Allocating and Funding Universal Service Obligations in a Competitive Network Market

We examine, in a network market open to competition, various mechanisms of allocating and funding ''universal service obligations'' among agents (rival operators and consumers). The obligations we consider are geographic ubiquity and non discrimination. We analyze, from both the efficiency and equity point of views, the respective advantages of a ''restricted-entry'' system (where the entrant is not allowed to serve high cost consumers) and the ''pay or play'' system at work for instance in Australia. We show that the pay or play regulation always dominates the restricted-entry regulation under ubiquity constraint alone. This result no longer holds when the regulator imposes also the non discrimination constraint.

Competition and mergers in networks with call externalities

This paper considers a model of two interconnected networks with different qualities. There are call externalities in the sense that consumers value calls they send and receive. Networks compete in two part tariffs. We show that call externalities create private incentives for each competitor to charge low access prices. This result moderates the risk of tacit collusion when competitors can freely negotiate their access charges. We also analyze the case of a merger between the two networks and give conditions under which the merger can be welfare improving.call externalities; interconnection; mergers; telecommunications

Optimal Collusion with Limited Liability and Policy Implications

Collusion sustainability depends on firms’ aptitude to impose sufficiently severe punishments in case of deviation from the collusive rule. We characterize the ability of oligopolistic firms to implement a collusive strategy when their ability to punish deviations over one or several periods is limited by a severity constraint. It captures all situations in which either structural conditions (the form of payoff functions), institutional circumstances (a regulation), or financial considerations (profitability requirements) set a lower bound to firms’ losses. The model specifications encompass the structural assumptions (A1-A3) in Abreu (1986) [Journal of Economic Theory, 39, 191-225]. The optimal punishment scheme is characterized, and the expression of the lowest discount factor for which collusion can be sustained is computed, that both depend on the status of the severity constraint. This extends received results from the literature to a large class of models that include a severity constraint, and uncovers the role of structural parameters that facilitate collusion by relaxing the constraint.

Competition and mergers in networks with call externalities

Working Paper du GATE 2003-08This paper considers a model of two interconnected networks with different qualities. There are call externalities in the sense that consumers value calls they send and receive. Networks compete in two part tariffs. We show that call externalities create private incentives for each competitor to charge low access prices. This result moderates the risk of tacit collusion when competitors can freely negotiate their access charges. We also analyze the case of a merger between the two networks and give conditions under which the merger can be welfare improving.Cet article examine un modèle de deux réseaux de qualités différentes interconnectés. Il existe des externalités d'appels dans le sens où les consommateurs valorisent les appels qu'ils émettent et également ceux qu'ils recoivent. Les réseaux se font concurrence en tarif binôme. Nous montrons que les externalités d'appels créent des incitations privées pour chaque réseau à facturer l'accès à son réseau à un prix bas. Ce résultat modère le risque de collusion tacite lorsque les opérateurs preuvent négocier librement les prix d'accès qu'ils se facturent. Nous étudions également le cas d'une fusion entre les deux opérateurs et donnons les conditions sous lesquelles la fusion améliore le bien-être

Large shareholder portfolios, monitoring and legal protection of shareholders : A note

We consider an optimal portfolio diversification model in which a large shareholder can influence shares return by monitoring efficiently managers. Less diversification decreases insurance but increases the stake in the ownership and then enhances efficiency of management monitoring. We analyze the effect of legal shareholders protection on portfolio diversification.corporate governance; large shareholders; optimal portfolio choice

Large shareholder portfolios, monitoring and legal protection of shareholders : A note

Working Paper du GATE 2001-18We consider an optimal portfolio diversification model in which a large shareholder can influence shares return by monitoring efficiently managers. Less diversification decreases insurance but increases the stake in the ownership and then enhances efficiency of management monitoring. We analyze the effect of legal shareholders protection on portfolio diversification.Nous considérons un modèle de diversification optimale de portefeuille dans lequel un gros actionnaire peut influencer le rendement d'un actif en contrôlant efficacement les managers. Un portefeuille moins diversifié réduit l'assurance mais améliore l'efficacité du contrôle sur la direction. Nous analysons l'impact de la protection juridique des actionnaires et de la dilution de la propriété sur la diversification du portefeuille

Optimal Collusion with Limited Liability and Policy Implications

Collusion sustainability depends on firms’ aptitude to impose sufficiently severe punishments in case of deviation from the collusive rule. We characterize the ability of oligopolistic firms to implement a collusive strategy when their ability to punish deviations over one or several periods is limited by a severity constraint. It captures all situations in which either structural conditions (the form of payoff functions), institutional circumstances (a regulation), or financial considerations (profitability requirements) set a lower bound to firms’ losses. The model specifications encompass the structural assumptions (A1-A3) in Abreu (1986) [Journal of Economic Theory, 39, 191-225]. The optimal punishment scheme is characterized, and the expression of the lowest discount factor for which collusion can be sustained is computed, that both depend on the status of the severity constraint. This extends received results from the literature to a large class of models that include a severity constraint, and uncovers the role of structural parameters that facilitate collusion by relaxing the constraint.

Market-making, inventories and martingale pricing

Working Paper du GATE 2002-03We discuss Shen and Starr(2002) results and show that the bid-ask spread of a monopolistic market-marker doesn't depend on his inventory when he posts ''martingale prices '' in an inventory model with random volumes and an unknown direction of trade.Nous discutons les résultats de Shen et Starr (2002) et montrons que la fourchette de prix de réservation d'un teneur de marché ne dépend pas de son inventaire lorsque celui-ci fixe un prix suivant une martingale dans un modèle d'inventaire avec volumes aléatoires et direction de l'échange inconnnue

Contrainte de capacité et développement des marques de distributeur : une analyse de la loi Raffarin

Working Paper du GATE 2001-01In this paper, we try to explain the ambiguous impact of the Raffarin law on the relationships between manufacturers and retailers. We show that the law has two conflicting effects on the share of profit between upstream and downstream firms. We study the influence of a capacity constraint on the development of own brands by retailers. We show that, when entry is free at the retailers' level, a restriction of the retailers' capacity, as imposed by the Raffarin law, can improve producers' profit. But barriers to entry on the downstream market remove this effect.Cet article tente d'expliquer l'impact ambigu de la loi Raffarin sur les relations entre producteurs et distributeurs, en montrant qu'elle exerce deux effets opposés sur le partage du profit entre les secteurs amont et aval. Nous proposons un modèle permettant d'appréhender l'influence d'une contrainte de capacité sur les choix de référencement d'un distributeur, et notamment sur sa décision d'introduire ou non une marque propre menaçant la situation de monopole du producteur. Nous montrons que, seule, l'imposition d'une limitation de la taille des magasins peut renforcer le pouvoir des producteurs face aux distributeurs, mais qu'associée à une barrière à l'entrée en aval, elle ne permet plus d'améliorer le pouvoir de négociation des producteurs