Contract Renegotiation and Organizational Design

This paper studies the implications of non-commitment for organizational design. An organizational form must trade-off between the coordination benefits associated with the centralization of information and its associated costs in terms of renegotiation. This analysis makes precise what these benefits and costs are. First, I characterize renegotiation-proof allocations for organizational forms that differ in the amount of decentralization that they support. Second, I compare these different organizational forms. The analysis shows that a complete decentralization of decision-making is always weakly dominated by more centralized structures when information is dispersed in the organization. Decision-making should always be in the hand of the player with the most important or relevant information. Ce papier étudie les implications pour la structure organisationnelle des problèmes de non-engagement. Une structure organisationnelle adéquate permet l'arbitrage entre les bénéfices et les coûts associés à la centralisation de la prise de décision. Parmi les bénéfices, on retrouve une meilleure coordination des informations des membres de l'organisation; parmi les coûts, on retrouve les inefficacités reliées aux difficultés d'engagement et à la renégociation. L'analyse démontre qu'une décentralisation complète est toujours faiblement dominée par une structure plus centralisée. Finalement, la prise de décision doit être conférée aux agents ayant l'information la plus cruciale pour la performance de l'organisation.Asymmetric information; Contract renegotiation; Organizational form; Decentralization, Information assymétrique ; Renégociation de contrats ; Structure organisationnelle ; Décentralisation

Organizational Design of R&D activities

This paper addresses the question of whether R&D should be carried out by an independent research unit or be produced in-house by the firm marketing the innovation. We define two organizational structures. In an integrated structure, the firm that markets the innovation also carries out and finances research leading to the innovation. In an independent structure, the firm that markets the innovation buys it from an independent research unit which is financed externally. We compare the two structures under the assumption that the research unit has some private information about the real cost of developing the new product. When development costs are negatively correlated with revenues from the innovation, the integrated structure dominates. The independent structure dominates in the opposite case.

Beyond Poisson-Boltzmann: Numerical sampling of charge density fluctuations

We present a method aimed at sampling charge density fluctuations in Coulomb systems. The derivation follows from a functional integral representation of the partition function in terms of charge density fluctuations. Starting from the mean-field solution given by the Poisson-Boltzmann equation, an original approach is proposed to numerically sample fluctuations around it, through the propagation of a Langevin like stochastic partial differential equation (SPDE). The diffusion tensor of the SPDE can be chosen so as to avoid the numerical complexity linked to long-range Coulomb interactions, effectively rendering the theory completely local. A finite-volume implementation of the SPDE is described, and the approach is illustrated with preliminary results on the study of a system made of two like-charge ions immersed in a bath of counter-ions

Using Ex Ante Payments in Self-Enforcing Risk-Sharing Contracts

In this paper we analyze a long-term risk-sharing contract between two risk-averse agents facing self-enforcing constraints. We enlarge the contracting space to allow for an ex ante transfer (at the beginning of the period) before the state of nature is realized. We analyze the trade-off between the self-enforcing constraints of the two agents by characterizing the optimal ex ante and ex post transfer payments. We show that optimal ex ante payments are non-stationary. They optimally depend on the surplus from the relationship each agent expects. The size of the ex ante payment an agent makes is inversely related to its expected surplus from the relationship. The introduction of ex ante payments generates interesting dynamic properties. In a two-state example with i.i.d. shocks, the dynamics of the optimal contract exhibit experience rating even though there is no private information or learning taking place. Ce papier analyse les propriétés dynamiques d'un contrat de partage de risque entre deux agents riscophobes qui font face à des contraintes de faillite. L'espace des contrats est élargi pour permettre aux agents d'effectuer un transfert au début de chacune des périodes avant la réalisation de l'incertitude. Ces paiements ex ante ne sont pas stationnaires. Ils dépendent du surplus que chaque agent attend de la relation. Ce paiement est inversement proportionnel à ce surplus. Dans un environnement i.i.d. à deux états de la nature, les propriétés dynamiques de la consommation de chacun des agents démontrent un lissage qui ressemble à de la tarification a posteriori.Risk sharing; Dynamic relationship; Self enforcing contracts, Partage de risque ; Relation dynamique ; Contrats auto-exécutoires

Disclosure of Information in Regulatory Proceedings

This paper examines how different rules for presentation of evidence affect verdicts in regulatory hearings and the welfare and efficiency properties these procedures exhibit. The hearing is modeled as a game of imperfect information in which the respondent is privately informed about validity of his case. The respondent may present evidence to support his case. The commission observes whether the respondent presents evidence, and the nature of the evidence presented to update its beliefs about the validity of the case. Based on these beliefs and the standard of proof for conviction, the commission decides whether the respondent's application should be accepted or rejected. The sequential equilibria of this game are examined for their implications regarding (i) the desirability of making disclosure of evidence mandatory rather than voluntary, (ii) the burden of proof undertaken by the respondent to prove his case, and (iii) the impact of information accuracy and disclosure costs on the outcome of the hearing and the welfare of the respondents. Ce papier étudie comment différentes règles pour la production de preuves peuvent influencer la prise de décision d'une agence de réglementation ainsi que les propriétés de bien-être de ces règles. Une firme réglementée possède une information privée quant à la validité de sa requête et peut produire des éléments de preuve pour la soutenir. Une agence de réglementation observe la preuve présentée par la firme et se forme alors une opinion sur la validité de la requête. Les équilibres de ce jeu sont caractérisés et les points suivants sont étudiés : (i) la production de certains éléments doit-elle être obligatoire ou volontaire ? (ii) quelles sont les conséquences du fardeau de la preuve que la firme doit supporter ? (iii) quel est l'impact de la précision de la preuve et des coûts associés à sa produciton sur la décision de l'agence et le bien-être de la firme ?Regulation; Imperfect information; Disclosure of evidence, Réglementation ; Information imparfaite ; Production de preuves

Incentives, Informational Economies of Scale, and Benchmarking

In this paper, we analyze the problem of providing incentives when there are more than one project. A principal has access to two (possibly correlated) projects which are managed by a single agent. Before undertaking a project, the agent-manager can spend some resources to investigate its quality, namely its probability of success. Only projects with a high probability of success are profitable, and therefore should be invested in. There are two classes of strategies. First, the manager may investigate only one project to save on investigation costs, but still use the acquired information to make an investment decision on the noninvestigated project. Second, the manager could investigate both projects, and make the investment decision based on the acquired information on each project. Comparing these two strategies, it would seem that the more correlated are the projects, the better it is to investigate only one project and use the acquired information to learn about the other project. And, when correlation is low, both projects should be investigated. There is, however, a third strategy that the principal could use. He could hire two agents, each managing one project. By making each agent's compensation dependent on the outcome of the project of the other agent, the principal creates some form of competition between them. When projects are highly correlated, endogenous competition provides incentives but duplicate investigation costs, while having one manager investigating only one project exploits informational economies of scale by economizing on investigation costs, but does not always yield the best investment decision since information on the noninvestigated project is not perfect. We assume that the investigation decision is private to the manager (moral hazard), as well as the information obtained doing so (adverse selection). We then show that the optimal structure depends, among other things, on the degree of correlation between the returns of the two projects. In general, delegating to one manager and investigating both projects is optimal when the projects are weakly correlated; delegating to two managers is optimal for intermediate values of the correlation coefficient, while delegating to one manager and investigating only one project may be optimal when projects are strongly correlated, depending on parameter values. We show that, for some parameter values, it may never be optimal to delegate to one manager and investigate only one project, and this even when projects are perfectly correlated. Endogenous competition is then optimal as it minimizes the cost of providing incentives to the managers, even though investigation costs are duplicated. In that case, delegating to two managers becomes optimal for intermediate and high values of the correlation coefficient.

Intermolecular correlations are necessary to explain diffuse scattering from protein crystals

Conformational changes drive protein function, including catalysis, allostery, and signaling. X-ray diffuse scattering from protein crystals has frequently been cited as a probe of these correlated motions, with significant potential to advance our understanding of biological dynamics. However, recent work challenged this prevailing view, suggesting instead that diffuse scattering primarily originates from rigid body motions and could therefore be applied to improve structure determination. To investigate the nature of the disorder giving rise to diffuse scattering, and thus the potential applications of this signal, a diverse repertoire of disorder models was assessed for its ability to reproduce the diffuse signal reconstructed from three protein crystals. This comparison revealed that multiple models of intramolecular conformational dynamics, including ensemble models inferred from the Bragg data, could not explain the signal. Models of rigid body or short-range liquid-like motions, in which dynamics are confined to the biological unit, showed modest agreement with the diffuse maps, but were unable to reproduce experimental features indicative of long-range correlations. Extending a model of liquid-like motions to include disorder across neighboring proteins in the crystal significantly improved agreement with all three systems and highlighted the contribution of intermolecular correlations to the observed signal. These findings anticipate a need to account for intermolecular disorder in order to advance the interpretation of diffuse scattering to either extract biological motions or aid structural inference.Comment: 12 pages, 5 figures (not including Supplementary Information

Information et marchés financiers : une revue de littérature

Cette revue de littérature étudie les problèmes d’information dans les marchés financiers. La première section établit un modèle de base qui étudie les effets des asymétries d’information sur le comportement des agents économiques et sur la nature de l’équilibre des marchés financiers. Dans la deuxième section, divers mécanismes incitatifs pouvant éliminer partiellement ou complètement les problèmes d’information sont ajoutés au modèle de base. Finalement, le rôle stratégique de la structure financière est étudiée dans la dernière section

UN FORUM SERIES – whistleblowing: a powerful tool to monitor human rights compliance

This post was contributed by Arnaud Poitevin, a business and human rights expert, PhD Candidate in international law at CNRS and lecturer in law at Université Sorbonne Paris Cité. Whistleblowers are individuals who disclose information about illicit activities and/or behaviour harmful to the public interest, facing the risk of serious retaliations. The case of Edward Snowden is well-known to everyone. Bradley Birkenfeld and Stéphanie Gibaud exposed illicit tax evasion schemes by major banks in the US and Europe respectively