The impact of regulating mobile termination rates and MNO-MVNO relationships on retail prices

A mobile virtual network operator (MVNO) provides mobile telecommunication services by eluding the constraints of the radio communication infrastructure and establishing an agreement with a hosting network operator (HNO) for the use of its spectrum. Thus, MVNOs offer a wide range of mobile services and directly compete with every mobile network operator (MNO). This paper studies the economic justifications for potential regulatory intervention that defines the level of mobile termination rates (MTRs) and negotiations and agreements among MVNOs and HNOs. The results show that symmetric MTR reduction leads to competition growth among operators, forcing every operator to reduce retail prices and, consequently, to enhancing consumer welfare. The paper also finds that a collaborative strategy adopted by an HNO and an MVNO is advantageous for both and induces a reduction in retail prices, thus weakening other MNOs.     

Exchange Rate Passthrough to Export Prices: Assessing Cross‐Country Evidence*

A growing empirical literature reports evidence of a decline in exchange rate passthrough to import prices in a number of industrial countries. Our paper complements this literature by examining passthrough from the other side of the transaction; that is, we assess the exchange rate sensitivity of export prices (denominated in the exporter's currency). We find that the prices charged on exports to the United States are more responsive to the exchange rate than are export prices to other destinations, which is consistent with results in the literature that import price passthrough in the US market is relatively low. In addition, the exchange rate sensitivity of export prices over time has been significantly affected by country‐ and region‐specific factors, including the Asian financial crisis (for emerging Asia), deepening integration with the United States (for Canada), and the effects of the 1992 ERM crisis (for the United Kingdom).     

Burger King and McDonald’s: Where’s the Spillover?

This paper studies how spillover effects from competitors’ choices affect a firm’s decision to open a store. Using panel data from the UK’s fast food industry, I propose and estimate a game of entry under incomplete information that incorporates spillover effects between firms’ entry decisions. A positive spillover is identified for Burger King – increasing the stock of existing McDonald’s by one outlet increases Burger King’s estimated equilibrium probability of opening a new store by approximately 18 percentage points. Furthermore, the estimated model suggests that this spillover affects Burger King’s variable profit, as opposed to its fixed cost of entry. It is less clear whether this externality matters for McDonald’s.     

On the cumulants of the logarithmic generalized variance and variance ratio

Summary

In dealing with certain extensions of the analysis of variance to samples from a multivariate normal population Wilks [4] introduced the quantity ‘generalized variance’ |S|, where |S| represents the determinant of the sample variances and covariances. He was able to obtain its distribution for a few special cases. The following note gives the general expressions for the cumulants of log |S| which is of interest in present asymptotic multivariate tests (cf. e.g. [2]).     

Organizational performance with a broader focus: The case for a stakeholder approach to leadership

In 2019, BlackRock CEO Larry Fink, Apple CEO Tim Cook, and the other 179 CEO members of the Business Roundtable argued that the purpose of a corporation must reflect not only the fiduciary interests of owners but also the varied interests of all stakeholders: employees, customers, partners, and broader society. This idea challenges a decades-old norm of shareholder primacy, so it is reasonable for organizational leaders to wonder whether doing so is truly in their firms’ best interests, and if so, how to implement this approach to leadership. To answer these questions, we draw on over 200 peer-reviewed articles covering leadership research to demonstrate how servant leadership, a stakeholder-focused approach to management, outperforms other leadership approaches across both shareholder and stakeholder criteria. We leverage case studies of organizational leaders from SAS, Zappos, Starbucks, and Jason’s Deli, financially successful organizations that exemplify how managers provide value and sustainability to stakeholders and shareholders through servant leadership. We also include practical steps managers can take to begin putting this form of leadership into practice.     

Uncertain regulatory timing and market dynamics

Using a dynamic model of capacity accumulation, I examine the relationship between uncertainty about the timing of a new Pigouvian tax and oligopolistic competition. I find that for some market structures uncertainty about the timing of the regulatory change leads firms to increase investment. These results stem from the nature of the uncertainty and its interaction with firms' strategic incentive to engage in capacity races. They dramatize the importance of accounting for initial conditions when forecasting firms' reactions to anticipated regulatory changes. In addition, I find that more protracted uncertainty leads to greater welfare costs.     

VIX changes and derivative returns on FOMC meeting days

We examine the link between scheduled Federal Open Market Committee (FOMC) meetings and the VIX measure. Our results indicate that VIX declines significantly on scheduled meeting dates. Unlike prior studies suggesting that the drop in VIX is mechanical, we attribute the decline to the resolution of uncertainty regarding future interest rates provided by the meetings. We examine returns to investable positions on VIX. Though a decline in the VIX level commonly occurs on FOMC meeting dates, we find that significant returns may still be garnered from taking short-VIX positions in derivative markets, even after accounting for the bid-ask spread.