Merger failures

This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre- and post-merger processes. We argue that failure may stem from informational asymmetries arising from the pre-merger period, and problems of cooperation and coordination within recently merged firms. We show that a partner may optimally agree to merge and abstain from putting forth any post-merger effort, counting on the other partner to make the necessary efforts. If both follow the same course of action, the merger goes ahead but fails. Our unique equilibrium allows us to make predictions on which mergers are more likely to fail.Mergers, Synergies, Asymmetric Information, Complementarities

Conglomeration with bankruptcy costs: Separate or joint financing?

The paper analyzes the determinants of the optimal scope of incorporation in the presence of bankruptcy costs. Bankruptcy costs alone generate a non-trivial tradeoff between the benefit of coinsurance and the cost of risk contamination associated to joint financing corporate projects through debt. This tradeoff is characterized for projects with binary returns, depending on the distributional characteristics of returns (mean, variability, skewness, heterogeneity, correlation, and number of projects), the bankruptcy recovery rate, and the tax rate advantage of debt relative to equity. Our testable predictions are broadly consistent with existing empirical evidence on conglomerate mergers, spin-offs, project finance, and securitization.Bankruptcy, conglomeration, mergers, spin-offs, project finance

Composition of electricity generation portfolios, pivotal dynamics and market prices

We use a simulation model to study how the diversification of electricity generation portfolios influences wholesale prices. We find that technological diversification generally leads to lower market prices but that the relationship is mediated by the supply to demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of non-linearities in the influence of diversification on market prices. The findings are robust to our choice of behavioural parameters and match close-form solutions where those are available.Electricity, market power, simulations, technology diversification

Are agent-based simulations robust? The wholesale electricity trading case

Agent-based computational economics is becoming widely used in practice. This paper explores the consistency of some of its standard techniques. We focus in particular on prevailing wholesale electricity trading simulation methods. We include different supply and demand representations and propose the Experience-Weighted Attractions method to include several behavioural algorithms. We compare the results across assumptions and to economic theory predictions. The match is good under best-response and reinforcement learning but not under fictitious play. The simulations perform well under flat and upward-slopping supply bidding, and also for plausible demand elasticity assumptions. Learning is influenced by the number of bids per plant and the initial conditions. The overall conclusion is that agent-based simulation assumptions are far from innocuous. We link their performance to underlying features, and identify those that are better suited to model wholesale electricity markets.Agent-based computational economics, electricity, market design, experience-weighted attraction (EWA), learning, supply functions, demand aggregation, initial beliefs.

Financial Incentives in Academia: Research versus Development

This paper investigates the effects of monetary rewards on the pattern of research. We build a simple repeated model of a researcher capable to obtain innovative ideas. We analyse how the legal environment affects the allocation of researcher?s time between research and development. Although technology transfer objectives reduce the time spent in research, they might also induce  researchers to conduct research that is more basic in nature, contrary to what the ?skewing problem? would presage. We also show that our results hold even if development delays publication.Faculty behaviour, basic vs. applied research

Mergers, Investment Decisions and Internal Organisation

We analyse the effects of investment decisions and firms' internal organisation on the efficiency and stability of horizontal mergers. In our framework economies of scale are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower total welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effiectively realised. Moreover, the paper offers a possible explanation for merger failures.Horizontal Mergers, Investment, Efficiency gains, Internal Conflict.

Theimpact of industry collaboration on research: Evidence from engineering academics in the UK

We study the impact of university-industry research collaborations on academic output, in terms of productivity and direction of research. We report findings from a longitudinal dataset on all the researchers from the engineering departments in the UK in the last 20 years. We control for the endogeneity caused by the dynamic nature of research and the existence of reverse causality. Our results indicate that researchers with industrial links publish significantly more. Productivity, though, is higher for low levels of industry involvement. Moreover, growing ties with the industry skew research towards a more applied approach.industry-science links, research collaborations, basic vs. applied research.

Mergers, Investment Decisions and Internal Organisation

We analyse the effects of investment decisions and firms’ internal organisation on the efficiency and stability of horizontal mergers. In our framework synergies are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures. ZUSAMMENFASSUNG - (Fusionen, Investitionsentscheidungen und unternehmensinterne Organisation) Wir analysieren die Auswirkungen von Investitionsentscheidungen und internen Organisationsstrukturen auf die Effizienz und Stabilität von horizontalen Firmenzusammenschlüssen. In unserer Untersuchung sind Synergien endogen und es können interne Konflikte in dem fusionierten Unternehmen auftreten. Es zeigt sich, dass "stabile" Fusionen häufig nicht zu mehr Effizienz, sondern sogar zu Effizienzverlusten führen können. Da solche Firmenzusammenschlüsse zu einer geringeren Wohlfahrt führen, sollte der Regulierer nicht ungeprüft annehmen, dass potentielle Wohlfahrtsgewinne auch immer tatsächlich erreicht werden. Außerdem bietet das Papier eine mögliche Erklärung für das Scheitern von Fusionen.Horizontal Mergers, Investment, Efficiency gains, Internal Conflict.

Information-Sharing Implications of Horizontal Mergers

We analyze the effects of uncertainty and private information on horizontal mergers. Firms face uncertain demands or costs and receive private signals. They may decide to merge sharing their private information. If the uncertainty parameters are independent and the signals are perfect, uncertainty generates an informational advantage only to the merging firms, increasing merger incentives and decreasing free-riding effects. Thus, mergers become more profitable and stable. These results generalize to the case of correlated parameters if the correlation is not very severe, and for perfect correlation if the firms receive noisy signals. From the normative point of view, mergers are socially less harmful compared to deterministic markets and may even be welfare enhancing. If the signals are, instead, publicly observed, uncertainty does not necessarily give more incentives to merge, and mergers are not always less socially harmful.Horizontal Merger, Uncertainty, Information Sharing

TV or not TV? Subtitling and English skills

We study the influence of television translation techniques on the quality of the English spoken across the EU and OCDE. We identify a large positive effect for subtitled original version as opposed to dubbed television, which loosely corresponds to between four and twenty years of compulsory English education at school. We also show that the importance of subtitled television is robust to a wide array of specifications. We then find that subtitling and better English skills have an influence on high-tech exports, international student mobility, and other economic and social outcomes.I21 i N00