Efficient Dissolution of Partnerships and the Structure of Control

In this paper, we study efficient dissolution of partnerships in a context of incomplete information. We generalize the results of Cramton, Gibbons and Klemperer (1987) to situations where the partnership takes on a common value that may depend upon all partners' types, so that each partner's individual rationality constraint depends on types other than his own. We show that in this case not only the distribution of ownership, emphasized in the earlier literature, but also the distribution of control within an organization matter in determining the possibility of efficient dissolution. We underscore this point by showing that two-person partnerships where one partner exercises complete control cannot be dissolved efficiently with any incentive compatible, individually rational mechanism, regardless of the ownership structureMechanism design, efficient trading, asymmetric control, partnerships

Protection and International Sourcing

We study the impact of import protection on relationship-specific investments, organizational choice and welfare. We show that a tariff on intermediate inputs can improve social welfare through mitigating hold-up problems. It does so if it discriminates in favor of the investing party, thereby improving its bargaining position. On the other hand, a tariff can prompt inefficient organizational choices if it discriminates in favor of less productive firms or if integration costs are low. Protection distorts organizational choices because tariff revenue, which is external to the firms, drives a wedge between the private and social gains to offshoring and integration.International trade, tariffs, hold-up problem, sourcing, organizational form

Ownership Structure and the Market for Corporate Control

We study the impact of the ownership structure of a corporation on the characteristics and efficiency of the market for corporate control. We adopt a general mechanism design approach, in which endogenous sources of inefficiency in the market, including adverse selection, moral hazard, budget balance and voluntary trading, may preclude the possibility of efficiently restructuring control and ownership. We identify necessary and sufficient conditions for an efficient market, and describe the characteristics of efficient restructuring mechanisms, when they exist. In efficient restructuring, corporations typically increase the number of shares of the incumbent manager when he remains in control, or give him a generous golden parachute when he is deposed. Corporations are also reluctant to assign full control and full ownership to a single stockholder, unless agency costs are severe. We characterize the set of ownership structures for which efficient restructuring is possible. While the distribution of ownership among the non-controlling shareholders is irrelevant, the level of initial managerial ownership is a central determinant of this set. Typically, efficient restructuring is easier to obtain for low levels of managerial ownership.ownership, corporate control, restructuring, mechanism design

The Economics of a Centralized Judiciary: Uniformity, Forum Shopping and the Federal Circuit

In 1982, the US Congress established the Court of Appeals for the Federal Circuit (CAFC) as the sole appellate court for patent cases. Ostensibly, this court was created to eliminate inconsistencies in the application and interpretation of patent law across federal courts, and thereby mitigate the incentives of patentees and alleged infringers to "forum shop" for a preferred venue. We perform the first econometric study of the extent of non-uniformity and forum shopping in the pre-CAFC era and of the CAFC's impact on these phenomena. We find that in patentee-plaintiff cases the pre-CAFC era was indeed characterized by significant non-uniformity in patent validity rates across circuits and by forum shopping on the basis of validity rates. We find weak evidence that the CAFC has increased uniformity of validity rates and strong evidence that forum shopping on the basis of validity rates ceased several years prior to the CAFC's establishment. In patentee-defendant cases, we find that validity rates are lower on average, but do not find either significant non-uniformity of validity rates across circuits or significant forum shopping.

How (not) to raise money

We show that standard winner-pay auctions are inept fund-raising mechanisms because of the positive externality bidders forgo if they top another's high bid. Revenues are suppressed as a result and remain finite even when bidders value a dollar donated the same as a dollar kept. This problem does not occur in lotteries and all-pay auctions, where bidders pay irrespective of whether they win. We introduce a general class of all-pay auctions, rank their revenues, and illustrate how they dominate lotteries and winner-pay formats. The optimal fund-raising mechanism is an all-pay auction augmented with an entry fee and reserve price

The costs and benefits of rules of origin in modern free trade agreements

We study the welfare impact of rules of origin in free trade agreements where final-good producers source customized inputs from suppliers within the trading bloc. We employ a property-rights framework that features hold-up problems in suppliers' decisions to invest, and where underinvestment is more severe for higher productivity firms. A rule of origin offers preferred market access for final goods if a sufficiently high fraction of inputs used in the production process is sourced within the trading bloc. Such a rule alters behavior for only a subset of suppliers, as some (very-high-productivity) suppliers comply with the rule in an unconstrained way and some (very-low-productivity) suppliers choose not to comply. For those suppliers it does affect, the rule increases investment, but it also induces excessive sourcing (for given investment) within the trading bloc. From a social standpoint, it is best to have a rule that affects high-productivity suppliers. The reason is that the marginal net welfare gain from tightening the rule increases with productivity. Therefore, when industry productivity is high, a strict rule of origin is socially desirable; in contrast, when industry productivity is low, no rule of origin is likely to help. Regardless of the case, a sufficiently strict rule can (weakly) ensure welfare gains

[S IV] in the NGC 5253 Supernebula: Ionized Gas Kinematics at High Resolution

The nearby dwarf starburst galaxy NGC 5253 hosts a deeply embedded radio-infrared supernebula excited by thousands of O stars. We have observed this source in the 10.5{\mu}m line of S+3 at 3.8 kms-1 spectral and 1.4" spatial resolution, using the high resolution spectrometer TEXES on the IRTF. The line profile cannot be fit well by a single Gaussian. The best simple fit describes the gas with two Gaussians, one near the galactic velocity with FWHM 33.6 km s-1 and another of similiar strength and FWHM 94 km s-1 centered \sim20 km s-1 to the blue. This suggests a model for the supernebula in which gas flows towards us out of the molecular cloud, as in a "blister" or "champagne flow" or in the HII regions modelled by Zhu (2006).Comment: Accepted for publication in the Astrophysical Journal 4 June 201

Multisegment Scheme Applications to Modified Chebyshev Picard Iteration Method for Highly Elliptical Orbits

A modified Chebyshev Picard iteration method is proposed for solving orbit propagation initial/boundary value problems. Cosine sampling techniques, known as Chebyshev-Gauss-Lobatto (CGL) nodes, are used to reduce Runge’s phenomenon that plagues many series approximations. The key benefit of using the CGL data sampling is that the nodal points are distributed nonuniformly, with dense sampling at the beginning and ending times. This problem can be addressed by a nonlinear time transformation and/or by utilizing multiple time segments over an orbit. This paper suggests a method, called a multisegment method, to obtain accurate solutions overall regardless of initial states and albeit eccentricity by dividing the given orbit into two or more segments based on the true anomaly