The market value of preventive activities: A contingent-claims approach

We use a contingent-claims approach to determine the market value of preventive investments. We show that the lower the initial probability of accident, the greater is the market value of a reduction in this probability. Besides, at initially low probabilities, ceteris paribus, the market gives a higher value to a reduction in accident probability when aggregate (correlated) catastrophic risks rather than independent ones are involved. The reverse occurs at initially high probabilities.     

Auctions and information acquisition: sealed bid or dynamic formats?

The value of an asset is generally not known a priori, and it requires costly investments to be discovered. In such contexts with endogenous information acquisition, which selling procedure generates more revenues? We show that dynamic formats, such as ascending‐price or multistage auctions, perform better than their static counterpart. This is because dynamic formats allow bidders to observe the number of competitors left throughout the selling procedure. Thus, even if competition appears strong ex ante, it may turn out to be weak along the dynamic format, thereby making the option to acquire information valuable. This very possibility also induces the bidders to stay longer in the auction, just to learn about the state of competition. Both effects boost revenues, and our analysis provides a rationale for using dynamic formats rather than sealed‐bid ones.     

Competition, entry and the social returns to infrastructure in transition economies

This paper presents a simple model for analysing the contribution of investments in physical and institutional infrastructure to the transition process. In addition to the direct cost savings, infrastructure investment generates important indirect effects, or transition impacts . The model shows that, by reducing transaction costs, infrastructure intensifies product market competition. This leads to more effective weeding out of the existing high-cost firms in the market. In this model, infrastructure also increases the incentives for low-cost firms to restructure which generates additional efficiency gains, but exacerbates the existing cost asymmetry in the economy. Finally, infrastructure investment enhances the incentives for relatively low-cost firms to enter the market, and thus improves the efficiency of the entry process. The importance of these transition impacts of infrastructure is dependent upon features of the economy, such as the degree of cost asymmetry among firms, the proportion of high-cost firms, the cost of restructuring and entry costs for new firms.
JEL classification: L1, O1, P2.     

Modelling Professional Sports Leagues: An Industrial Organization Approach

This paper outlines a simple model of professional sports contests that can provide a number of useful insights into the operations of professional sports leagues. The model incorporates a concern for competitive balance on the part of fans and has the advantage that a number of league market structures can be analyzed using standard industrial organization techniques. The model can also be used to determine the effect of a number of league rules including revenue sharing, payroll caps, and luxury taxes on the respective demands for talented players. In addition, it can be shown that the model of professional sports contests developed here has a useful parallel with a standard model of differentiated products.      

The Relevance of XBRL Voluntary Disclosure for Stock Market Valuation: The Role of Corporate Governance

The aim of this paper is to investigate the relevance for stock market pricing of accounting earnings of voluntary disclosures in XBRL files considering the quality of corporate governance. Results are the following. It appears that XBRL extensions attract financial analysts. Good governance is positively associated with voluntary XBRL extensions. We observe that XBRL extensions enhance the positive relationship between accounting earnings and stock price. However, this positive association is reduced for firms with good governance, suggesting a substitution effect between XBRL extensions and corporate governance. Finally, it appears that XBRL extensions would strategically be related to earnings quality. This research highlights the importance to consider governance when assessing the value relevance of XBRL disclosures for stock market pricing.     

Modeling advertising impact at campaign level: Empirical generalizations relative to long-term advertising profit contribution and its antecedents

Research on advertising effectiveness is focused on sales and provides few empirical generalizations on profitability and its antecedents. To fill this gap, we develop an econometric model to capture the impact of advertising at campaign level, using retail panel data coupled with TV audience tracking data. Our study involves 31 brands from six packaged goods categories observed weekly and nationally over 4 years and representing 264 TV campaigns. Although we confirm empirical generalizations on the capacity of advertising to increase sales, we establish a different picture for profitability. Only 11 % of campaigns make a positive contribution to profit. Advertising is more profitable for challengers and medium brands, whereas leaders and small brands (recent or established) have a lower profitability. Advertising intensity in the category and campaign carry-over emerge as the strongest (respectively) negative and positive drivers of profitability. The antecedents of carry-over are also analyzed and discussed.     

Organizational Sensemaking of Non-ethical Consumer Behavior: Case Study of a French Mutual Insurance Company

Researchers and managers alike are becoming increasingly interested in the topic of unethical consumer behavior. Where most studies view unethical behavior as something that is identifiable per se, the authors of the present article believe that it only exists because it has been constructed by people operating within a specific context. Hence the efforts made by this paper to explore, at the level of one specific organization, how interactions between employees and consumers might lead to the construct of unethical consumers. Based on a case study of France’s AMDM—a mutual insurance company set up to serve a client base comprising motorcyclists—the paper addresses how one group of consumers ends up being categorized as unethical by revealing the existence of a sensemaking process within the target organization. This process develops in three main phases: the nurturing of a shared ethos; the protection of employees’ recognized status; and the demonization of any group of consumers threatening this status. Managers incorporating this sensemaking process can avoid or mitigate the negative effects befalling organizations when these kinds of unethical consumer behavior are constructed.     

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).

Relaciones laborales y medidas de ajuste frente a la crisis. Análisis microestadístico comparativo de Francia y Gran Bretaña

En este estudio comparativo, los autores analizan los vínculos entre las relaciones laborales y los ajustes salariales o de plantilla tras la crisis de 2007–2008, a partir de dos encuestas comparables sobre empresas de Gran Bretaña (WERS) y de Francia (REPONSE) en 2010–2012. Pese a las diferencias contextuales (composición del tejido productivo, circunstancias temporales e intensidad de la crisis), los vínculos entre las relaciones laborales y las estrategias de ajuste son parecidos (la presencia sindical no logra evitar los ajustes). Por lo tanto, la diferenciación de los sistemas de relaciones laborales no permite explicar las divergencias entre las modalidades de ajuste a nivel macroeconómico.     

Size matters for OTC market makers: General results and dimensionality reduction techniques

In most over‐the‐counter (OTC) markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting optimization problem: they need to choose bid and ask prices for making money while mitigating the risk associated with holding inventory in a volatile market. Many market‐making models have been proposed in the academic literature, most of them dealing with single‐asset market making whereas market makers are usually in charge of a long list of assets. The rare models tackling multiasset market making suffer however from the curse of dimensionality when it comes to the numerical approximation of the optimal quotes. The goal of this paper is to propose a dimensionality reduction technique to address multiasset market making by using a factor model. Moreover, we generalize existing market‐making models by the addition of an important feature: the existence of different transaction sizes and the possibility for the market makers in OTC markets to answer different prices to requests with different sizes.