Global and political strategies in deregulated industries: the asymmetric behaviors of former monopolies

In deregulated industries former monopolies often adopt asymmetric behaviors: these firms impede the entry of foreign competitors in their home market, especially using defensive political strategies, and, at the same time, aggressively develop international strategies in foreign markets. To account for this behavior, I develop a game theoretic model involving three players: the former monopoly, its home government, and the host government of the country into which the firm wants to enter. I show first that there are in fact different asymmetric strategies that former monopolies can use in such a setting, and that a global strategy cannot always be implemented by those firms because of cooperation issues between the two governments. I also study the conditions under which these issues can be solved and show that this can happen only when the firm develops a political strategy that integrates both defensive and offensive activities. Overall, this paper therefore argues that asymmetric strategies are not always adopted to maintain monopoly rents but are also dictated by the nature of the international relationships between the governments involved. Copyright © 2003 John Wiley & Sons, Ltd.     

Barriers to the “key supplierization” of the firm

The phenomenon of key supply management (KSM) in business companies is far less investigated than the phenomenon of key account management (KAM) which beneficiates, both in practice and in an academic context, from a growing interest. This article is based on the empirical analysis of a sample of 10 international companies which have recently launched KSM programmes or are currently working on launching such programs. It examines the difficulties these companies come up against when implementing such programmes and proposes to organize these difficulties around three dimensions: 1) the difficulties in implementing real supplier portfolio approaches; 2) the narrow view of value co-creation with suppliers, and 3) the persistent lack of integration of the purchasing function with other internal functions within the company. The conclusion of the article is that KSM is far from being a mere symmetric phenomenon of KAM. Several implications are then discussed in relation to the implementation of KSM programmes within companies.     

Assessing horizontal mergers under uncertain efficiency gains

The analysis of horizontal mergers hinges on a tradeoff between unilateral effects and efficiency gains. We examine the role of uncertainty in this tradeoff. In theory, the attitude towards uncertainty depends on the curvature of the social objective function. On the one hand, adjustment effects, both on the consumers' and firms' sides, tend to make consumers' surplus and firms' profits convex. On the other hand, pass-through effects may act in the opposite direction. We show that convexity prevails in a number of situations, including the most general linear demand model. Implications for empirical merger analysis are exposed.     

Long COVID? Prospects for economic scarring from the pandemic

This paper examines the potential persistent effects (scarring) of the COVID-19 pandemic on the economy and the channels through which they may occur. Our findings from a broad set of historical recessions confirm that recessions are associated with persistent output losses and that the greatest scarring has occurred following financial crises. The amount of scarring following pandemic and epidemic recessions in the sample is in between that of typical recessions and financial crises. Results on the channels show that the productivity channel is important, as all types of recessions have been followed by persistent losses to total factor productivity.     

Bayesian estimation of an extended local scale stochastic volatility model

A new version of the local scale model of Shephard (1994) is presented. Its features are identically distributed evolution equation disturbances, the incorporation of in-the-mean effects, and the incorporation of variance regressors. A Bayesian posterior simulator and a new simulation smoother are presented. The model is applied to publicly available daily exchange rate and asset return series, and is compared with t-GARCH and Lognormal stochastic volatility formulations using Bayes factors.     

Education and growth with endogenous debt constraints

When future human capital cannot be alienated, households are allowed to borrow up to the point where it is in their own interest not to default. In such a framework, endogenous borrowing limits arise as the outcome of individual rationality constraint. In a model where education is the engine of growth, we show that endogenous borrowing constraints imply global indeterminacy. Comparing outcomes across the various equilibria we show that the relation between growth and yields is hump-shaped. Maximum growth can arise in an equilibrium with binding borrowing constraints, specially if the elasticity of human capital to education spending is large. Deepening financial markets promotes long-run growth in the case of a poverty trap, but not necessarily otherwise. On the methodological side, our approach stresses the importance of studying borrowing limits in general equilibrium, not only in small open economies. Philippe Michel passed away on July 22, 2004. His death is a great loss for his friends and for the overlapping generations and optimal control community.     

Growth, distance to frontier and composition of human capital

We examine the contribution of human capital to economy-wide technological improvements through the two channels of innovation and imitation. We develop a theoretical model showing that skilled labor has a higher growth-enhancing effect closer to the technological frontier under the reasonable assumption that innovation is a relatively more skill-intensive activity than imitation. Also, we provide evidence in favor of this prediction using a panel dataset covering 19 OECD countries between 1960 and 2000 and explain why previous empirical research had found no positive relationship between initial schooling level and subsequent growth in rich countries.     

Financial market integration: Theory and empirical results

In this article, we introduce a new theoretical international asset pricing model which accounts for partial financial market segmentation. We show that if some investors do not hold all international assets because of implicit and/or explicit segmentation factors, the world market portfolio is not efficient and the classic ICAPM must be augmented by a new factor reflecting the local risk undiversifiable internationally. We test this model empirically for a sample of emerging markets. Our findings show that the degree of market integration is time-varying and that the premium associated with the domestic risk factors is the most important component of the total risk premium. However, our results also show that most of the emerging markets we study have become more integrated in the end of our sample period as a result of liberalization and reforms.     

Marketing in medium-sized manufacturing firms: The state-of-the-art in France and in Quebec

An examination of the relationship between marketing and SMEs raises two kinds of questions: the first relates to the categories of SMEs studied, and it goes without saying that their responses will depend on their size (very small, small, and medium); the second depends on the elements likely or not to bring out a marketing approach. In fact, we can infer a large part of this approach from the answers having to do with segmentation practices, positioning, and information research. These three practices constitute the foundation of this approach. For all that, to ask questions directly (especially with regard to segmentation) would lead to biased responses. Taking these premises into account and with understanding of marketing behaviour in the medium-sized firms as an objective, we conducted two surveys in two locations, France and Québec (Canada), in which only enterprises with 50 to 250 employees were retained. The results show that if the marketing approach of the medium-sized firms is always focused on client distinction (more than on the market as such), competition leading to positioning is very much a part of their preoccupations; finally, these enterprises commonly practice commercial intelligence. This implies structuring commercial activity in general and marketing in particular, the two not always well delimited. These last two traits differentiate them from the other categories of SMEs, the very small enterprises (VSEs) and the small enterprises (SEs).

Gradualism in Bargaining and Contribution Games

This paper identifies a source of gradualism in bargaining and contribution games. In the bargaining games we examine, each party can opt out at any time, and the outside option outcome is assumed to depend on the offers made in the negotiation phase. Specifically, we assume that (1) making a concession in the negotiation phase increases the other party's outside option pay-off and (2) the outside option outcome induces an efficiency loss as compared with a negotiated agreement. The main finding is that the mere presence of such history-dependent outside options forces equilibrium concessions in the negotiation phase to be gradual, and the degree of gradualism is characterized. The model also applies to contribution games in which the outside option may be interpreted as the option to implement a partial project using the total contributions made so far.