scholarly journals Partner Uncertainty and the Dynamic Boundary of the Firm

2017 ◽  
Vol 9 (4) ◽  
pp. 277-302 ◽  
Author(s):  
Thomas Hellmann ◽  
Veikko Thiele
Keyword(s):  
Asset Specificity ◽  
The Other ◽  
Trade Off ◽  
Specific Investments ◽  
Dynamic Boundary ◽  
Ex Post ◽  
Ex Ante

We develop a new theory of the dynamic boundary of the firm where asset owners may want to change partners ex post. We identify a fundamental trade-off between (i) a “displacement externality” under non-integration, where a partner leaves a relationship even though his benefit is worth less than the loss to the displaced partner, and (ii) a “retention externality” under integration, where a partner inefficiently retains the other. With more asset specificity, displacement externalities matter more and retention externalities less, so that integration becomes more attractive. Wealth can resolve ex post inefficient partner arrangements, but may weaken ex ante incentives for specific investments. (JEL D21, D23, D25, D62, D86, G31)

scholarly journals Integrating ESG Analysis into Smart Beta Strategies

2020 ◽  
Vol 12 (22) ◽  
pp. 9351
Author(s):  
Federica Ielasi ◽  
Paolo Ceccherini ◽  
Pietro Zito
Keyword(s):  
Investment Analysis ◽  
The Other ◽  
Portfolio Rebalancing ◽  
A Value ◽  
Ex Post ◽  
The Us ◽  
Ex Ante ◽  
The Impact ◽  
Smart Beta ◽  
Increase In Risk

Smart beta strategy is an increasingly frequent approach to investment analysis for portfolio selection and optimization and it can be combined with environmental, social, and governance (ESG) considerations. In order to verify the impact of the integration between ESG and smart beta analysis, first we apply a portfolio rebalancing based on ESG scores on securities selected according to different smart beta strategies (ex-post ESG rebalancing approach). Secondly, we apply different smart beta approaches to sustainable portfolios, screened according to the issuers’ ESG scores (ex-ante ESG screening approach). We find that ESG rebalancing and screening are able to impact both on return and risk statistics, but with a different level of efficiency for each smart beta strategy. ESG rebalancing proves to be particularly efficient when it is applied to a “Value” portfolio. On the other hand, when smart beta is applied to ESG-screened portfolios, “Growth” is the strategy which shows the highest increase in risk-adjusted performance, particularly in the US. Minimum volatility proves to be the most efficient smart beta strategy for sustainable portfolios. In general, the increase in the level of sustainability does not deteriorate the risk-adjusted performances of most smart beta strategies.

Law and Economics of Alternative Dispute Resolution

2017 ◽  
Author(s):  
Talia Fisher
Keyword(s):  
Dispute Resolution ◽  
Legal System ◽  
Cost Efficiency ◽  
Alternative Dispute Resolution ◽  
Law And Economics ◽  
The Other ◽  
Ex Post ◽  
The Social ◽  
Ex Ante ◽  
Welfare Implications

Alternative dispute resolution (ADR) refers to a variety of private processes for resolving disputes, independent of trial before a court of law. Economists are interested in ADR for two main reasons. First, from an ex post perspective, the manner in which disputes are resolved or decided in society affects the operation of the legal system and its cost-efficiency. Second, from an ex ante perspective, the manner in which rights are vindicated impacts primary behavior and investments in prospective dispute avoidance. The literature relating to the economic analysis of ADR can be divided into two facets: one facet is dedicated to the interests of litigating parties to make use of ADR mechanisms; the other is directed at the social interest in ADR. This chapter identifies the conditions under which parties will be incentivized to enter into ADR proceedings, and then moves on to examine the social welfare implications of ADR.

Incentive for innovation and the optimal allocation of patents

2017 ◽  
Vol 42 (4) ◽  
pp. 692-707 ◽  
Author(s):  
Kojun Hamada
Keyword(s):  
Property Rights ◽  
Ownership Structure ◽  
Optimal Allocation ◽  
Ownership Structures ◽  
Specific Investment ◽  
Specific Investments ◽  
Ex Post ◽  
Ex Ante ◽  
Joint Ownership

This article theoretically investigates how different ownership structures of patents affect ex ante and ex post incentives for innovation by applying a property rights approach. We explore a model in which two research laboratories invest in R&D to obtain an innovative patent, and after successfully obtaining the patent they determine an ownership structure for the patent. The two parties consider how the determined patent ownership would affect their noncontractible relation-specific investments for commercialisation. We demonstrate that joint ownership of a patent between two parties is optimal. More concretely, if a selfish (altruistic) relation-specific investment is more important than an altruistic (selfish) investment, a joint ownership with no (bilateral) veto is optimal to maximise the joint value. Moreover, when both parties do not commit themselves to joint ownership in advance, they have greater incentive to invest in R&D than committing, even if they understand that joint ownership is desirable ex post.

The Ranking Properties of Healthy-Years Equivalents and Quality-Adjusted Life-Years Under Certainty and Uncertainty

1995 ◽  
Vol 11 (1) ◽  
pp. 40-48 ◽  
Author(s):  
Magnus Johannesson
Keyword(s):  
Expected Utility ◽  
The Other ◽  
Quality Adjusted Life Years ◽  
Health States ◽  
Trade Off ◽  
Individual Preferences ◽  
Life Years ◽  
Ex Ante ◽  
Quality Adjusted Life ◽  
Health Profiles

AbstractThis paper investigates the theoretical properties of healthy-years equivalents (HYEs) and quality-adjusted life-years (QALYs). A distinction is made between ex ante HYEs (EA-HYEs) and expected HYEs (EXP-HYEs) and between risk-neutral quality-adjusted life-years (RN-QALYs) and risk-adjusted quality adjusted life-years (RA-QALYs). In the case of certainty, HYEs always rank health profiles according to individual preferences, whereas QALYs only rank health profiles according to individual preferences if constant proportional trade-off holds for all health states and if additive independence of quality in different periods holds. In the case of uncertainty, EA-HYEs always rank risky health profiles the same way as expected utility. The assumptions needed for the other measures to rank risky health profiles the same way as expected utility are: risk neutrality with respect to healthy time for EXP-HYEs; risk neutrality with respect to time in all health states and additive independence of quality in different periods for RN-HYEs; and constant proportional risk posture with respect to time in all health states and additive independence of quality in different periods for RA-QALYs.

Two Advantages of the Negligence Rule Over Strict Liability when the Parties are Risk Averse

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Henrik Lando
Keyword(s):  
Transaction Costs ◽  
Strict Liability ◽  
The Other ◽  
Risk Allocation ◽  
Risk Averse ◽  
Insurance Contracts ◽  
Ex Post ◽  
Ex Ante ◽  
Negligence Rule

AbstractWhen parties are risk-averse and therefore take out insurance, the efficiency of a tort rule depends on how well the insurance contracts govern incentives, risk allocation and transaction costs under the rule. This article presents two overlooked or discarded advantages of the rule of negligence over strict liability, which appear when insurance contracts are incomplete due to ex-ante transaction or ex-post verification costs. One advantage arises because of a legal impediment under strict liability: insurers cannot exempt coverage for all acts of simple negligence. Instead, the insurer must, at a cost, precisely specify each act for which coverage is excluded. Such specification can be prohibitively costly when there are many acts and many contingencies. These transaction costs, or the inefficient risk allocation associated with a deductible, are avoided under the negligence rule, where under idealized conditions the injurer can simply take due care and need not take out insurance. The other advantage of the negligence rule is that it provides incentives for the victim to bring forward information about the injurer’s acts. The victim has little incentive to convey such information under strict liability, whereas the victim’s insurer may elicit it, e. g. by not covering the victim’s loss fully.

scholarly journals Some Issues in the Measurement of Profit Accountants versus Economists

2017 ◽  
Vol 3 (2) ◽  
pp. 13
Author(s):  
Zubair Hasan
Keyword(s):  
Empirical Work ◽  
Growth Efficiency ◽  
The Other ◽  
Focal Points ◽  
Ex Post ◽  
Ex Ante ◽  
Theoretical View ◽  
The Impact ◽  
Reconciliation Process ◽  
Forward Looking

This paper discusses a topic rarely addressed in the literature on profit theory over the decades. In empirical work on subjects like growth, efficiency and welfare in mainstream or Islamic economics business profits at times appear as one of the determinants. Such studies perforce use profit data reported in the accounting records. This data is invariably at variance in important ways with the economists’ theoretical view of profit. The cause of divergence is the cosmopolitan forward looking ex ante view of entrepreneurism the economists take in the matter as opposed to the narrow conservative ex post focus of the accountants needed to protect the interest of business proprietors who pay them for the job. There is a need to narrow this gap to improve the results of empirical explorations. This paper identifies and examines some issues like maintenance of capital, evaluation of inventories and the impact of conservatism as causes of divergence as focal points for reducing the gap. It concludes that the economists are obliged more to take cognizance of accounting compulsions than the other way round in the reconciliation process.

scholarly journals Competitive Search with Ex-post Opportunism

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Pedro Gomis-Porqueras ◽  
Benoît Julien ◽  
Liang Wang
Keyword(s):  
Terms Of Trade ◽  
The Other ◽  
Monopoly Power ◽  
Symmetric Equilibrium ◽  
Equilibrium Allocation ◽  
Matching Process ◽  
Ex Post ◽  
Ex Ante ◽  
Competitive Search

Abstract:We consider a frictional market where an element of the terms of trade (price or quantity) is posted ex-ante (before the matching process) while the other is determined ex-post. By doing so, sellers can exploit their local monopoly power by adjusting prices or quantities once the local demand is realized. We find that when sellers can adjust quantities ex-post, there exists a unique symmetric equilibrium where an increase in the buyer-seller ratio leads to higher quantities and prices. When buyers instead can choose quantities ex-post, a higher buyer-seller ratio leads to higher prices but lower traded quantities. These equilibrium allocations are generically constrained inefficient in both intensive and extensive margins. When sellers post ex-ante quantities and adjust prices ex-post, a symmetric equilibrium exists where buyers obtain no surplus from trade. This equilibrium allocation is not constrained efficient either. If buyers choose prices ex-post, there is no trade in equilibrium when entry is costly.

Conflict Management and Outcomes in Franchise Relationships: The Role of Regulation

2013 ◽  
Vol 50 (5) ◽  
pp. 577-589 ◽  
Author(s):  
Kersi D. Antia ◽  
Xu (Vivian) Zheng ◽  
Gary L. Frazier
Keyword(s):  
Conflict Management ◽  
Ownership Structure ◽  
Regulatory Oversight ◽  
Trade Off ◽  
Ex Post ◽  
Ex Ante ◽  
Archival Database ◽  
The Impact ◽  
Good Cause

Franchise relationships are prone to conflict. To safeguard the rights of individual franchisees, several states have legislated greater franchisor disclosure (registration law) ex ante and/or franchisor “termination for good cause” (relationship law) ex post. The impact of regulatory oversight on franchisor–franchisee conflict, however, remains unclear. Relying on agency theory arguments, the authors first assess the influence of the regulatory context, both by itself and in combination with the franchise ownership structure, on the incidence of litigated conflict. Conditional on litigation, they also predict the impact of franchise regulation on both the parties’ litigation initiation and resolution choices and the resulting outcomes. The authors test the hypotheses using a unique multisource archival database of 411 instances of litigation across 75 franchise systems observed over 17 years. The results indicate that the regulatory context, by itself as well as in combination with the franchise ownership structure, significantly shapes parties’ conflict management choices. The authors also find evidence of a trade-off between prevailing in the particular conflict and achieving franchise system growth objectives.

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