Partnerships, Lemons and Efficient Trade

We analyze the possibility of efficient trade with informationally interdependent valuations and with a dispersed ownership. A crucial role is played by the sign of the derivatives that measure how valuation functions depend on others’ signals. If valuations are increasing functions of other agents’ signals, it is more difficult to achieve efficient trade with interdependent values than with private values (where the respective derivatives are zero.) In contrast, if valuations are decreasing functions of other agents’ signals, it is easier to achieve efficient trade with interdependent values. Our results unify and generalize the insights of Cramton et al. [1987], Myerson and Satterthwaite [1983], and Akerlof [1970].

Partnerships, lemons and efficient trade

We analyze the possibility of efficient trade with informationally interdependent valuations and with a dispersed ownership. A crucial role is played by the sign of the derivatives that measure how valuation functions depend on others’ signals. If valuations are increasing functions of other agents’ signals, it is more difficult to achieve efficient trade with interdependent values than with private values (where the respective derivatives are zero.) In contrast, if valuations are decreasing functions of other agents’ signals, it is easier to achieve efficient trade with interdependent values. Our results unify and generalize the insights of Cramton et al. [1987], Myerson and Satterthwaite [1983], and Akerlof [1970]

Rethinking the Disclosure Paradigm in a World of Complexity

In a prior article, Professor Schwarcz examined the factors that differentiate Enron\u27s questionable use of off-balance sheet special purpose entities, (SPEs) from the trillions of dollars of legitimate securitization and other structured-finance transactions that use SPEs. The presence of meaningful differences, Professor Schwarcz argued, may inform regulatory schemes by providing a basis to distinguish which such transactions should be allowed or restricted. In that connection, Professor Schwarcz encountered the dilemma that some structured transactions are so complex that disclosure to investors of the company originating the transaction is necessarily imperfect - either oversimplifying the transaction, or providing detail and sophistication beyond the level of even most institutional investors and securities analysts. In this article, Professor Schwarcz focuses on solutions to this dilemma, arguing that complexity forces a rethinking of the long-held disclosure paradigm of securities law

Rethinking the Disclosure Paradigm in a World of Complexity

In a prior article, Professor Schwarcz examined the factors that differentiate Enron\u27s questionable use of off-balance sheet special purpose entities, (SPEs) from the trillions of dollars of legitimate securitization and other structured-finance transactions that use SPEs. The presence of meaningful differences, Professor Schwarcz argued, may inform regulatory schemes by providing a basis to distinguish which such transactions should be allowed or restricted. In that connection, Professor Schwarcz encountered the dilemma that some structured transactions are so complex that disclosure to investors of the company originating the transaction is necessarily imperfect - either oversimplifying the transaction, or providing detail and sophistication beyond the level of even most institutional investors and securities analysts. In this article, Professor Schwarcz focuses on solutions to this dilemma, arguing that complexity forces a rethinking of the long-held disclosure paradigm of securities law

Personnel Economics

In this review of the personnel economics literature, we introduce key topics of personnel economics, focus on some relatively new findings that have emerged since prior reviews of some or all of the personnel economics literature, and suggest open questions in personnel economics where future research can make valuable contributions to the literature. We explore five aspects of the employment relationship - incentives, matching firms with workers, compensation, skill development, and the organization of work - reviewing the main theories, empirical tests of those theories, and the open questions in each area.

Towards Asymmetric Information for the G2B Inter-Organizational Networks

With the emergence of innovative (networked) organization forms such as enhanced supply chain collaboration and modern forms of public-private partnerships (PPP), effective and efficient collaboration among network participants becomes crucial but often difficult to achieve. One of the leading factors&#; which cause such defective collaboration is the asymmetric information issue among the network participants. Two identifiable problems resulted by the asymmetric information are the moral hazard and adverse selection problems. Former studies mainly positioned asymmetric information problems within the context of traditional business environment; in this paper we suggest that similar problems may also occur in the Government to Business (G2B) context. We discuss these issues via a collaborative pilot case study (hereafter, Beer Living Lab) between the Dutch Tax and Customs Administration (DutchTCA) and a Dutch beer company (Beer Co.). The paper reveals that both moral hazard and adverse selection problems may occur during the G2B interactions and tamper the relationships between the two. In addressing these problems, we propose an advanced information technology (IT) solution, drawing upon an effective and efficient information sharing schema that can on the one hand minimize the moral hazard by enhancing supply chain management for the business and on the other hand preventing tax fraud for the government. Further we argue that the application of the advanced IT may serve as a strong signaling and screening tool for overcoming the adverse selection problem during the PPP forming and result in a win-win situation. The insights learned should benefit those involved in various inter-organizational business networks, partnership as well as supply chain management settings

Trigger Happy or Gun Shy? Dissolving Common-Value Partnerships with Texas Shootouts

Many partnership contracts (and other joint-venture agreements) include so-called Texas Shootout Clauses to govern future breakups. In a Texas Shootout, one partner names a single buy-sell price and the other partner has the option to buy or sell at that price. While the prior literature has considered the allocative efficiency of the Texas Shootout, this paper focuses on the incentives of private parties to make these offers to begin with. We consider a model where sole ownership is more efficient than joint ownership. Although both partners are equally capable, one has private information about the common value of the asset. When given the choice, they avoid making buy-sell offers because these offers give away bargaining surplus (the partners are gun shy ). Instead, they often (but not always) prefer to make simple offers to buy or simple offers to sell and bargaining failures arise. Texas Shootout contracts that assign trigger rights - where one party can force the other to name a price - increase efficiency and are jointly desirable

Organic Citrus: Challenges in Production and Trade

Organic citrus still is a niche and makes about 1-2% of the global citrus production. However, it is increasing year-by-year in parallel with the increasing demand for organic products. Organic citrus offers creative and circumspect producers and exporters excellent opportunities for success. Key success factors are specific know-how, access to production inputs and to markets. The main production areas of organic citrus – oranges, mandarins, grapefruit, limes and lemons – are Latin America, North America, Europe and Near East. Many tropical countries in the Americas are extending organic citrus production. What are the challenges for organic citrus production and trade