Multinationals, tax competition and outside options

We analyse tax competition when a multinational firm has invested in two countries but also has an outside option, e.g., towards a third country. An interesting finding is that more attractive outside options for firms may constitute a win-win situation; the firm as well as its present host countries may gain when this occurs. The reason that it benefits the host countries is that an enhanced outside option reduces the inefficiencies of tax competition. An implication of the result is that better outside options for multinational firms may reduce the gains from host countries’ policy coordination and thus reduce those countries’incentives to coordinate their policies. Also, with a development where outside options become more accessible, the perceived costs of tax competition, e.g., in terms of underprovision of public goods, may be overestimated. Our findings may also have implications for international negotiations, since it provides an argument for mutual reduction of entry barriers, as this may improve outside options.Tax competition; mobility; common agency; countervailing incentives

Distorted Performance Measures and Dynamic Incentives

Incentive contracts must typically be based on performance measures that do not exactly match agents’ true contribution to principals’ objectives. Such misalignment may impose difficulties for effective incentive design. We analyze to what extent implicit dynamic incentives such as career concerns and ratchet effects alleviate or aggravate these problems. Our analysis demonstrates that the interplay between distorted performance measures and implicit incentives implies that career and ratchet effects have real effects, that stronger ratchet effects or more distortion may increase optimal monetary incentives, and that bureaucratic promotion rules may be optimal.Search; Learning; Information and Knowledge; Communication; Belief; Compensation Packages; Payment Methods; Labor Management.

Tournaments with prize-setting agents

In many tournaments it is the contestants themselves who determine reward allocation. Labor-union members bargain over wage distribution, and many firms allow self-managed teams to freely determine internal resource allocation, incentive structure, and division of labour. We analyze, and test experimentally, a rank-order tournament where heterogenous agents determine the spread between winner prize and looser prize. We investigate the relationship between prize spread, uncertainty (i.e. noise between e¤ort and performance), heterogeneity and effort. The paper challenges well-known results from tournament theory. We find that a large prize spread is associated with low degree of uncertainty and high degree of heterogeneity, and that heterogeneity triggers effort. By and large, our real-effort experiment supports the theoretical predictions.Rank-order tournament; prize spread; ability-difference

Access regulation and cross-border mergers: Is international coordination beneficial?

The international integration of regulated markets poses new challenges for regulatory policy. One question is the implications that the overall international regulatory regime will have for cross-border and/or domestic merger activity. In particular, do non-coordinated policies stimulate cross-border mergers that are overall inefficient, and is this then an argument for international coordination of such policies? The paper addresses this issue in a setting where firms must have access to a transportation network which is controlled by national regulators. The analysis reveals that while non-coordinated regulatory policies may induce cross-border mergers (by allowing the firms in question to play national regulators out against each other), this can nevertheless be overall welfare enhancing compared to market outcomes under coordinated regulation.Access regulation; Endogenous merger; Policy coordination

Cross border mergers and strategic trade policy with two-part taxation: is international policy coordination beneficial?

We analyse how national taxation of firms are likely to affect merger incentives in international markets. In particular, we ask whether non-coordinated trade policies stimulate cross-border mergers that are overall inefficient, and if this is then an argument for international coordination of such policies? We address this issue in a setting where policy makers use two-part tariffs to tax exporting firms. The analysis reveals that while non-coordinated policies may induce cross-border mergers (by allowing the firms in question to play national policy makers out against each other), this can nevertheless be overall welfare enhancing compared to market outcomes under coordinated policy making. -- Das Papier untersucht die möglichen Wirkungen der nationalen Besteuerung auf Anreize für Fusionen in internationalen Märkten. Dabei wird vor allem gefragt, ob unkoordinierte Handelspolitik zu grenzüberschreitenden Fusionen führt, die insgesamt ineffizient sind und ob das für die internationale Koordination der Handelspolitik spricht. Im vorgestellten Modellrahmen nutzen Politikentscheider zweiseitige Zölle um Exportfirmen zu besteuern. Die Untersuchung zeigt, dass zwar nichtkoordinierte Politik grenzüberschreitende Fusionen hervorbringt, indem die beteiligten Firmen ihre nationalen Gesetzgeber gegeneinander ausspielen können; allerdings ist das Ergebnis durchaus wohlfahrtssteigernd im Vergleich zu dem Marktergebnis, das sich aus koordinierter Handelspolitik ergibt.Strategic trade policy,two-part taxation,endogenous merger,policy coordination

Cooperation in knowledge-intensive firms

The extent to which a knowledge-intensive firm should induce cooperation between its employees is analyzed in a model of relational contracting between a firm (principal) and its employees (two agents). The agents can cooperate by helping each other, i.e. provide effort that increases the performance of their peer without affecting their own performance. We extend the existing literature on agent-cooperation by analyzing the implications of incomplete contracts and agent hold-up. A main result is that if the agents’ hold-up power is sufficiently high, then it is suboptimal for the principal to implement cooperation, even if helping effort is productive per se. This implies, contrary to many property rights models, that social surplus may suffer if the investing parties (here the agents) are residual claimants. The model also shows that long-term relationships facilitate cooperation even if the agents cannot monitor or punish each others’ effort choices

Relational incentive contracts for teams of multitasking agents

We analyze optimal relational contracts for a group (team) of multitasking agents with hidden actions. Contracts are based on noisy signals that may be correlated across agents and between tasks. The optimal contract defines a performance measure in the form of an index (a scorecard) for each agent, and awards a bonus to the highest performing agent, provided his or her index exceeds a hurdle. An optimal index generally involves benchmarking against other agents, and this may, in combination with the hurdle requirement, introduce a cooperative element in the otherwise competitive incentive structure. For agents with separate tasks and normally distributed signals, we find that strong correlation (either positive or negative) across agents is beneficial, while larger correlation within each agent's tasks is detrimental for efficiency, and that this has implications for optimal organization of tasks. For agents with common tasks the optimal contract may have features of both tournament and team incentives. The tournament aspect incentivizes an agent to exert effort on his own task, while the hurdle necessary to receive a bonus also incentivizes an agent to help his peers. In our setting this hybrid scheme can only be optimal if signals from agents' tasks are negatively correlated. Otherwise pure team incentives are optimal

Ola Bratteli and his diagrams

This article discusses the life and work of Professor Ola Bratteli (1946--2015). Family, fellow students, his advisor, colleagues and coworkers review aspects of his life and his outstanding mathematical accomplishments.Comment: 18 pages, 15 figure

The temperate Australasian genus Papawera Oskars and Malaquias, 2019 (Gastropoda: Cephalaspidea: Haminoeidae), with a redescription of P. zelandiae and P. maugeansis

The genus Papawera includes two species of haminoeid snails found only in temperate waters of New Zealand and southeastern Australia. In this work, we redescribe the Papawera species based on characters of their external morphology, shells, and anatomical features such as radulae, jaws, gizzard plates, and male reproductive systems, using for the first time, scanning electron microscopy. A multi-locus phylogenetic hypothesis and the species delimitation method Automatic Barcode Gap Discovery based on DNA sequences of the cytochrome c oxidase subunit I gene were used to corroborate species status. The type species of the genus, P. zelandiae, is restricted to New Zealand and P. maugeansis is only known from South Australia, Victoria, and Tasmania. These species are easily distinguished externally by the shape of the shell, colouration of the living animal, and morphology of the cephalic shield. Anatomically they have differences in the number of marginal teeth, distribution of rods in the gizzard plates, and anatomy of the fundus in the male reproductive system.publishedVersio

Non-equivalence of key positively charged residues of the free fatty acid 2 receptor in the recognition and function of agonist versus antagonist ligands

Short chain fatty acids (SCFAs) are produced in the gut by bacterial fermentation of poorly digested carbohydrates. A key mediator of their actions is the G protein-coupled Free Fatty Acid 2 (FFA2) receptor and this has been suggested as a therapeutic target for the treatment of both metabolic and inflammatory diseases. However, a lack of understanding of the molecular determinants dictating how ligands bind to this receptor has hindered development. We have developed a novel radiolabelled FFA2 antagonist in order to probe ligand binding to FFA2 and in combination with mutagenesis and molecular modelling studies define how agonist and antagonist ligands interact with the receptor. Although both agonist and antagonist ligands contain negatively charged carboxylates that interact with two key positively charged arginine residues in transmembrane domains V and VII of FFA2, there are clear differences in how these interactions occur. Specifically, while agonists require interaction with both arginine residues to bind the receptor, antagonists require an interaction with only one of the two. Moreover, different chemical series of antagonist interact preferentially with different arginine residues. A homology model capable of rationalizing these observations was developed and provides a tool that will be invaluable for identifying improved FFA2 agonists and antagonists to further define function and therapeutic opportunities of this receptor