Monopoly, asymmetric information, and optimal environmental taxation

This paper aims to examine optimal environmental taxation in an incomplete-information two-period model in which a monopolistic firm produces and pollutes. It is assumed that the polluting firm is privately informed about its costs of production, and the policymaker, which can only infer the firm's costs from observing the output produced in the first period, has the chance to set environmental taxes to affect emissions; the emitter of pollution may then choose a non-optimal level of production in such a period in order to manipulate the policymaker's beliefs concerning its costs. If the policymaker values environmental quality sufficiently, the low-cost polluter has an incentive to misrepresent itself as a high-cost firm in order to secure a low environmental tax in the second period. This leads the high-cost polluting firm to produce, in the first period, an output level that is not higher than output which would be optimal if only short-term considerations were taken into account. The optimal environmental tax rate in the first period, when the firm's output is a signal of its cost, is then lower than or equal to what it would be if the firm's output was not a signal of firm's costs. The expected emissions in the former context are also lower than or equal to those in the latter case. By contrast, when the policymaker's valuation of the environment is sufficiently low, the environmental tax is negative (a subsidy per unit of pollutant emitted) in both the signaling and non-signaling contexts and no less in the former context than in the latter.Environmental tax and subsidy policy, monopolistic polluting firm, vertical asymmetric information, signaling and non-signaling

Double informational asymmetry, signaling, and environmental taxes

This paper examines the effect of signaling on environmental taxation when each polluter privately knows whether its production cost is low or high, whereas third parties (i.e. the rival firms and the regulator) have only a subjective perception on such a cost. Consequently, there is both horizontal and vertical asymmetric information, and each polluting firm can strategically manipulate both the competitor and the policymaker's prior cost perceptions. We show that if the policymaker's ecological conscience is sufficiently high, polluters wish to be perceived as low-cost firms and, to this end, they will produce a high output level and they will emit a high emissions level. Therefore, optimal pollution taxes are higher than would be the case if firms' costs were not signaled in such a manner as to force low-cost polluters, in an attempt to distinguish themselves from high-cost polluters (by increasing their output level and their emissions level), to reduce the distortions in their production and also in their emissions levels. By contrast, if the policymaker values environmental quality less than consumption, environmental taxes become negative (a subsidy per unit of pollutant emitted), but each polluting firm continues to attempt to convince the other players (the rival firm and the regulator) that it is a low-cost supplier. In this case, if the quantity produced by each polluter signals its costs, over-subsiding holds as compared to the benchmark case of non-signaling.Polluting firms, horizontal and vertical asymmetric information, signaling and non-signaling, environmental taxes

The dominance of fee licensing contracts under asymmetric information signaling

This paper compares different licensing contracts defined by the type of payment (fees or royalties) and contract duration (short- or long-term) in a setting in which an outside patent holder that owns a patented innovation lasting for two periods licenses it to downstream Cournot firms; further, there is asymmetric information about firms' costs emerged from the use of innovation, but they are signaled through the output produced in period 1. In this context, if we concentrate on fee contracts, the patent holder prefers short-term (revealing) contracts rather than long-term contracts.Licensing, signaling, fees, royalties, short- and long-term contracts, welfare

Screening vs. signaling in technology licensing

A patent holder owning a two-period lasting innovation is unable to push it into the market, so it is licensed to a downstream user with production capabilities to market it. The production cost of this firm can be low or high, but the patent holder has only a prior on this factLicensing, asymmetric information, screening, signaling

Complementaries and commitment in a Cournot setting

When oligopolistic firms compete by investing simultaneously in cost-reducing R&D and in demand-creating advertising expenditures, their strategic commitment in such assets may differ qualitatively from the behavior pursued when only one of them is used. In particular, if R&D (and advertising) investment is decided on and made public before selecting the output, then cases of undercommitment in cost reduction can arise despite the non-existence of technological spillovers; and others in which there is no room for a differentiated strategic use of R\&D. Furthermore, when advertising is included among the investment variables of firms, their R&D expenses may equal or even exceed the socially optimal level.

Impuesto de sociedades cuando los beneficios no son observables

Using a two-period tax-signalling model, a study is performed on the behaviour of a revenue-raising government in setting profit-based corporate taxes for a company with private information on its potential profitability. In a separating equilibrium in which both the high- and low-profit company produce a positive amount in period 1 (separating equilibrium S2), the tax set for that period is lower than that of the symmetric information, resulting in informational rent to the high-profit company in that period, but not in period 2. As result, taxes increase with time. In a separating equilibrium in which only the high-profit company produces (separating equilibrium S1 or shut-down equilibrium), no informational rent goes to the high-profit company in either period, but at the cost that the low-profit firm exits the market. Finally, in a pooling equilibrium, taxes are time-invariant and charged in such a way that period-1 informational rent to the high-profit company is lower than in S2, but persists in period 2. Consequently, the government can maximize tax revenue by not forcing information disclosure. The impact of government behaviour on welfare is also examinedEste artículo examina, a través de un modelo de señalización de dos períodos, el comportamiento de un gobierno recaudatorio a la hora de fijar el impuesto de sociedades a una empresa con información privada sobre su potencial de rentabilidad. En un equilibrio separador en el que tanto la empresa muy rentable como la poco rentable producen una cantidad positiva en el periodo 1 (equilibrio separador S2), el impuesto fijado para dicho período es inferior al de información simétrica, lo que resulta en rentas informacionales a la empresa rentable, aunque estas rentas desaparecen en el periodo 2. Como resultado, el impuesto crece con el tiempo. En un equilibrio separador en el que solo la empresa rentable produce (equilibrio separador S1), el gobierno ahorra cualquier renta informacional a esta empresa en ambos periodos, pero a costa de que la empresa poco rentable salga del mercado. Por último, en un equilibrio agrupador, el impuesto es invariante en el tiempo y fijado de forma que la renta informacional de la empresa rentable en el período 1 es menor que en S2, pero persiste en el periodo 2. En consecuencia, el gobierno puede maximizar los ingresos fiscales no forzando la divulgación de información. También se examina el impacto que la citada conducta del gobierno tiene en el bienestarMy acknowledgement is also to the Xunta de Galicia for funding through project GPC 2013-04

Output taxation by a revenue-raising government under signaling

In this paper the behavior of a tax-collecting government (a tax office) when imposing a quantity-tax to firms is analyzed along a two-period signaling model. Each taxpayer privately knows its technological attributes, while third parties—the tax office among them—have only a prior belief about this fact, so firms can be tempted to behave opportunistically. In monopoly, signaling is always costly in terms of output deviation and the tax office reacts by setting, a smaller tax in (asymmetric information) period 1 than it would under symmetric information. In oligopoly, signaling can be either costly or costless. In the former case, the tax imposed by the tax office to each firm is below that imposed under symmetric information, while it is equal in the latter case. Besides, fiscal revenue under signaling is unambiguously lower than under symmetric information, even when tax size is the same in both contextsOutput-tax, tax office, asymmetric information, signaling

¿Son realistas los modelos financieros de carácter normativo?

In this paper we approach financial investors to see how they analyze financial markets, adopt their investment decisions, and buy financial products. Our main goal is to ascertain whether or not the investment guidelines provided by the most accepted normative theories in Finance are carried out in practice by investors. In order to do that, we review the the main financial theories, either normative or descriptive, and we then provide empirical evidence of the investors’ behaviour. Findings show that investors often disobey the recommendations offered by normative theories in FinanceEn este artículo abordamos cómo los agentes que adquieren productos financieros toman sus decisiones de inversión. El objetivo es averiguar si las pautas de actuación emanadas de las modernas teorías de Finanzas se reproducen o no en la práctica. Para ello ofrecemos una panorámica de las principales teorías financieras de tipo normativo y descriptivo, así como evidencia empírica del comportamiento de los inversores. La conclusión es que el comportamiento de los inversores suele discrepar a menudo de las indicaciones ofrecidas por las teorías financieras de carácter normativ

Consolidación fiscal y sostenibilidad de la deuda pública en los países GIPSI

Correcting fiscal imbalances and reducing public debt is a priority among the peripheral countries of the Eurozone (the so-called GIPSI countries). However, there is no consensus about which is the most appropriate policy mix to achieve it: the debate on fiscal austerity vs. growth is bitter now among researchers and international policymakers. In this paper we review the effects of different fiscal consolidation policies on macroeconomic performance. We also provide an empirical analysis that complements the recent study performed by the IMF regarding the sustainability of public debt for GIPSI countries in different scenarios of grpwth inflation, and fiscal and monetary policies. Finally, a policy mix is offered that would be suitable for these five countries to achieve both fiscal consolidation and economic growthCorregir los desajustes fiscales y reducir la deuda pública son dos objetivos prioritarios para los países periféricos de la Eurozona, si bien no existe consenso sobre la política más adecuada para alcanzarlos. En este artículo repasamos los efectos que las diferentes políticas de consolidación fiscal tienen sobre los agregados macroeconómicos y ofrecemos un análisis empírico que complementa el reciente estudio del FMI sobre la sostenibilidad de la deuda pública en los citados países en diferentes escenarios de crecimiento, inflación, y políticas fiscales y monetarias. Asimismo, describimos la política que consideramos más deseable para los países de la periferia de la Eurozona al objeto de alcanzar la consolidación fiscal y el crecimiento económicoAcknowledges financial aid received from the Galician Regional Government (Xunta de Galicia) through Grant GPC2013-04

The effect of behavioral biases on financial decisions

Financial management decisions are made by people, and people, in all instances, are shaped by their behavioral traits. Here we provide extensive insight on the theoretical and empirical analysis made on cognitive biases and their influence on financial decisions. To provide a systematic exposition, we set three broad categories: heuristics and biases, choices (including framing and preferences) and social factors. We then describe the main biases within each category and provide an extensive revision of the main theoretical and empirical developments about their impact on financial decisions.Las decisiones de gestión financiera las toman las personas, y las personas, en todos los casos, están determinadas por sus rasgos de comportamiento. Aquí proporcionamos una visión amplia del análisis teórico y empírico realizado sobre los sesgos cognitivos y su influencia en las decisiones financieras. Para proporcionar una exposición sistemática, establecemos tres categorías amplias: heurísticas y sesgos, elecciones (incluidos encuadres y preferencias) y factores sociales. A continuación, describimos los principales sesgos dentro de cada categoría y proporcionamos una revisión exhaustiva de los principales desarrollos teóricos y empíricos sobre su impacto en las decisiones financieras