Roaming in the Mobile Internet

With the acquisition of UMTS licenses Mobile Operators (MOs), have often been obliged to deploy 3G network infrastructures covering at least a given percentage of users by a given date. This paper discusses the rationale for imposing these minimum coverage requirements by regulatory bodies. To that end, a model is built, which studies the incentives for MOs to compete for market share and over coverage within an unregulated environment where MOs are assumed to be free to enter sharing agreements and to negotiate a reciprocal roaming charge. Within this framework, it is first shown that MOs would deploy their infrastructure to guarantee the coverage of the entire territory (population), but they would avoid any network duplication in order to maximize rents from roaming revenues. It is then discussed whether a minimum coverage requirement is the best policy to reduce these excess rents, or whether alternative measures could be adopted which could serve other goals as well, such as the avoidance of network duplication.     

Policymakers and the R&D-patent relationship

Patent-based indicators at the country level are frequently used to assess countries’ innovation performances or efforts. Yet they are often said to reflect the propensity to patent rather than actual research productivity. The authors of this article argue that patent-based indicators can rightfully be used to measure research productivity, as witnessed by the influence of several policy tools on the R&D-patent relationship. They also put forward a new counting methodology, less subject to “home” bias. ECARES and CEB, member of ECORE, Senior Fellow at Bruegel and CEPR Fellow. ECARES and CEB, member of ECORE, FNRS Research Fellow.     

Corporate insurance with optimal financial contracting

Summary. This paper attemps to rationalize the use of insurance covenants in financial contracts, and shows how external financing generates a demand for insurance by risk-neutral entrepreneurs. In our model, the entrepreneur needs external financing for a risky project that can be affected by an accident during its realization. Accident losses and final returns are private information to the firm, but they can be evaluated by two costly auditing technologies. We derive the optimal financial contract: it is a bundle of a standard debt contract and an insurance contract with franchise, trading off bankruptcy costs vs auditing costs. We then analyze how this optimal contract can be achieved by decentralized trading on competitive markets when insurance and credit activities are exogenously separated. With additive risks, the insurance contract involves full coverage above a straight deductible. We interpret this result by showing how our results imply induced risk aversion for risk-neutral firms. Received: December 14, 1998; revised version: August 11, 1999     

Scale Economies,Technical Efficiency,and the Sources of Total Factor Productivity Growth of Quebec Dairy Farms

Canada's average cost for milk production is among the highest in the world. This paper focuses on specific potential causes by estimating economies of scale and technical efficiency for a panel of Quebec dairy farms that spans the 2001–10 period. Additionally, this paper investigates the sources of total factor productivity growth. The stochastic frontier analysis, based on an input‐distance function, is used to estimate returns to scale relationships across dairy farms. The results show that there is significant economies scale to be exploited and that cost of production could also be reduced by improving technical efficiency. Accordingly, the paper indicates that input‐mix effect is the main source of total factor productivity growth. The results have important implications for Canada's supply management policy, and more specifically for the trading of production quota between dairy farmers, as well as for the delivery of targeted extension services.     

Informal and Formal Credit Markets and Credit Rationing in Cote d'Ivoire

This paper endeavours to shed light on the respective rolesof the formal and the informal credit markets in developingcountries. We use survey data for manufacturing firms in Côted'Ivoire, documenting their access to informal credit markets,their investments, and their financing. We confront these datawith a simple moral-hazard model of credit rationing. Becauseof socio-cultural effects, the magnitude of moral-hazard problemsand the cost of credit can be different in the informal creditmarket. We offer a structural econometric estimation of thismodel. Our empirical results point at severe moral-hazard problemsfor all firms, and reduced cost of credit in the informal market.Our point estimate suggests that moral-hazard problems can bealleviated in the informal credit market. Policy implicationsof our results are sketched.     

Seemingly Competitive Food Retail Regulations: Who Do They Really Help?

The food distribution and retail sectors in Quebec are highly concentrated and integrated as large food distributors are also involved in food retailing. As such, they are competing with small grocery and convenience stores they sell inputs to. A review of the industry suggests that there are important economies of size in distribution, but that smaller stores offering convenience face a more inelastic demand. Concerns over the survival of smaller stores in Quebec have motivated two types of regulations. The first type aims at reducing the cost advantage of dominant retailers by restricting the number of employees that they are allowed to use during specific time periods. The second type restricts retail prices. We develop a simple model capturing the main features of the industry to ascertain the impact of these regulations on retail and wholesale prices. Our results suggest that these regulations reduce welfare and may induce both tighter margins and lower surplus for small retailers. Au Québec, les secteurs du commerce de détail et de la distribution des aliments sont fortement concentrés et intégrés puisque les grands distributeurs d’aliments sont aussi engagés dans le commerce de détail. À ce titre, ils font concurrence aux petites épiceries et aux dépanneurs qu’ils approvisionnent. Un examen de l’industrie autorise à penser qu’il existe d’importantes économies de taille dans le secteur de la distribution, mais que les petites épiceries de dépannage sont confrontées à une demande plus inélastique. Les inquiétudes entourant la survie des petites épiceries au Québec ont motivé deux types de règlements. Le premier vise à diminuer l’avantage de coût des détaillants dominants en limitant le nombre d’employés pendant certaines périodes spécifiques. Le deuxième vise à limiter les prix de détail. Nous avons élaboré un modèle simple qui renferme les principales caractéristiques de l’industrie pour évaluer les répercussions de ces règlements sur les prix de détail et de gros. Nos résultats portent à croire que ces règlements diminuent le bien‐être et peuvent entraîner un resserrement des marges et une diminution des surplus des petits détaillants.     

A quasi-sure optional decomposition and super-hedging result on the Skorokhod space

Finance and Stochastics - We prove a robust super-hedging duality result for path-dependent options on assets with jumps in a continuous-time setting. It requires that the collection of martingale...