price dynamics financial fragility and aggregate volatility within a standard framework a la arrow debreu we investigate the dynamics emerging from the interactions of heterogeneous households and firms that are adaptive price setters and financially constrained we show that depending on the stringency of the financial constraints the model can settle in two very different regimes one characterized by equilibrium the other by disequilibrium and financial fragility we then investigate how the structure of the production network affects the emergence of aggregate volatility from micro level price and financial shocks hence providing a dynamical counterpart to recent results of acemoglu and al 2012

cartel stability when costs are heterogeneous abstract this paper addresses a neglected question in the literature of cartel stability and the use of trigger strategies to maintain such stability we employ a model in which market demand is linear and involving n firms each operating subject to one of possibly n different cost functions we show that the stability of the cartel may depend crucially upon the relative efficiencies of the firms and argue that in such models explicit attention must be given to this possibility

product risk asymmetric information and trade credit the purpose of this paper is to explain cross sectional variations in trade credit terms across firms and industries this study shows that there is a separating equilibrium in which the size of the cash discount conveys information about product quality the driving forces of this equilibrium outcome are the risk sharing motives of the producer and buyer as well as asymmetric information about product quality the empirical implications of the model are derived and discussed in relation to industry practices

from production networks to geographical economics abstract although standard economics textbooks are seldom interested in production networks modern economies are more and more based upon supplier customer interactions one can consider entire sectors of the economy as generalised supply chains we will take this view in the present paper and study under which conditions local failures to produce or simply to deliver can result in avalanches of shortage and bankruptcies and in localisation of the economic activity we will show that a large class of models exhibit scale free distributions of production and wealth among firms and that regions of high production are localised

dynamics of brand competition effects of unobserved social networks brand competition is modelled using an agent based approach in order to examine the long run dynamics of market structure and brand characteristics a repeated game is designed where myopic firms choose strategies based on beliefs about their rivals and consumers consumers are heterogeneous and can observe neighbour behaviour through social networks although firms do not observe them the social networks have a significant impact on the emerging market structure presence of networks tends to polarize market share and leads to higher volatility in brands yet convergence in brand characteristics usually happens whenever the market reaches a steady state scale free networks accentuate the polarization and volatility more than small world or random networks unilateral innovations are less frequent under social networks

factors affecting drivers willingness to pay for biofuels the case of italy biofuels represent a promising alternative to substitute fossil fuels and given the relevance of environmental impacts of the transport sector policy initiatives worldwide aim at supporting the shift towards such cleaner energy source acknowledging the crucial role that biofuels will play in years to come in the energetic paradigm the study aims at investigating key determinants of drivers willingness to pay for biofuels focusing on a sample of 260 individuals from northern italy n 260 in line with recent research on consumer behavior socio demographics are not good predictors of drivers willingness to pay surprisingly on the other hand knowledge of the topic is negatively correlated to willingness to pay so that the more people know about biofuels the less they are willing to pay a premium price moreover certification is not an effective tool to convince drivers of the eco friendliness of biofuels hence spurring willingness to pay possible explanations of the research findings as well as policy implications are discussed in detail along with suggestions for future research on the topic

households willingness to accept compensation for agricultural waste recycling taking biogas production from livestock manure waste in hubei p r china as an example the problem of agricultural waste pollution has aroused wide concern around the world an effective measure to solve this problem is to implement the compensation policy so as to encourage people to participate in agricultural waste recycling this paper seeks to estimate households willingness to accept compensation in terms of agricultural waste recycling adopting the contingent valuation method and to calculate the compensation standard for households participation in agricultural waste recycling by methods of non parametric and parametric estimate it aims to answer two questions how much the compensation should be given for encouraging households to participate in agricultural waste recycling which factors would affect willingness to accept compensation value of households for participating in agricultural waste recycling the results show that most households recognize the value of agricultural waste recycling and a certain amount of compensation which is about 1 08 1 31 of average family annual income does encourage households to participate in agricultural waste recycling household s willingness to accept compensation and household s expected value of compensation are affected by personal or family characteristics such as gender household income as well as the non economic variables such as environmental knowledge and environmental attitude according to this research reasonable compensation standard is the cornerstone of the effectiveness and efficiency of compensation policies household income inequality and capital allocation in terms of households willingness to accept compensation should be taken into consideration when compensation policies about agricultural waste recycling are formulated environmental education for households is an effective measure to enhance their environmental consciousness while raising the strength of government s waste management is turned out to be effective for improving the rural ecological environment conclusions of this study provide an important scientific basis for developing countries and regions to formulate compensation policies in terms of inspiring their agricultural waste recycling

electricity transition in the middle east and north africa a de risking governance approach high upfront costs and investment risks constitute critical barriers for investments in low carbon infrastructure technologies in the middle east and north africa this article uses a case study of morocco s solar strategy for the electricity sector in order to explore how domestic versus regional multilateral governance structures impact upon the downside risk of clean energy investments and translate into lower financing costs we firstly process trace the differential effects of governance on policy and financial de risking intended as risk reduction and risk transfer then we quantify the impact of policy and financial de risking on the financing costs of the ouarzazate csp noor 1 project our results suggest that i policy and financial de risking depended on a clear policy commitment of the government to develop solar electricity a strong domestic institutional capacity to transform commitment into concrete projects as well as a strong commitment of development finance institutions at project level our results suggest that ii lower financing cost depended on concessional finance provided by multiple lenders proactive policy de risking efforts taken at domestic level and the competitive auction besides the expected impact of concessional finance these findings lend qualitative quantitative support to the argument that domestic policy de risking pay off unlocking concessional finance and reducing the private investors required return from the project therefore governments of the middle east and north africa countries should pursue any efforts in implementing or enhancing policy de risking measures under the emerging post 2020 climate policy regime new instruments might also incorporate a focus on investment risks through country specific technical and financial assistance however our analysis suggests that electricity policy legacies and practices are hard to change in the middle east and north africa therefore technical and financial assistance should target especially those areas that have a particular policy de risking potential namely capacity building on project assessment project finance and grid management

capacity constraints mergers and collusion abstract the objective of this paper is two fold to contribute to the analysis of tacit collusion in bertrand supergames with asymmetric capacity constraints and from a more applied perspective to bring a new light on merger analysis and provide useful guidelines for competition policy taking into account dynamic aspects of competition it is well known that capacity constraints affect tacit collusion as they limit both incentives to deviate e g to undercut rivals and retaliation possibilities however most studies have so far focused on symmetric situations where all firms have the same capacity which leads to ambiguous and unintuitive results and also considerably limits the scope of application studying asymmetric situations makes it possible to analyse the impact of changes in the distribution of these capacities expansions but also mergers split offs transfers etc and to provide guidelines for competition policy and particularly for merger policy these guidelines which differ substantially from those inspired by more static analyses such as the herfindahl or other standard concentration tests are applied to a famous merger that took place in the french bottled water market the nestle perrier merger case

price setting supergames with capacity constraints this paper examines the role of industry capacity in enforcing collusion in the context of repeated games for a fixed capacity per firm it is shown that changes in the number of firms have a non monotone effect on the best enforceable cartel price this is due to the fact that while an additional firm lowers the share that each of the other firms enjoys at the collusive price it also increases the losses to each firm should the cartel fail

fiscal policy and business cycle characteristics in a heterogeneous agent macro model abstract this paper explores the macroeconomic implications of changing fiscal policy in a heterogeneous interacting agent hia model the key contributions to the existing hia complex adaptive trivial system cats literature include the addition of a progressive income tax structure an expanded role for redistribution and a stylized reactive government sector in certain specifications deficit financed tax cuts are shown to effectively shorten recessions while deficit financed spending stimulus is able to lengthen recoveries alternative specifications provide ambiguous support for generalizing the effectiveness of these policy treatments robustness checks support the general findings that increased redistribution towards the unemployed results in higher unemployment rates greater inequality and shorter contractions

measuring the systemic risk in interfirm transaction networks using a unique and massive dataset that contains information on interfirm transaction relationships this study examines default propagation in trade credit networks and provides direct and systematic evidence of the existence and relevance of such default propagation not only do we implement simulations in order to detect prospective defaulters we also estimate the probabilities of actual firm bankruptcies and compare the predicted defaults and actual defaults we find first that an economically sizable number of firms are predicted to fail when their customers default on their trade debt second these prospective defaulters are indeed more likely to go bankrupt than other firms third firms that have abundant external sources of financing or whose transaction partners have such abundant sources are less likely to go bankrupt even when they are predicted to default this provides evidence for the existence and relevance of firms called deep pockets by kiyotaki and moore 1997 that can act as shock absorbers

an interdisciplinary model for macroeconomics macroeconomic modelling has been under intense scrutiny since the great financial crisis when serious shortcomings were exposed in the methodology used to understand the economy as a whole criticism has been levelled at the assumptions employed in the dominant models particularly that economic agents are homogeneous and optimizing and that the economy is equilibrating this paper seeks to explore an interdisciplinary approach to macroeconomic modelling with techniques drawn from other natural and social sciences specifically it discusses agent based modelling which is used across a wide range of disciplines as an example of such a technique agent based models are complementary to existing approaches and are suited to answering macroeconomic questions where complexity heterogeneity networks and heuristics play an important role

collusive behavior with heterogeneous firms in a repeated duopoly with heterogeneous firms i ask which enforceable collusive arrangement is likely to prevail i propose the equilibrium at which both firms are just indifferent between colluding and defecting for discount factors not exceeding a critical level i show this equilibrium is pareto optimal possibly even the unique pareto optimum i then apply bargaining theory and show that the proposed equilibrium is the likely outcome of explicit negotiations finally i argue that the proposed equilibrium is an obvious focal point on which firms may tacitly coordinate the proposed equilibrium promises to be useful for comparative statics analysis of collusive oligopoly

endogenous cartel formation with heterogeneous firms in the context of an infinitely repeated capacity constrained price game we endogenize the composition of a cartel when firms are heterogeneous in their capacities when firms are sufficiently patient there exists a stable cartel involving the largest firms a firm with sufficiently small capacity is not a member of any stable cartel when a cartel is not all inclusive colluding firms set a price that serves as an umbrella with non cartel members pricing below it and producing at capacity contrary to previous work our results suggest that the most severe coordinated effects may come from mergers involving moderate sized firms rather than the largest or smallest firms

financial fragility and distress propagation in a network of regions we investigate how the financial fragility in the real economy is affected by the average level of interdependence among agents across different regions of the economy to this end we develop a parsimonious agent based model of firms and banks organized in geographic regions the model is built on the framework of an existing class of models for business fluctuations the goal of our exercise is to clarify the effect on systemic failures of the interplay between network interconnectedness and financial acceleration in particular we investigate the probability of individual and systemic failures with varying levels of interconnectedness we find that in the absence of financial acceleration connectivity makes the system more resilient in contrast in the presence of financial acceleration the probability of both individual and systemic failures are minimized at intermediate level of diversification

key sectors in input output production networks an application to brexit this paper presents the first detailed and holistic description of the european production network epn and provides different rankings of the most systemically important industries involved in brexit employing techniques of complex networks analysis and input output traditional tools the study identifies those industries that are key in the complex structure of the uk eu trade relationships the method developed would help policy makers to better understand which tariff would have a more distortive impact which export sector should be pushed which imports should be safeguarded such information may have foremost importance in the negotiations between the uk and eu our findings suggest that brexit would be not just a problem for the uk as it is often portrayed but any form of brexit could propagate affecting the global production system further by inspecting industries centrality within the epn we find that the uk could be less exposed to trade barriers than eu countries

endogenous mergers and collusion in asymmetric market structures recent empirical evidence shows that cartels are often asymmetric while cartel theory suggests that firm symmetry is conducive to collusion including an indivisible cost of cartelization we show that medium asymmetric market structures are more conducive to collusion since they balance the small firms incentives to stay in the cartel against the need to cover the cartel leaders indivisible cartelization cost using an endogenous merger model we also show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion current antisymmetry merger policy can thus be counterproductive

wind farm externalities and public preferences for community consultation in ireland a discrete choice experiments approach abstract in ireland the deployment of onshore wind turbines has become progressively more difficult in some areas because of the potential negative externalities associated with their operation using a discrete choice experiment dce we employ a willingness to accept framework to estimate the external effects of wind turbines on local residents with the inclusion of community consultation and to quantify the compensation required to permit wind farms to be built in ireland our findings reveal that the majority of respondents are willing to make monetary tradeoffs to allow for wind power initiatives and we find that respondents require less compensation if provision is made for a community representative and setback distance is increased

rethinking macroeconomics what failed and how to repair it the standard macroeconomic models have failed by all the most important tests of scientific theory they did not predict that the financial crisis would happen and when it did they understated its effects monetary authorities allowed bubbles to grow and focused on keeping inflation low partly because the standard models suggested that low inflation was necessary and almost sufficient for efficiency and growth after the crisis broke policymakers relying on the models floundered notwithstanding the diversity of macroeconomics the sum of these failures points to the need for a fundamental re examination of the models and a reassertion of the lessons of modern general equilibrium theory that were seemingly forgotten in the years leading up to the crisis this paper first describes the failures of the standard models in broad terms and then develops the economics of deep downturns and shows that such downturns are endogenous further the paper argues that there have been systemic changes to the structure of the economy that made the economy more vulnerable to crisis contrary to what the standard models argued finally the paper contrasts the policy implications of our framework with those of the standard models

cartel contract duration empirical evidence from inter war international cartels a formal cartel organization sets up a multilateral relationship between firms in a given industry while standard contracting literature has studied bilateral monopoly relationships in detail there are horizontal relationships like cartels that also have contractual aspects to shed light on how these contracts work this paper takes a sample of legal formal cartel contracts and examines their structure and durability borrowing from industrial organization theories and transaction cost theories the empirical model tests for the importance of demand uncertainty and cartel organizational characteristics in determining cartel contract duration the results show that the more uncertain the environment within which the cartel operates the shorter the expected cartel duration other industry structure characteristics and cartel organization variables included in the empirical model have a much weaker influence on duration copyright 2005 oxford university press

barometric price leadership abstract barometric price leadership refers to situations in which a price leader acts as a barometer of prevailing market conditions for other firms in the industry in this paper a model of price setting with costly information acquisition is analyzed it is shown that the unique equilibrium outcome is for one firm to acquire information and become a price leader while the other firm does not purchase information and becomes a follower in contrast to most previous work leadership in this model is due to the informational setting not the price setting mechanism as with symmetric information the unique outcome is the symmetric bertrand equilibrium

ringleaders in larger number asymmetric cartels the concept of a cartel ringleader has specific legal meaning but has received relatively little attention in the economic literature of cartels this article draws on a sample of 89 european cartels to identify how often ringleaders exist who they are and what they do it argues that ringleaders are more likely where the traditional cartel problems are likely to be most acute i e with larger numbers of members exhibiting substantial size asymmetries this is confirmed for price fixing and bid rigging cartels and is especially pronounced where the ringleader displays aggressive as opposed to merely organisational behaviour

endogenous cartel formation experimental evidence in a bertrand oligopoly experiment firms choose whether or not to engage in cartel like communication and if so they may get fined by a cartel authority we find that the four firm industries form cartels more often than the duopolies because they gain less from a hysteresis effect after cartel disruption

measuring the covariance risk of consumer debt portfolios abstract the covariance risk of consumer loans is difficult to measure due to high heterogeneity using the chilean household finance survey i simulate the default conditions of heterogeneous households over distinct macro scenarios i show that consumer loans have a high covariance beta relative to the stock market and bank assets banks loan portfolios have very different covariance betas with some banks being prone to high risk during recessions high income and older households have lower betas and help diversify banks portfolios households covariance risk increases the probability of being rejected for credit and has a negative impact on loan amounts

can money always talk implication for environmental compensation by international agribusiness abstract with the development of agricultural industrialization the environmental issues of intensive animal farming are attracting increasing attention using survey data from 313 chinese households living near large scale broiler farms of an international food company this paper employs a contingent valuation method and discrete choice experiment to quantify the willingness to accept an air pollution compensation scheme the findings are as following 1 42 of respondents have a nonmonetary preference for compensation thus the conventional contingent valuation method is unsuitable for application to them 2 the results of a sample selection model show that in addition to income trust and subjective factors dominate decision making based on willingness to accept however the effect of actual distance is weak 3 the combination of nonmonetary options is feasible and beneficial for both the company and local residents in the long term this paper distinguishes between the wta with regard to monetary and nonmonetary ecological compensation measure ecm and it develops a methodological approach that allows the development of wta based monetary and non monetary to establish compensation guidelines for international food companies our study focuses on a case study of a major foreign company providing an example to other similar multi national businesses for sustainable development strategy in developing countries

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

business fluctuations in a behavioral switching model gridlock effects and credit crunch phenomena in financial networks abstract in this paper we characterize the evolution over time of a credit network in the most general terms as a system of interacting banks and firms operating in a three sector economy with goods credit and interbank market credit connections change over time via an evolving fitness measure depending from lenders supply of liquidity and borrowers demand of credit moreover an endogenous learning mechanism allows agents to switch between a loyal or a shopping around strategy according to their degree of satisfaction the crucial question we investigate is how financial bubbles and credit crunch phenomena emerge from the implemented mechanism

collusion under monitoring of sales collusion under imperfect monitoring is explored when firms prices are private information and their quantities are public information such an information structure is consistent with several recent price fixing cartels such as those in lysine and vitamins for a class of symmetric oligopoly games it is shown that symmetric equilibrium punishments cannot sustain any collusion an asymmetric punishment is characterized that does sustain collusion and it has firms whose sales exceed their quotas compensating those firms with sales below their quotas in practice cartels could have performed such transfers through sales among the cartel members

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

denying leniency to cartel instigators costs and benefits abstract a large number of countries have introduced successful leniency programs into their competition law enforcement to encourage colluding firms to come forward with evidence that will help detect cartels and punish price fixers this paper studies a feature of some of these programs that has received relatively little attention in the literature the inclusion of no immunity for instigators clauses niics these provisions deny leniency benefits to parties that instigate cartel behavior or function as cartel ringleaders our results show that niics can lead to increased or decreased levels of cartel conduct by removing the instigator s benefit from cooperating with the authorities a niic undoes some of the destabilizing benefit the leniency program was intended to generate and thereby furthers cartel stability on the other hand the instigator faces an asymmetrically severe punishment under a niic and this can reduce the incentive to instigate in the first place

a new approach to business fluctuations heterogeneous interacting agents scaling laws and financial fragility abstract in this paper we discuss a scaling approach to business fluctuations our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to re discover a set of stylized facts which have to be satisfactorily accounted for in their models standard macroeconomics based on a reductionist approach centered on the representative agent is definitely badly equipped for this task on the contrary we show that a simple financial fragility agent based model based on complex interactions of heterogeneous agents is able to replicate a large number of scaling type stylized facts with a remarkable high degree of statistical precision

trade credit and the propagation of corporate failure an empirical analysis using an exhaustive data set on claims held by trade creditors suppliers on failed trade debtors customers we quantify the importance of trade credit chains for the propagation of corporate bankruptcy we show that trade creditors experience significant trade credit losses due to trade debtor failures and that creditors bankruptcy risks increase in the size of incurred losses by exploring the roles of financial constraints and creditor debtor dependences we infer that the trade credit failure propagation mechanism is driven by both credit losses and demand shrinkage finally we show that the documented propagation mechanism constitutes a significant part of the overall bankruptcy frequency suggesting that it has measurable implications for the aggregate level

environmental awareness consumption and labor supply empirical evidence from household survey data abstract what is the effect of environmental awareness on the households consumption of polluting goods and labor supply decisions we answer this question using household survey data from the united states and measuring environmental awareness with the decision to make environmental donations we find that environmental awareness has a negative and economically significant effect on labor supply the respective impact on the consumption of polluting goods is also negative but less robust in terms of statistical significance our results highlight the importance of understanding the foundations of household behavior related to environmental quality indeed environmentally aware households are willing to tradeoff work hours with improved environmental quality and less so to change their consumption habits

beyond microfoundations towards a not too rational macroeconomics at ucla we are establishing a center for computable economics i have been very much involved in this effort this may surprise you that a non mathematical macro monetary economist should become an enthusiast for this project is one of those things that do not compute but then as i will explain we take a special interest in things that do not compute one may come to computable economics by many intellectual routes i will trace my own not because it makes a particularly edifying story but because it will tell you what kind of problems i hope we can make progress on by developing the field of computable economics but before we get to that i had better explain what i mean by computable economics

the investment strategies for a dynamic supply chain under stochastic demands abstract a successful supply chain management scm should aim to maximize the net present value of joint profits along the supply chain however the volatile market conditions cause the future cash flows along the supply chain more difficult to anticipate to obtain higher supply chain value the supplier and the retailer should cooperatively determine the optimal entry time this paper proposes a two stage dynamic optimization model by using a real option approach and then performs the sensitivity analyses for the option value and the investment threshold the impacts of some critical factors including the growth rate and the volatility of demand shock sunk cost and relating operational costs cost rates fix costs holding costs of inventory and shipping costs are investigated

the financial accelerator in an evolving credit network we model a credit network characterized by credit relationships connecting i downstream d and upstream u firms and ii firms and banks the net worth of d firms is the driver of fluctuations the production of d firms and of their suppliers u firms in fact is constrained by the availability of internal finance proxied by net worth to the d firms the structure of credit interlinkages changes over time due to an endogeneous process of partner selection which leads to the polarization of the network at the aggregate level the distribution of growth rates exhibits negative skewness and excess kurtosis when a shock hits the macroeconomy or a significant group of agents in the credit network a bankruptcy avalanche can follow if agents leverage is critically high in a nutshell we want to explore the properties of a network based financial accelerator

firm network characteristics and economic robustness to natural disasters this article proposes a theoretical framework to investigate economic robustness to exogenous shocks such as natural disasters it is based on a dynamic model that represents a regional economy as a network of production units through the disaggregation of sector scale input output tables results suggest that disaster related output losses depend on direct losses heterogeneity and on the economic network structure two aggregate indexes concentration and clustering appear as important drivers of economic robustness offering opportunities for robustness enhancing strategies modern industrial organization seems to reduce short term robustness in a trade off against higher efficiency in normal times c 2011 published by elsevier b v

liaisons dangereuses increasing connectivity risk sharing and systemic risk the recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what architecture can make the financial system more resilient to global crises this paper shows that a financial network can be most resilient for intermediate levels of risk diversification and not when this is maximal as generally thought so far this finding holds in the presence of the financial accelerator i e when negative variations in the financial robustness of an agent tend to persist in time because they have adverse effects on the agent s subsequent performance through the reaction of the agent s counterparties 2012 elsevier b v all rights reserved

macro networks an application to euro area financial accounts abstract this paper develops a financial network designated the macro network that depicts the connections between the main financial and non financial sectors of the economy in the various financial instruments of the euro area the macro network comprises of linkages across financial and non financial sectors in each country these country level sector networks are then connected by the cross border links between the individual banking sectors using the macro network to simulate financial shocks we find that the propagation effects depend on the underlying network structure which evolves over time after the financial crisis bilateral linkages contracted sharply reflecting the surge in counterparty risk and the de leveraging processes nonetheless our analysis suggests that even after this process vulnerabilities remained in the euro area financial system while a more diversified portfolio of cross border exposures might mitigate the shock effects we identify sectors which are most relevant for the propagation of financial shocks in the macro network

some results on optimal penal codes in asymmetric bertrand supergames abstract optimal penal codes in asymmetric bertrand supergames exhibit security level punishments for the largest firm if no firm has sufficient capacity to service the market then collusion that is barely sustainable by optimal penal codes entails higher capacity utilization by the largest firm than by the other firms collusion supported by optimal penal codes in models with a large firm facing a competitive fringe can result in the large firm having low capacity utilization and thus providing a price umbrella for the fringe firms which have high capacity utilization journal of economic literature classification numbers c72 c73 l11 l13

credit chains and bankruptcy propagation in production networks abstract we present a simple model of a production network in which firms are linked by supplier customer relationships involving extension of trade credit our aim is to identify the minimal set of mechanisms which reproduce qualitatively the main stylized facts of industrial demography such as firms size distribution and at the same time the correlation over time and across firms of output growth and bankruptcies the behavior of aggregate variables can be traced back to the direct firm firm interdependence in this paper we assume that the number of firms is constant and the network has a periodic static structure but the framework allows further extensions to investigate which network structures are more robust against domino effects and if the network is let to evolve in time which structures emerge spontaneously depending on the individual strategies for orders and delivery

collusion with persistent cost shocks we consider a dynamic bertrand game in which prices are publicly observed and each firm receives a privately observed cost shock in each period although cost shocks are independent across firms within a firm costs follow a first order markov process we analyze the set of collusive equilibria available to firms emphasizing the best collusive scheme for the firms at the start of the game in general there is a trade off between productive efficiency whereby the low cost firm serves the market in a given period and high prices we show that when costs are perfectly correlated over time within a firm if the distribution of costs is log concave and firms are sufficiently patient then the optimal collusive scheme entails price rigidity firms set the same price and share the market equally regardless of their respective costs when serial correlation of costs is imperfect partial productive efficiency is optimal for the case of two cost types first best collusion is possible if the firms are patient relative to the persistence of cost shocks but not otherwise we present numerical examples of first best collusive schemes

collusion among asymmetric firms the case of different discount factors abstract this study investigates collusive behavior among asymmetric firms for this purpose we develop a selection criterion for deriving a unique collusive outcome and apply it to the case when firms have different discount factors our analysis reveals that for collusion to be self enforcing it is unnecessary that all firms have sufficiently high discount factors but rather only that firms on average have a sufficiently long run view the optimal collusive outcome entails a strict ordering of output quotas in which firms with relatively low discount factors receive a disproportionate share of market demand as found in the case of a common discount factor a fall in a firm s discount factor reduces the likelihood of successful collusion this effect reduces firm profits on the other hand in the event that firms can collude a lowering of a firm s discount factor increases its output quota so that its profits rise

in which industries is collusion more likely evidence from the uk i examine the factors facilitating or hindering collusion using a comprehensive data set on the incidence of price fixing across uk manufacturing industries in the 1950s the econometric results suggest that collusion is more likely the higher the degree of capital intensity and less likely in advertising intensive than in low advertising industries there is also some evidence of a non monotonic relationship between market growth and the likelihood of collusion there is no clear link between concentration and the incidence of collusion

the determination of price and output quotas in a heterogeneous cartel applying a selection criterion that uses both subgame perfection and the nash bargaining solution this paper investigates the relationship between firms cost functions and collusive behavior it is found that the optimal collusive price exceeds the price that the low cost firm would set if it was a monopolist comparative statics reveal that the optimal collusive price is increasing in the low cost firm s unit cost but is decreasing in the high cost firm s unit cost when the cost differential between firms is sufficiently large copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

collusion and leadership abstract the paper explores the role of price or quantity leadership in facilitating collusion it extends the standard analysis of tacit collusion by allowing firms to make their strategic choices either simultaneously or sequentially it is shown that price leadership indeed facilitates collusion by making it easier to punish deviations by the leader in case of pure bertrand competition price leadership restores the scope for perfect collusion in markets where collusion would not be sustainable otherwise when firms face asymmetric costs or offer differentiated products price leadership can also enhance the profitability of collusion in case of asymmetric costs the less efficient firm must act as the leader finally such leadership is less effective in case of cournot competition since following an aggressive deviation by the leader the follower would rather limit its own output making it more difficult to punish the deviation still quantity leadership may enhance collusion when it is already somewhat effective in a simultaneous move setting

quantifying the deterrent effect of anticartel enforcement this paper presents a rare attempt to quantify the deterrent effect of anti cartel policy it develops a conceptual framework which establishes the sort of information necessary for such quantification this is then illustrated and calibrated by drawing upon existing literatures and using evidence from legal cartels to approximate what would be observed absent policy measuring impact by the proportion of all potential harm that is deterred our best estimate is two thirds and even on conservative assumptions at least half of all harms or seven times the detected harm is deterred

collusive price leadership with capacity constraints abstract in this paper collusive price leadership in homogeneous good capacity constrained repeated price competition is examined in the stage game firms choose their timing of price setting although setting a price early is disadvantageous per se a large firm has an incentive to move early in order to demonstrate its commitment not to deviate if the discount factor is not too large this behavior raises the collusive price compared to that arising in collusion with simultaneous moves as a result all firms obtain strictly higher profits

a price setting supergame between two heterogeneous firms when firms attempt to tacitly collude they inevitably face a market sharing problem this problem is further complicated when firms have asymmetries this paper studies a price setting supergame between two firms with different costs the paper investigates sustainability of tacit collusion and solves the market sharing problem under tacit collusion the resulting equilibrium from the supergame is used to study limit pricing government policies toward entrants and welfare change due to technological progress and a change in the time discount rate the paper shows that even costlessly achieved technological progress can decrease social welfare