The B.E. Journal of Economic Analysis & Policy Volume 12 Issue 1

The B.E. Journal of Economic Analysis & Policy

Volume 12 Issue 1

Contents
Journal Overview

Frontiers Article

On the Competitive Effects of Bidding Syndicates

Vlad Mares, Mikhael Shor September 11, 2012

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Abstract

Firms commonly form syndicates to bid jointly for financial assets. Recently, this practice has come under legal scrutiny motivated by models which suggest syndicates are anti-competitive. These models do not account for two important features of financial markets: bidders' value estimates are likely to be correlated, and complicated mechanisms known to be optimal in such settings are usually eschewed in favor of simpler auction formats. We show that these features make it possible for syndicate bidding to generate higher revenues for the auctioneer than bidding among independent firms, even when syndicates are asymmetric or lead to a highly concentrated market. This occurs because syndication can make the industry more suitable to the simple auction format in use. We identify conditions under which syndicates are pro-competitive and discuss the implications for antitrust.

Using borrower-level data from FINCA, one of Peru's leading microfinance institutions (MFIs), this paper evaluates the effect on borrowers' access to credit of FINCA's decision to share information on individual outstanding debt records (positive information) as well as group default records (negative information). Since all borrowers were simultaneously exposed to the same policy, the paper develops a creative identification strategy that relies on the exogenous variation of the opening and closing dates of loan cycles across lending groups. A credit expansion effect is identified for some borrowers in FINCA who looked more creditworthy after their positive records were exposed, suggesting that other lenders targeted FINCA clients with good credit records. This credit expansion effect seems to have hurt FINCA through higher default rates as its better clients were skimmed off.

This paper applies a political economy approach to the study of the endogenous determination of the size and composition of a public education budget. In this model, there are two education stages: the first is compulsory, while advanced education is optional. Parents decide on the education policy by a majority vote, children attend schools and then decide whether to get advanced education. This paper shows that even in a simple scenario where only public education is available, children's college-attendance decisions may lead the single-crossing condition to fail, which indicates that a majority voting equilibrium may not exist. In a scenario where individuals can opt for private education services, the model provides necessary and sufficient conditions for an equilibrium of the "ends-against-the-middle" type, where the poor are decisive. An implication of this result is that the opting-out feature of education may improve the welfare of the poor.

This article investigates optimal quality report design problems in a dynamic context when the service providers have moral hazard problem. I use a two-period repeated contest model between two firms in an attempt to attain a relatively better rating since a better rating leads to a bigger market share. The quality report agency calculates a firm's current rating with the inspected quality of the firm's service and carried-over advantage from the firm's past rating. The size of this advantage is the agency's control variable and models the degree of inertia in the scoring rule. The result shows that how much inertia a scoring rule is required to have, depends on several market characteristics such as the uncertainty in quality production, the consumers switching costs, and the quality investment persistency.

About this journal

Objective
The B.E. Journal of Economic Analysis & Policy (BEJEAP) welcomes submissions that employ microeconomics to analyze issues in organizational economics, consumer behavior, and public policy. Articles submitted to BEJEAP can come in two formats: research papers and letters. Authors should bring to their analysis whatever microeconomic theoretical, experimental or econometric tools are helpful. We publish both empirical work and applied theory (though not more abstract forms of applied theory), and our aim is to disseminate papers that have practical implications for public policy, organizational or individual decision making.

Topics

Design of organizations and institutions
Industrial organization
Health economics
Public finance
Labour Economics
Economics of education, family, development, law, or the environment
Effects of domestic and international policy

Article formats
Research Papers, Letters

> Information on submission process