Profutures. The birth of the strategic prospective and futures studies international network for applied methodology

On 30 September and 1 October 1993, the European Commission's Institute for Prospective Technological Studies (PROMPT) organized a meeting, in collaboration with LIPS-CNAM (the Laboratory for Investigation in Prospective and Strategy of the Conservatoire National des Arts et Métiers in Paris), on the theme: ‘Methods and tools in strategic prospective: retrospective and perspectives’. The main outcome of this meeting, which brought together 23 international experts from the strategic prospective-futures studies field at the Ispra campus of the EC's joint Research Centre, was the creation of a new network, devoted to applied methodology, to be known as Profutures.     

Downstream Competition, Foreclosure, and Vertical Integration

This paper analyzes the effect of competition among downstream firms on an upstream firm's payoff and on its incentive to integrate vertically when firms in both segments negotiate optimal contracts. We argue that as downstream competition becomes more intense, the upstream firm obtains a larger share of a smaller downstream industry profit. The upstream firm may encourage downstream competition (even excessively) in response to high downstream bargaining power. The option of vertical integration may be a barrier to entry downstream and may trigger strategic horizontal spinoffs or mergers. We extend the analysis to upstream competition.     

Price Rigidity and the Selection of the Exchange Rate Regime

We evaluate and qualify Friedman's, 1953, “case for flexible exchange rates” in the presence of sticky prices in a two country model. We find that a flexible regime performs indeed better when the degree of nominal price rigidity is high while a bilateral peg does better when prices are fairly flexible. This result obtains independent of whether monetary policy is activistic or not and is mostly due to the negative relationship between employment and productivity shocks when prices are relatively sluggish (Gali, 1999). A unilateral peg tends to produce the lowest level of world welfare but it sometimes represents the best monetary arrangement for the pegger. JEL Classification Numbers: E32, E52, F33, F42     

Communication externalities in cities

To identify communication externalities in French cities, we exploit a unique survey recording workplace communication of individual workers. Our hypothesis is that in larger and/or more educated cities, workers should communicate more. In turn, more communication should have a positive effect on wages. By estimating both an earnings and a communication equation, we find evidence of communication externalities. In larger and more educated cities, workers communicate more and in turn this has a positive effect on their wages. Depending on the estimates, we find that 13 to 22% of the effects of a more educated and larger city on wages percolate through this channel.     

Economic Integration, Factor Mobility, and Wage Convergence

This paper studies the effect of economic integrationof two regions on the mobility of skilled and unskilled workersacross regions and on the resulting location of industrial activity.In particular, we study what happens when wages in both regionsare set by the unions of the West—the region with agreater initial relative stock of human capital. We show thatunder some circumstances, it is the interest of the West's unionsto set up a speed of wage convergence greater than equilibrium,thus generating unemployment in the East. This slows the migrationof human capital toward the East, but quickens the migrationof raw labor toward the West. A greater share of economic activityis eventually located in the Western region. Unions in the Westwill benefit from this provided human capital has low migrationcosts relative to raw labor.     

Risk-sharing networks and farsighted stability

Evidence suggests that in developing countries, agents rely on mutual insurance agreements to deal with income or expenditure shocks. This paper analyzes which risk-sharing networks can be sustained in the long run when individuals are farsighted, in the sense that they are able to forecast how other agents would react to their choice of insurance partners. In particular, we study whether the farsightedness of the agents leads to a reduction of the tension between stability and efficiency that arises when individuals are myopic. We find that for extreme values of the cost of establishing a mutual insurance agreement, myopic and farsighted agents form the same risk-sharing networks. For small costs, farsighted agents form efficient networks while myopic agents don’t.     

Is Supply's Actual Contribution to Sustainable Development Strategic and Operational?

This paper addresses the issue of how sustainable supply practices are actually used as a leverage for sustainable development (SD). In order to assess the level of sustainable supply management within an organization, the authors have reviewed the literature extensively and then developed a five‐step maturity model around five management dimensions. A qualitative exploratory approach based on two detailed case studies of organizations whose reputation for SD is recognized internationally has been used. This methodology allowed us to show (1) how sustainable supply practices could be used as a leverage for an organization's sustainable development approach and (2) that sustainable supply practices still have quite a distance to go with regards to the maturity model for sustainable supply, even in organizations that are often mentioned as leaders in the SD area. In these organizations, managers still emphasize environmental considerations, while neglecting practices that would make it possible to reach the three SD objectives simultaneously. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Stochastic regularization for the mean-variance allocation scheme

Despite being based on sound principles, the original Markovitz portfolio allocation theory cannot produce sound allocations, and restrictions or modifications need to be imposed from outside the theory in order to obtain meaningful portfolios. This is unsatisfactory, and the reasons for this failure are discussed, in particular, the unavoidable small eigenvalues of the covariance. Within the original principles of risk minimization and return maximization, several modifications of the original theory are introduced. First, the strategic and tactical time horizons are separated. A base long-term allocation is chosen at the strategic time horizon, while the portfolio is optimized at the tactical time horizon using information from the price histories. Second, the tactical portfolio is financed by the strategic one, and a funding operator is introduced. The corresponding optimal allocation (without constraints) has one free parameter fixing the leverage. Third, the transaction costs are taken into account. This includes the current re-allocation cost, but crucially the expected costs of the next reallocation. This last term depends on the sensitivity of the allocation with respect to the covariance, and the expectation introduces another dependency on the (inverse) covariance. The new term regularizes the original minimization problem by modifying the lower part of the spectrum of the covariance, leading to meaningful portfolios. Without constraints, the final Lagrangian can be minimized analytically, with a solution that has a structure similar to the original Markovitz solution, but with the inverse covariance regularized by the expected transaction costs.