selection bias is more severe when there is a larger spread in the average quality of investment opportunities between the two divisions

a reexamination of the conglomerate merger wave in the 1960s an internal capital markets view one possible explanation for bidding firms earning positive abnormal returns in diversifying acquisitions in the 1960s is that internal capital markets were expected to overcome the information deficiencies of the less developed capital markets examining 392 bidder firms during the 1960s we find the highest bidder returns when financially unconstrained buyers acquire constrained targets this result holds while controlling for merger terms and for different proxies used to classify firms facing costly external financing we also find that bidders generally retain target management suggesting that management may have provided companyspecific operational information while the bidder provided capital budgeting expertise

factors determining household use of clean and renewable energy sources for lighting in sub saharan africa abstract the purpose of the current research is to examine the factors that influence household use of determinants of renewable and clean energy sources used for lighting purposes in africa using the data from the living standard measurement study lsms from three african countries ethiopia tanzania and malawi for this purpose the paper uses multinomial logit and ordered probit econometrics models the descriptive analysis reveals that rural households are dependent largely on kerosene and batteries for lighting their houses while electricity and batteries form a major source of energy for lighting urban households a small fraction of households uses solid fuels and solar as their source of energy for lighting econometric results show that female headed households are likely to adopt clean and renewable sources of energy compared to male headed households wealthier and more educated households are found to use electricity and solar energy for lighting while poorer households tend to use kerosene batteries and solid fuels empirical results indicated that the ethiopian households followed by malawian households are more likely to use clean sources of energy compared to tanzanian households