Do Vertical Mergers Facilitate Upstream Collusion?

In this paper we investigate the impact of vertical mergers on upstream firms’ ability to sustain collusion. We show in a number of models that the net effect of vertical integration is to facilitate collusion. Several effects arise. When upstream offers are secret, vertical mergers facilitate collusion through the operation of an outlets effect: Cheating unintegrated firms can no longer profitably sell to the downstream affiliates of their integrated rivals. Vertical integration also facilitates collusion through a reaction effect: the vertically integrated firm’s ‘contract’ with its downstream affiliate can be more flexible and thus allows a swifter reaction in punishing defectors. Offsetting these two effects is a possible punishment effect which arises if the integrated structure is able to make more profits in the punishment phase than a disintegrated structure.vertical mergers, collusion

Reputational contagion and optimal regulatory forbearance

This paper examines common regulation as cause of interbank contagion. Studies based on the correlation of bank assets and the extent of interbank lending may underestimate the likelihood of contagion because they do not incorporate the fact that banks have a common regulator. In our model, the failure of one bank can undermine the public’s confidence in the competence of the banking regulator, and hence in other banks chartered by the same regulator. Thus depositors may withdraw funds from their, unconnected, banks. The optimal regulatory response to this ‘panic’ behaviour can be to privately exhibit forbearance to the initially failing bank in the hope that it - and hence other vulnerable banks - survives. By contrast, public bailouts are ineffective in preventing panics and must be bolstered by other measures such as increased deposit insurance coverage. Regulatory transparency improves confidence ex ante but impedes regulators’ ability to stem panics ex post. JEL Classification: G21, G28Bank Regulation, Contagion, Reputation

Precautionary Bidding: First Price Auctions with Stochastic Private Values

We analyse a first-price auction where risk-averse bidders bid for an object whose value is risky. Using a private values setting, we provide the first analysis of the pure comparative statics of risk in auctions. We show that as risk increases, decreasingly risk-averse bidders will reduce their bids by more than the risk premium. Ceteris paribus, bidders will be better off bidding for a more risky object. This effect arises because as risk increases, so does the expected marginal utility of income, so bidders are reluctant to bid so highly. Even in the presence of this effect, the expected revenue of a first price auction remains higher than that of a second price auction. We show how this result extends to common values.

When and how the punishment must fit the crime

In repeated normal-form (simultaneous-move) games, simple penal codes (Abreu,1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes. We show that the logic of simple penal codes fails in repeated extensive-form games. By means of examples, we identify two types of settings in which a subgame-perfect outcome may be supported only by a profile with the property that the continuation play after a deviation is tailored not only to the identity of the deviator, but also to the nature of the deviation

The personal tutor as a role model for students: humanising nursing care.

This article explores how nurse academics in one British university uphold and role model the humanising framework developed by Todres et al (2009). It gives a brief overview of nurse education in the UK. Next it outlines the nature of the personal tutor role. It then offers an overview of the humanising framework, its background and embodiment in the undergraduate nursing curriculum. It explores how nurse academics role model humanisation and how this influences and impacts on students’ ability to live and apply the humanising dimensions of nursing to enhance patients’ lived experience of care. It concludes with examples of how this encourages positive meaningful relationships between students and tutors