The role of the entrepreneurial encounter in the emergence of opportunities: Vallée’s Dallas Buyers Club

ABSTRACT

This paper aims to explore the conceptual potential of the Deleuzian notion of the encounter in order to better understand the genealogy of opportunities. We adopt a processual perspective of opportunities. In order to translate this notion to the domain of entrepreneurship, we analysed and interpreted Jean-Marc Vallée’s Dallas Buyers Club. This film follows the creation of the first club in the United States that illegally allowed HIV-positive people to supply themselves with foreign antiretroviral drugs from Mexico or Japan. The article highlights encounters in this process that disturb the entrepreneur’s belief systems and allow him or her to be open to potential opportunity. It finally explores how the encounter may improve our understanding of the political becoming of opportunities within the entrepreneurial process.     

Unit roots and infrequent large shocks: new international evidence on output

The nature and magnitude of the economic shocks that have affected the per capita GDP of 16 OECD countries are analyzed over a long period using the outlier method. Strong proof of infrequent large permanent and transitory shocks were found, essentially resulting from the two major wars in the twentieth century, the recession in the 1920s, the Great Depression, among others. We also examine the nature of the output trend by combining different tests of non-stationarity on different GDP series corrected by the outliers detected. It is shown that the per capita GDP series cannot reject the unit root hypothesis in 13 of the 16 countries examined. No conclusion could be drawn for the other countries because the test results were contradictory.     

Designing Optimal Crop Revenue Insurance

When the indemnity schedule is contingent on the farmer's price and individual yield, an optimal crop revenue insurance contract depends only on the farmer's gross revenue. However, this design is not efficient if, as is the case with available contracts, the coverage function is based on imperfect estimators of individual yield and/or price. The producer's degree of prudence and the extent of basis risks have important influences on the optimal indemnity schedule. In this broader context, optimal protection is not provided by available U.S. crop insurance contracts and may include combinations of revenue insurance, yield insurance, futures, and options contracts.     

Collective consumption and welfare

Abstract.  In this paper, we present a collective model of household demand based on Pareto‐efficiency. In addition, we suppose that (a) each household member is egoistic and consumption is purely private, (b) there is a set of distribution factors and (c) there is one exclusive good. Then we derive the testable restrictions that are implied by this theoretical setting and show how welfare comparisons at the individual level can be performed. JEL classification: D11     

On the impact of leverage constraints on asset prices and trading volume

Abstract. Researchers have used stylized facts on asset prices and trading volume in stock markets (in particular, the mean reversion of asset returns and the correlations between trading volume, price changes and price levels) to support theories where agents are not rational expected utility maximizers. This paper shows that this empirical evidence is in fact consistent with a standard infinite horizon – perfect information – expected utility economy where some agents face leverage constraints similar to those found in todays financial markets. In addition, and in sharp contrast to the theories above, we explain some qualitative differences that are observed in the price-volume relation on stock and on futures markets. We consider a continuous-time economy where agents maximize the integral of their discounted utility from consumption under both budget and leverage constraints. Building on the work by Vila and Zariphopoulou (1997), we find a closed form solution, up to a negative constant, for the equilibrium prices and demands in the region of the state space where the constraint is non-binding. We show that, at the equilibrium, stock holdings volatility as well as its ratio to stock price volatility are increasing functions of the stock price and interpret this finding in terms of the price-volume relation. We would like to thank the editor and two anonimous referees for valuable substantive comments. Our gratitude also to Franklin Allen, Kerry Back, Domenico Cuoco, Xavier Freixas, Sanford Grossman, Michel Habib, Lutz Hendricks, Richard Kihlstrom, Fernando Restoy, Mary Thomson, Jean-Luc Vila, participants to seminars at Birkbeck College, Carnegie-Mellon, Columbia, ESSEC, HEC, IAE, INSEAD, London Business School, London School of Economics, McGill, Michigan, National University of Singapore, Pompeu Fabra, North Carolina, Washington-St-Louis, Wharton, the Jornadas de Economía Financiera BBV, and the Meetings of the Society for Economic Dynamics and Control and the American Finance Association. Special thanks are due to Süleyman Basak for his enthusiastic support and many helpful suggestions. The usual disclaimer applies. We gratefully acknowledge the support of the BBV and Caja de Madrid Foundations and CREF (both authors) and of the Spanish Ministry of Education under DGICYT grant no. PB93-0388 (first author).     

Some Further Results on the Tempered Multistable Approach

This article provides new results on the tempered multistable approach. After a preliminary section recalling the main definitions, we show the correspondence between a series representation and a characteristic function representation for asymmetrical field-based tempered multistable processes and for asymmetrical independent increments tempered multistable processes. We also show that both processes are semimartingales, which is a convenient property in finance. Next, we study the structure of autocorrelations that is conveyed by this approach. Finally, we provide an illustration showing the term structures of Value-at-Risk that can be obtained with this model.     

Optimal Insurance Against Climatic Experience

An optimal insurance contract against a climatic risk is derived in the presence of an uninsurable and dependent aggregate production risk. The optimal design depends on the stochastic dependency between both sources of uncertainty and on the producer's attitude towards risk, especially on his prudent behavior. Rational weather insurance purchasing decisions are also derived. The prudent producer responds to actuarially fair weather insurance by increasing his exposure towards risk.     

The relevance of political affinity for the initial acquisition premium in cross‐border acquisitions

Research summary : In the context of economic nationalism, we investigate the relevance of political affinity between countries to the initial acquisition premium offered in cross‐border acquisitions. Political affinity is defined as the similarity of national interests in global affairs. We argue that political affinity affects how foreign acquirers anticipate their bargaining position in their negotiations with domestic target firms. With decreasing political affinity, the host government becomes increasingly likely to intervene against foreign firms in an acquisition deal. Consequently, foreign acquirers need to provide a more lucrative initial offer to dissuade target firms from leveraging government intervention to oppose the acquisition. Our prediction is supported by strong evidence that political affinity, as revealed by UN general assembly voting patterns, leads to lower initial acquisition premiums. Managerial summary : Media reports suggest that politics plays an important role in international business transactions. However, we still know very little about how bilateral political relations affect corporate decision‐making. In this article, we analyze the influence of the quality of bilateral political relations on the bidding behavior of foreign acquirers in cross‐border acquisitions. We argue that the host government is more likely to intervene against the foreign acquirer during deal negotiations if the quality of bilateral political relations is poor. A lower political affinity between countries therefore decreases the bargaining power of the acquirer and pushes up the initial bid premium the acquirer has to offer to the local target. Our empirical results confirm our argument. Copyright © 2015 John Wiley & Sons, Ltd.     

The instability principle revisited: an essay in Harrodian dynamics

Abstract

Harrod's contribution to economic dynamics is very often reduced to the dynamic equation whose character is unstable. Growth theory and cycle theory based on Harrod's contributions aimed at reducing this instability. Following Harrod, who was strongly opposed to the ‘knife-edge’ interpretation, we define the warranted rate of growth as a ‘moving equilibrium’ and focus on its interaction with the effective rate of growth. Our simple Harrodian model generates various dynamics from stable path, to growth cycle and corridor of stability.