Trade uncertainties and the hedging abilities of Bitcoin

In this paper, we first estimate the monthly realised correlation, based on daily data, between stock returns of the United States (US) and Bitcoin returns. Then, we relate the realised correlation over the period October 2011 to May 2019 with a news-based measure of the growth of trade uncertainty of the US. Our results show that the realised correlation is negatively impacted by increases in trade uncertainty, which continues to hold under alternative robustness checks, suggesting that Bitcoin can act as a hedge relative to the conventional stock market in the wake of heightened trade policy-related uncertainties, and provide diversification benefits for investors.     

Industrial Policies in France: The Old and the New

Industrial policy is mainly sector based in France, moulding industrial specialization and often promoting “grand projects.” It intended to make use of economies of scale, specifically in technologically sophisticated sectors and has been labelled as High Tech Colbertism. The European unification and the Single Market Programme has to some extent converted European industrial policy to the horizontal approach, banning sectoral activities, promoting framework policies, and a sound macro economic policy. The Lisbon strategy then designed a new agenda for growth which acknowledged a gap in competitiveness relative to the USA. In France new initiatives were launched in the past decade, which to some extent are echoing the French type of industrial policy. Regional cluster programs (“poles de competitivité”) were introduced, an industrial innovation agency and a national research agency were founded and the Oseo program promotes small and medium firms. The history, preconditions and chances of the new initiatives are analysed.     

Union–firm bargaining: Order of play and efficiency

This paper shows that a modified alternating offers Rubinstein model can provide a Pareto superior outcome in the context of the right-to-manage union–firm bargaining. Two examples of bargaining protocols that yield a superior outcome are provided. In the first example, the parties engage in a game in which the order of play is determined as part of the bargaining. We show that the game has a unique subgame perfect equilibrium in which the firm always moves first in the wage bargaining game. The equilibrium wage is, therefore, unique. In the second example, we examine a two-part-tariff alternating offers bargaining protocol, where the parties bargain over the wage and transfer payments. We show that this bargaining protocol has a Pareto efficient, unique subgame perfect equilibrium. Thus, although the parties do not bargain over the level of employment, the outcome under this protocol is, nevertheless, socially optimal.     

Innovation Strategy and Entry Deterrence

We model an incumbent’s decision to pursue radical or incremental innovation when facing a rival entrant. The radical innovation may yield lucrative financial returns but entails significant technological and market‐related uncertainties. It is also particularly attractive to the rival entrant: if the market for it pans out, such an innovation obsoletes the existing technology and any incremental improvements to it. Each firm has its own assessment of the market potential for the radical innovation, and the reliability of these market forecasts can differ. We show that when the entrant’s market‐assessment capability is weak, the incumbent will pursue incremental innovation and postpone its plans to develop radical innovation even when it thinks highly of the market potential for the radical innovation. The incumbent does so to avoid validating the high market potential to the entrant, who may otherwise be encouraged to invest aggressively. The incumbent thus prefers to look “soft” with respect to its innovation strategy in order to discourage entry. Even if its innovation strategy is not observable, we show that an incumbent that assesses the commercial potential for a radical innovation favorably may pursue an incremental path and communicate its plans publicly; this strategy serves to reduce entry by affecting the entrant’s beliefs about the market potential of the innovation. Finally, we extend the model to investigate the entrant’s decision to communicate its innovation intentions. We find that the entrant communicates its plans to aggressively pursue radical innovation only if the incumbent’s market‐assessment capabilities are strong. In doing so, the entrant acts preemptively to discourage the incumbent from pursuing the radical innovation, and is less concerned with validating market potential.     

Import-Price Uncertainty, Production Decisions, and Relative Factor Shares

The effects of import-price uncertainty on factor income in Switzerland are estimated. The production-theory approach is used to derive the import demand function from an expected utility maximization problem, treating imports as an input to the technology. The model is also used to test for risk aversion and to assess the impact of uncertainty on the volume of imports and gross output. Evidence is found that, for most years, labor has been relatively more vulnerable to uncertainty than has capital.     

The Lindahl equilibrium in Schumpeterian growth models

The main motivation of the paper is to determine the social value of innovations in a standard scale-invariant Schumpeterian growth model, which explicitly introduces knowledge diffusion over a Salop (Bell J Econ 10(1):141–156 1979) circle. The social value of an innovation is defined as the optimal value of the knowledge inherent in this innovation. We thus have to price optimally knowledge. For that purpose, contrary to what is done in standard growth theory, we complete the markets using Lindahl prices for knowledge. The Lindahl equilibrium, which provides the system of prices that sustains the first-best social optimum in an economy with non rival goods, appears as a benchmark. First, its comparison with the standard Schumpeterian equilibrium à la Aghion and Howitt (Econometrica (60)2:323–351 1992) enables us to shed a new light on the issue of non-optimality of the latter. Second, the Lindahl equilibrium also allows us to revisit the issue of R&D incentives in presence of cumulative innovations. Finally, this benchmark may be a first step to understand how knowledge is exchanged in new technology sectors.     

Testing price taking behavior

The purpose of this paper is to present an empirically implementable technique for the analysis of non-competitive behavior in production. We provide a statistical test for the price taking behavior hypothesis which can be used to distinguish among different market structures. We apply this approach to the U.S. crude petroleum and natural gas industry and find that the price taking behavior hypothesis is not appropriate for this industry.     

Spillovers between Bitcoin and other assets during bear and bull markets

This article contributes to the embryonic literature on the relations between Bitcoin and conventional investments by studying return and volatility spillovers between this largest cryptocurrency and four asset classes (equities, stocks, commodities, currencies and bonds) in bear and bull market conditions. We conducted empirical analyses based on a smooth transition VAR GARCH-in-mean model covering daily data from 19 July 2010 to 31 October 2017. We found significant evidence that Bitcoin returns are related quite closely to those of most of the other assets studies, particularly commodities, and therefore, the Bitcoin market is not isolated completely. The significance and sign of the spillovers exhibited some differences in the two market conditions and in the direction of the spillovers, with greater evidence that Bitcoin receives more volatility than it transmits. Our findings have implications for investors and fund managers who are considering Bitcoin as part of their investment strategies and for policymakers concerned about the vulnerability that Bitcoin represents to the stability of the global financial system.     

Inference on endogenously censored regression models using conditional moment inequalities

Under a quantile restriction, randomly censored regression models can be written in terms of conditional moment inequalities. We study the identified features of these moment inequalities with respect to the regression parameters where we allow for covariate dependent censoring, endogenous censoring and endogenous regressors. These inequalities restrict the parameters to a set. We show regular point identification can be achieved under a set of interpretable sufficient conditions. We then provide a simple way to convert conditional moment inequalities into unconditional ones while preserving the informational content. Our method obviates the need for nonparametric estimation, which would require the selection of smoothing parameters and trimming procedures. Without the point identification conditions, our objective function can be used to do inference on the partially identified parameter. Maintaining the point identification conditions, we propose a quantile minimum distance estimator which converges at the parametric rate to the parameter vector of interest, and has an asymptotically normal distribution. A small scale simulation study and an application using drug relapse data demonstrate satisfactory finite sample performance.     

Paradigm Conflict and the Wealth Effects of Blockholder Formation in Private Target Acquisitions

Decision making in public companies follows an organized structure dominated by risk aversion. The decisions in private entrepreneurial firms tend to be driven by overconfidence and reliance on trial and error. Such entrepreneurial attitudes are reinforced by high levels of profitability. The authors argue that this difference in decision-making paradigms limits the wealth effect of blockholder formation by the profitable private target's owners in mergers and acquisitions. Blockholder formation by private target owners is associated with substantial acquirer shareholder gains in the acquisitions of targets with relatively low and moderate profitability levels. To the opposite, the market reacts to blockholder formation by the owners of highly profitable targets with skepticism. Such announcements are associated with insignificant wealth effects overall and substantial acquirer losses in acquisitions in human capital-intensive sectors whereby disagreements are likely to be consequential. Acquirers understand these wealth effects and reduce the extent of stock financing when acquiring highly profitable targets.