The role of private litigation in antitrust enforcement

In this article, we study the effects of encouraging private actions for breaches of competition law. We also analyze how to design a private litigation system which deters anticompetitive actions without deterring legitimate pro-competitive actions.Private Antitrust Litigation

The roles of reputation and transparency on the behavior of biased experts

We analyze situations in which an expert is biased toward some decision but cares also about his reputation in the market for experts. The information the expert reveals decreases as his bias moves toward stronger preference for the status quo. We show that it is optimal to publicly disclose both the expert's contribution and his identity. Surprisingly, revealing the intensity of the expert's bias doesn't always improve the information he reveals in equilibrium. The presence of a second expert raises the first expert's incentives to report truthfully when reports are public, but reduces them when they are secret. In particular, having an option to call another expert may be detrimental in terms of information production if reports are not public. Finally, sequential consultation of experts reduces the information obtained when reports are public, but raises it when they are secret.Experts, Bias, Reputation

Group lending with endogenous group size

This paper focuses on the size of the borrower group in group lending. We show that, when social ties in a community enhance borrowers' incentives to exert effort, a profit-maximizing financier chooses a group of limited size. Borrowers that would be fundable under moral hazard but have insufficient social ties do not receive funding. The result arises because there is a trade-off between raising profits through increased group size and providing incentives for borrowers with less social ties. The result may explain why many micro-lending institutions and rural credit cooperatives lend to groups of small size.Group Lending; Moral Hazard; Social Capital

Collusion in Board of Directors

There is a large literature on the composition of the boards as well as the monitoring role and the advisory role of the boards. Nevertheless, the problem of collusion between the CEO and the board has receive little attention. The aim of this paper is to study collusive aspects of the board of directors. Our paper sheds light on the problem of composition of the board of directors. We study what is the optimal composition of the board of directors in particular if it is preferable to have a insider-oriented board or a outsider-oriented board with a majority of independent directors. We consider that a board of independent directors that are all chosen directly by the CEO is a friendly board if the independent directors follow the decision of the CEO. We study the case of collusion considering a CEO facing a choice of projects.We propose a model where we have di¤erent projects each with a certain level of risk. The choice of the best project for the company is function of remuneration of the CEO as well as the private benefits of the CEO

The role of agency costs in financial conglomeration

This paper focuses on the role of managerial agency costs in financial conglomeration. We model conglomeration as the integration of commercial and investment banking in one organizational unit where bank managers accomplish both activities. We assume that managers differ in their abilities to undertake the individual tasks. The higher is a manager's ability in undertaking one task, the lower is her disutility of effort for that activity and the higher is her disutility of effort for the other task. When there is no managerial moral hazard, it is not optimal for the bank to form a conglomerate. We show that under managerial moral hazard, forming a conglomerate may be in the bank's interest because it may entail lower agency costs and a larger group of borrowers to fund.Financial Conglomerates, Commercial Banking, Investment Banking, Banking Organization, Multi-task, Moral Hazard

Collusion in board of directors

The aim of this paper is to study what is the best structure of a Board of Directors when collusive aspects between the Board and the CEO are taken into account. We analyze how shareholders should select the members of the Board in a framework with asymmetric information and uncertainty about the optimal projects for the firm. In particular, we examine the optimal degree of independence of the Board from a shareholders perspective. This allows us to state when it is beneficial for shareholders to have an insider-oriented board or an outsider oriented board with a majority of independent directors when collusion is a major threat.Collusion, Corporate Governance, Asymmetric Information, Uncertainty

Expertise and Bias in Decision Making

In this paper, we develop a model of a decision maker using an expert to obtain information. The expert is biased toward some favoured decision but cares also about its reputation on the market for experts. We then analyse the corresponding decision game depending on the nature of the informational linkage with the market. In the case where the expert is biased in favour of the status quo, the final decision is always biased in the same direction. Moreover, it is better to rely on experts biased against the status quo. We also show that it is optimal to publically disclose the expert report. Finally, we prove that the intuitive results that hiring an honest inside expert raises the outside expert's incentives to report truthfully holds when reports are public but not when they are secret.Experts, Bias, Reputation, Merger Control

Private antitrust enforcement in the presence of pre-trial bargaining

We study the effect of encouraging private actions for breaches of competition law. We develop a model in which a plaintiff, who may have private information about whether a breach of law has been committed, decides whether to open a case against a defendant. If opened, the case may be settled out of court or may proceed to full trial. The authorities can facilitate private actions by lowering the costs of opening a case or of proceeding to a full trial, or by raising the damages to be expected in the event of success. We show that facilitating private action increases the number of cases opened and sometimes but not always makes plaintiffs more aggressive in pre-trial bargaining. The latter, if it occurs, tends to make defendants who have committed anti-trust violations more likely to settle than innocent defendants. We also show that for screening to work requires the Court to be committed to rely only on submitted evidence in the case, and not on other possibly relevant background material. We finally study how to design the rules so as to enhance the role of private litigation on antitrust enforcement and prove that it is better to increase damages that to reduce costs of initiating a suit. In particular we find large benefits from introducing a system of compensation for Defendants found non-liable, paid by unsuccessful plaintiffs.litigation, private actions, out-of-court settlement, enforcement

Private Antitrust Enforcement in the Presence of Pre-Trial Bargaining

We study the effect of encouraging private actions for breaches of competition law. We develop a model in which a plaintiff, who may have private information about whether a breach of law has been committed, decides whether to open a case against a defendant. If opened, the case may be settled out of court or may proceed to full trial. The authorities can facilitate private actions by lowering the costs of opening a case or of proceeding to a full trial, or by raising the damages to be expected in the event of success. We show that facilitating private action increases the number of cases opened and sometimes but not always makes plaintiffs more aggressive in pre-trial bargaining. The latter, if it occurs, tends to make defendants who have committed anti-trust violations more likely to settle than innocent defendants. We also show that for screening to work requires the Court to be committed to rely only on submitted evidence in the case, and not on other possibly relevant background material. We finally study how to design the rules so as to enhance the role of private litigation on antitrust enforcement and prove that it is better to increase damages that to reduce costs of initiating a suit. In particular we find large benefits from introducing a system of compensation for Defendants found non-liable, paid by unsuccessful plaintiffs.

Diversification of Investor's Expertise in IPOs

In most Initial Public Offerings (IPO) in the world, the underwriter selects syndicate members and uses the information of their investors' clientele to set the offering price. The objective of this paper is to develop a model of the "book building" process in which the formation of the syndicate is an endogenous decision variable. More specifically, I will examine in which cases the lead underwriter will benefit from selecting syndicate members with different investors clientele characterized by a specific line of expertise. I model the fact that different investors have different lines of expertise in assuming that the uncertainty about the value of the shares has two dimensions. One may think about those two dimensions as information elicited from retail and institutional investors. Another interpretation may be that the first dimension is an industry-specific information and the second one, information from a local underwriter. A lead underwriter may also value both particular information about the issuer and indications of interest from key institutional investors coming from previous relationships of a syndicate member. In previous IPO's models with one dimensional uncertainty about the value of the shares, the underwriter must underprice shares to extract information from investors. Informational rents are therefore concealed to these investors in order to induce them to reveal their information and this results in underpricing. In this multi-dimensional context, I prove that it is not always optimal for the decision-maker to acquire all available information about the value of the shares. When deciding which syndicate's organization she wants to implement, the underwriter faces a trade off between the cost of extracting information and the informational efficiency. I show that it is optimal for the lead underwriter to select syndicate members having investors' clienteles with different lines of expertise when she faces a great informational problem, when she values more price accuracy, when the firm going public is more transparent, riskier, and when the capacity of the retail investors increases, which is consistent with the empirical evidence