Preemption, Start-Up Decisions and the Firms’ Capital Structure

In this article, we analyse the interactions between financial and start-up decisions in an oligopolistic framework, where firms compete to enter a new market. We show that preemption can substantially reduce the negative effects of credit rationing on start-up investment decisions.capital structure, irreversibility, preemption, real options

Harmful Freedom of Choice: Lessons from the Cellphone Market

This article focuses on the relationship between provider and customer, specifically on the complexity of available contracts in the cellphone market and the ways this complexity might be harmful to consumers. This article aims to elucidate the issues, fleshing them out both as a general phenomenon and as a specific implementation in the cellphone context. The aim is not to provide ultimate solutions, but to show the directions these solutions might take and the difficulties involved

What's New About the New Economy? Sources of growth in the managed and entrepreneurial economies

The purpose of this paper is to document the fundamental shift that is taking place in OECD countries. This shift is from the managed economy to the entrepreneurial economy. While politicians and policy makers have made a plea for guidance in the era of entrepreneurship, scholars have been slow to respond. This paper attempts to make a first step identifying and articulating these differences. We do this by contrasting the most fundamental elements of the newly emerging entrepreneurial economy with those of the managed economy. We identify fourteen trade-offs confronting these two polar worlds. The common thread throughout these trade-offs is the increased role of new and small enterprises in the entrepreneurial economy. A particular emphasis is placed on changes in economic policy demanded by the entrepreneurial economy vis-?-vis the managed economy.entrepreneurship;Europe;government policy;industrial structure;new economy

Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets

Tacit collusion reduces welfare comparably to explicit collusion but remains mostly unaddressed by antitrust enforcement which greatly depends on evidence of explicit communication. We propose to target specific elements of firms’ behavior that facilitate tacit collusion by providing quantitative evidence that links these actions to an anticompetitive market outcome. We apply our approach to incidents on the Italian gasoline market where the market leader unilaterally announced its commitment to a policy of sticky pricing and large price changes which facilitated price alignment and coordination of price changes. Antitrust policy has to distinguish such active promotion of a collusive strategy from passive (best response) alignment. Our results imply the necessity of stronger legal instruments which target unilateral conduct that aims at bringing about collusion

Raising capital in an insurance oligopoly market

We consider an oligopoly of firms that compete on price. Firms produce a non-stochastic output, insurance coverage, which is sold before the true cost is known. They behave as if they were risk-averse for a standard reason of costly external finance. The model consists in a two-stage game. At stage 1, each firm chooses its internal capital level. At stage 2, firms compete on price. We characterize the conditions for Nash equilibria and analyze the strategic impact of capital choice on the market. We discuss the model with regard to insurance industry specificity and regulation.Price Competition; Risk-averse Firms; Insurance Market; Capital Choice.

Preemption, Start-Up Decisions and the Firms' Capital Structure

In this article, we analyse the interactions between financial and start-up decisions in an oligopolistic framework, where firms compete to enter a new market. We show that preemption can substantially reduce the negative effects of credit rationing on start-up investment decisions.capital structure

On sunk costs and trade liberalization in applied general equilibrium

We argue that the rationalization gains often predicted by static applied general equilibrium models with imperfect competition and scale economies are artificially boosted by an unrealistic treatment of fixed costs. We introduce sunk costs into one such model calibrated with real-world data. We show how this changes the oligopoly game in a way significant enough to affect, both qualitatively and quantitatively, the outcome of a trade liberalization exercise.Free trade