Weak links and the management of reputational interdependencies

This paper builds on a growing literature that takes into account the fact that firms in an industry may be interdependent with regard to their corporate reputations, thus sharing a “reputation commons.” We argue that the theory of public goods can help us to understand the interdependencies that link corporate reputations and to frame the contexts and requirements for collective action that they induce. In particular, we suggest that more and more frequently these interdependencies make industry reputation a “weak link” public good. We show that this raises new challenges for the strategic management of industry reputation by communities of firms. The discussion of these challenges is based on the case study of the collective action of the European chlorine companies towards restoring their reputation after being accused of not being safe, and on a model of the production of reputation by companies. Copyright © 2013 John Wiley & Sons, Ltd.     

REGULATION BY DUOPOLY

This paper analyzes, within the framework of the new regulatory economics that emphasizes asymmetries of information, the optimal structure of an industry. The duplication of fixed costs incurred in a duopoly structure may be socially justified in a static model by three effects: the sampling effect, the yardstick competition effect, and the increasing marginal cost effect.
We show that in general, asymmetric information favors duopoly when the market structure is decided before firms discovers their cost characteristics (a common situation in dual sourcing for procurement), and favors monopoly when the market structure is decided after firms discover their cost characteristics (the case of split-award auctions).     

Sustainable procurement: Building legitimacy in the supply network

The challenges introduced by sustainable development deeply affect purchasing and supply management practices and therefore foster a change in the firm's supply network. After a literature review on supply network management, sustainable sourcing and legitimacy, this paper presents the results of an in-depth case study of a gardening distributor which adopted a sustainable strategy. The analysis illustrates how the firm conquers its legitimacy in sustainable development through the evolution of its supply network. The paper highlights three types of legitimacy – product legitimacy, corporate legitimacy and cause legitimacy – and reveals the different roles of business and non-business actors in the firm's extended sustainable supply network.     

Fruit and vegetable access to EU markets: Dissecting tariffs faced by Mediterranean countries

This paper analyzes the access of Eastern and Southern Mediterranean countries to the EU fruit and vegetables market and provides a measure of the level of preferences from which they benefit. To take into account the complexity of EU protection in the F&V sector, in particular the seasonality of protection and the Entry Price System, we conducted our analysis at a very disaggregated level (eight digits of the nomenclature, monthly data). We showed that, on average, Mediterranean countries do have significant preferences compared to other countries exporting to the EU. However, the magnitude of the preferences differs among countries; Morocco has the highest preference, while Syria and Israel have the lowest. We simulated a multilateral reduction in the MFN tariffs (as planned in the Doha Round) and showed that this would reduce the heterogeneity within the zone by more strongly eroding the preferences of the most advantaged countries. The classification of Entry Price products as sensitive products would either benefit or have no effect on most Mediterranean countries.     

Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Stewardship Scheme Design Reduce Adverse Selection?

The Environmental Stewardship Scheme provides payments to farmers for the provision of environmental services based on foregone agricultural income. This creates a potential incentive compatibility problem which, combined with information asymmetry about farm land potential, can lead to adverse selection of land into the Scheme and therefore a less cost‐effective provision of environmental goods and services. However, the Higher Level Stewardship (HLS) Scheme design includes some features that potentially reduce adverse selection. This paper studies the adverse selection problem of the HLS using a principal‐agent framework at the regional level. It is found that, at the regional level, the enrolment of more land from lower payment regions for a given budget constraint has reduced the adverse selection problem through contracting a greater overall area and thus higher overall environmental benefit. In addition, for landscape regions with the same payment rate (i.e. of the same agricultural value), differential weighting of the public demand for environmental goods and services provided by agriculture (measured by weighting an environmental benefit function by the distance to main cities) appears to be reflected in the regulator’s allocation of contracts, thereby also reducing the adverse selection problem.     

Infrastructure and Public Utilities Privatization in Developing Countries

Should governments in developing countries promote private ownershipand deregulated prices in noncompetitive sectors? Or shouldthey run publicly owned firms and regulate prices at the expenseof rents to insiders? A theoretical model is used to answerthese normative questions. The analysis focuses on the tradeoffbetween fiscal benefits and consumer surplus during privatizationof noncompetitive sectors. Privatization transfers control rightsto private interests and eliminates public subsidies, yieldingbenefits to taxpayers at the cost of increased prices for consumers.In developing countries, where budget constraints are tight,privatization and price liberalization may be optimal for lowprofitability industries but suboptimal for more profitableindustries. And once a market has room for more than one firm,governments may prefer to regulate the industry. Without a credibleregulatory agency, regulation is achieved through public ownership.     

COMPETITIVE GROWTH IN A LIFE‐CYCLE MODEL: EXISTENCE AND DYNAMICS*

The dynamic behavior of the capital growth rate is analyzed using an overlapping‐generations model with continuous trading. Assuming a technology satisfying constant social returns to capital, the equilibrium growth rate is piecewise‐defined by functional differential equations with both delayed and advanced terms. The main result concerns the existence of a solution expressed as a series of exponentials, which is shown to crucially depend on the initial wealth distribution among cohorts. Upon existence, the dynamics of the capital growth rate has a saddle‐point trajectory that converges to a unique steady state. Along the transition path, the growth rate exhibits exponentially decreasing oscillations.