Documento de Trabajo

Emerging Markets Variance Shocks: Local or International in Origin?

We examine the source of permanent shocks to the variance of a set of emerging and developed markets. By using the ICSS algorithm, Bai-Perron (2003)’s test for structural breaks in mean level, and wavelets, and analyzing weekly data for 18 countries over the January 1996 – April 2006 period, we find significant numbers of variance

Economic performance, creditor protection and labor inflexibility

We present a static general equilibrium model of an economy with agents with heterogeneous wealth and endogenous credit constraints created by partial loan recovery rates. Higher loan recovery rates and better bankruptcy protection increase output and credit penetration, while the former raises the average interest rate spread and the latter decreases it. We also study

Loyalty inducing programs and competition with homogeneous goods

We analyze a market where two firms producing a homogenous good compete by means of two mechanisms: prices and a loyalty bonus. We assume that firms act simultaneously when posting their loyalty bonus and prices. Consumers who purchase from a firmin the first period must return the bonus in case they switch providers in the

Note on Optimal Auctions

This paper considers a general optimal auction problem, with many goods and with a buyer’s utility that can depend non-linearly in his type. We point out that incentive compatibility constraints may be binding even if virtual utilities are strictly increasing in the buyer’s type. More importantly, optimal mechanisms may involve randomizations between different allocations.

The behavior of stock returns in the Asia-Pacific mining industry following the Iraq war

In this article, we pursue to determine which mining firms have seen their stock returns become more sensitive to fluctuations in energy prices, over a time period predominated by the political turmoil caused by 9/11 and the subsequent invasion of Iraq. By resorting to wavelets and spatial statistics, we characterize the behavior of volatility and

The Role of Outside Options in Auction Design

This paper studies revenue maximizing auctions when buyers’ outside options depend on their private information. The set-up is very general and encompasses a large number of potential applications. The main novel message of our analysis is that with type-dependent non-participation payoffs, the revenue maximizing assignment of objects can crucially depend on the outside options that

Multi-period hedge ratios for a multi-asset portfolio when accounting for returns comovement

This article presents a model to select the optimal hedge ratios of a portfolio comprised of an arbitrary number of commodities. In particular, returns dependency and heterogeneous investment horizons are accounted for by copulas and wavelets, respectively. We analyze a portfolio of London Metal Exchange metals for the period July 1993-December 2005, and conclude that

Sequential Procurement Auctions and Their Effect on Investment Decisions

In this paper we characterize the optimal procurement mechanism and the investment level for an environment where two projects must be adjudicated sequentially, and the winner of the first project has the opportunity to invest in a distributional upgrade for its costs in the second project. We study 4 cases, based on the commitment level

Competition with asymmetric switching costs

We analyze the effects of asymmetric switching costs on two identical firms that produce an homogeneousgood and compete in prices. Both firms inherit a fraction of themarket which is “locked-in” by the switching costs. When switching costs are low, firms face a tradeoff between charging a high price to their locked in customers, or pricing

A Note on the Comparative Statics of Optimal Procurement Auctions

We find a necessary and sufficient condition such that a distributional upgrade on a seller’s cost implies a lower expected procurement cost for a buyer. We also show that even under the strongest assumption about this upgrade made in the literature so far, the seller can be worse off, even if this upgrade is costless.

School markets: The impact of information approximating school effectiveness

The impact of competition on academic outcomes is likely to depend on whether parents are informed about schools’ effectiveness or valued added (which may or may not be correlated with absolute measures of their quality), and on whether this information influences their school choices. To explore these issues, this paper considers Chile’s SNED program, which

Marginal Cost Pricing in Hydro-Thermal Power Industries: Is a Capacity Charge Always Needed?

This paper explores marginal cost pricing in hydro-thermal power industries. As in standard peak-load pricing for all-thermal electric systems, pricing consists of an energy charge and a capacity charge. However, the marginal cost of hydro generation now includes the value of water, which is determined endogenously. In turn, the capacity charge equals the marginal cost