Dynamic multilateral markets

We study dynamic multilateral markets, in which players' payoffs result from intra-coalitional bargaining. The latter is modeled as the ultimatum game with exogenous (time-invariant) recognition probabilities and unanimity acceptance rule. Players in agreeing coalitions leave the market and are replaced by their replicas, which keeps the pool of market participants constant over time. In this infinite game, we establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type's equilibrium payoff as the market frictions vanish

European Specialist Porphyria Laboratories: Diagnostic Strategies, Analytical Quality, Clinical Interpretation, and Reporting As Assessed by an External Quality Assurance Program

BACKGROUND: The porphyrias are a group of rare metabolic disorders whose diagnosis depends on identification of specific patterns of porphyrin precursor and porphyrin accumulation in urine, blood, and feces. Diagnostic tests for porphyria are performed by specialized laboratories in many countries. Data regarding the analytical and diagnostic performance of these laboratories are scarce. METHODS: We distributed 5 sets of multispecimen samples from different porphyria patients accompanied by clinical case histories to 18–21 European specialist porphyria laboratories/centers as part of a European Porphyria Network organized external analytical and postanalytical quality assessment (EQA) program. The laboratories stated which analyses they would normally have performed given the case histories and reported results of all porphyria-related analyses available, interpretative comments, and diagnoses. RESULTS: Reported diagnostic strategies initially showed considerable diversity, but the number of laboratories applying adequate diagnostic strategies increased during the study period. We found an average interlaboratory CV of 50% (range 12%–152%) for analytes in absolute concentrations. Result normalization by forming ratios to the upper reference limits did not reduce this variation. Sixty-five percent of reported results were within biological variation–based analytical quality specifications. Clinical interpretation of the obtained analytical results was accurate, and most laboratories established the correct diagnosis in all distributions. CONCLUSIONS: Based on a case-based EQA scheme, variations were apparent in analytical and diagnostic performance between European specialist porphyria laboratories. Our findings reinforce the use of EQA schemes as an essential tool to assess both analytical and diagnostic processes and thereby to improve patient care in rare diseases

Incomplete Contracts with Asymmetric Information: Exclusive v. Optional Remedies

Law and economics scholars have always had a strong interest in contract remedies. Perhaps the most explored issue in contract law has been the desirability of various contract remedies, such as expectation damages, specific performance, or liquidated damages, to name the most common. Scholars have been debating for years, from various perspectives, the comparative advantage of these remedies. Yet, most scholars have assumed that each of these remedies is exclusive, and their work has compared a single remedy contract to another single remedy contract. Interestingly, an analysis that assumes these remedies are optional (or cumulative) has not yet been explored, in spite of the fact that contract law provides the non-breaching party with a variety of optional remedies to choose from in case of a breach, and in spite of the fact that parties themselves write contracts which provide such an option. In this paper we attempt to start filling in this gap by studying the relationship between these remedies. Specifically, we study the conditions at which a contract that grants the non-breaching party an option to choose from optional remedies is superior to an exclusive remedy contract. We show that under conditions of double-sided uncertainty and asymmetric information between a seller (who might breach) and a buyer (who never breaches) the interaction of the parties\u27 distributions should determine whether a contract provides for exclusive or optional remedies. Specifically, if the buyer\u27s conditional expected valuation is larger than the seller\u27s conditional expected valuation (in both cases - conditional that their expected valuation is above the buyer\u27s mean valuation), then a contract which provides the buyer an option to choose between liquidated damages or specific performance (or actual damages) is superior. Our analysis in this paper informs transactional lawyers of the relevant economic factors they should consider when deciding the optimal composition of remedies in a given context. Moreover, our analysis is relevant for courts that interpret contracts because it will help them to better understand whether rational parties would have agreed that a particular remedy would be an exclusive remedy or an optional remedy when the language of the contract is ambiguous. Lastly, our analysis provides yet another economic rationale for why courts should enforce parties\u27 liquidated damages clauses even if it seems ex-post over, or under, compensatory. We present a model which shows when parties will agree on a non-exclusive liquidated damages clause. Under such a contract the parties stipulate ex-ante that the buyer will have the option to choose upon breach whether she prefers an optional remedy, such as actual damages or specific performance, to the pre-determined liquidated damages. We focus on the ex-ante design of the contract in light of the new information that the parties anticipate they will gain after they draft the contract. Therefore, we assume that no renegotiation or investments are involved. We demonstrate the optimal way to design contract clauses which takes advantage of the information that the seller and the buyer receive between the time they enter into the contract and the time of the actual breach. We further suggest that parties indeed use such clauses and that courts honor them. After laying out the basic model we provide some extensions to it. As is well known, an exclusive liquidated damages contract is equivalent to granting the seller a call option to breach and pay, where the exercise price is equal to the amount of the agreed liquidated damages. What is perhaps less known is that a non-exclusive, or optional, contract, where the buyer can choose performance, is equivalent to giving the buyer a consecutive call option with the same exercise price. Yet, the consecutive call option to the buyer does not have to have the same exercise price but can rather have a higher one. We call this new contract a two-price contract and show that it is even more efficient than the basic contract we have explored before. Next, we introduce more rounds of sequential options and show that while the regular ex-ante contract can achieve on average about 4 Indeed, in an environment of asymmetric information renegotiation costs are high. More on this below. 90% of the first-best allocative efficiency, an n-rounds contract approaches the first best, as n goes to infinity. We show numerically that within just 4 rounds, 96% of the allocative efficiency can be achieved. Section two describes the legal background against which we have designed our model. Section three surveys the literature that evaluates contract remedies from an economic perspective. Section four presents a simple model with two-sided incomplete information and with a liquidated damages clause. In section four we compare the performance of a regime with optional remedies with a regime of exclusive remedy and then determine the conditions at which each regime should be applied. Section five discusses some interesting extensions meant to approach the first-best allocative efficiency. The appendix provides a more rigorous mathematical demonstration of the model

An empirical analysis of countervailing power in business-to-business bargaining

Pricing schemes in business-to-business (B2B) relationships reflect price discrimination and bargaining over rents. Bargaining outcomes are determined by upstream market power and countervailing buyer power downstream. This paper uses an exceptional panel of B2B transactions in the UK brick market to study B2B transaction prices. The empirical analysis identifies three effects on prices: nonlinear volume and freight absorption effects; countervailing power effects arising from buyers' local commercial significance; and competition effects due to the buyers' local potential suppliers. And it shows that small buyers benefit more from competition than large buyers because they are not constrained by the suppliers' capacity