Contestable Licensing

We analyze a model of repeated franchise bidding for natural monopoly with contestable licensing - a franchisee halds an (exclusive) license to operate a franchise until another rm offers to pay more for it. In a world where quality is observable but not veri able, the simple regulatory scheme we describe combines market-like incentives with regulatory oversight to generate efficient outcomes.

Credits, Crises, and Capital Controls: A Microeconomic Analysis

We analyze the behavior of foreign banks who sequentially provide credit to finance projects in an emerging market. The foreign banks are exposed to both micro-economic risks and the macro-economic risk of a currency crisis, and there are no bailout guarantees. Nevertheless, we show that it is often the case that banks provide too much credit too easily and that this behavior may precipitate the onset of a currency crisis. We demonstrate how the imposition of capital controls in the form of taxes and subsidies on foreign investment may improve the situation. Whereas most of the literature explains currency crises as the consequence of causes that lie within the debtor countries, the general message of our paper may be interpreted as placing part of the blame on the international financial community as well.

Optimal Pricing and Endogenous Herding

We consider a monopolist who sells indetical objects of common but unknown value in a herding-prone environment. Buyers make their purchasing decisions sequentially, and rely on a private signal as well as previous buyers´actions to infer the common value of the object. The model applies to a variety of cases, such as the introduction of a new product or the sale of licenses to use a patent. We characterize the monopolist´s optimal pricing strategy and its implications for the temporal pattern of prices and for herding.The analysis is performed under alternative assumptions about observability of prices. We find that when previous prices are observable, herding may but need not arise. In contrast, herding arises immediately when previous prices are unobservable and the seller´s equilibrium strategy is a pure Markov strategy. While the possibility of social learning is present in the first case, it is absent in the second. Finally, we examine the seller´s to manipulate the buyers´evaluation of the object when buyers are naive. Using secret discounts the seller succsessfully interferes with social learning, and herding occurs in finite time.

Optimal Pricing and Endogenous Herding

We consider a monopolist who sells identical objects of common but unknown value in a herding-prone environment. Buyers make their purchasing decisions sequentially, and rely on a private signal as well as We consider a monopolist who sells identical objects of common but previous buyers’ actions to infer the common value of the object. The model applies to a variety of cases, such as the introduction of a new product or the sale of licenses to use a patent. We characterize the monopolist’s optimal pricing strategy and its implications for the temporal pattern of prices and for herding. The analysis is performed under alternative assumptions about observability of prices. We find that when previous prices are observable, herding may but need not arise. In contrast, herding arises immediately when previous prices are unobservable and the seller’s equilibrium strategy is a pure Markov strategy. While the possibility of social learning is present in the first case, it is absent in the second. Finally, we examine the seller’s incentive to manipulate the buyers’ evaluation of the object when buyers are naive. Using secret discounts the seller successfully interferes with social learning, and herding occurs in finite time.herding, informational cascades, optimal pricing