Ecole d’économie de Toulouse – TSE

Université Toulouse 1 Capitole, Manufacture des Tabacs – 31042 Toulouse cedex – France

Tél : +33 (0)5 61 63 36 90 - Fax : +33(0)5 61 63 35 86, www.ecole.tse-fr.eu – Contact : ecole–tse@ut-capitole.fr

Master 2 Syllabi

2011 – 2012

Microeconomics I

2011-2012

This 36-hour class is an introduction to the fundamental concepts in Microeconomics: consumers, producers, general equilibrium, optimum, externalities and public goods. The underlying motivation is ambitious (to say the least): we want to understand what makes the world go round, and how it could be made a better place. That ambition may be shared by other social sciences. The specificity of Microeconomics is to rigorously derive general recommendations from a set of carefully chosen assumptions. Do not underestimate the power of these recommendations (quotation from Keynes, The General Theory, 1935):

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

In the same line, Robert L. Heilbronner wrote (in “The Worldly Philosophers”, 1953):

“This is a book about a handful of men with a curious claim to fame. By all the rules of schoolboy history books, they were nonentities: they commanded no armies, sent no men to their deaths, ruled no empires, took little part in history-making decisions. […] Yet what they did was more decisive for history than many acts of statesmen who basked in brighter glory, often more profoundly disturbing than the shuttling of armies back and forth across frontiers, more powerful for good and bad than the edicts of kings and legislatures. It was this: they shaped and swayed men's minds. And because he who enlists a man's mind wields a power even greater than the sword or the scepter, these men shaped and swayed the world. […] they left in their train shattered empires and exploded continents; they buttressed and undermined political regimes; they set class against class and even nation against nation -- not because they plotted mischief, but because of the extraordinary power of their ideas.

Who were these men? We know them as the Great Economists.”

Now you are enthusiastic. You want to learn the microeconomic tools, so as to be able to understand and criticize economists’ ideas. Welcome.

Textbooks

As often, the emphasis on rigor translates into the use of mathematics. This class reference book (hereafter MWG)

Mas-Colell, A., M. Whinston and J. Green, « Microeconomic Theory », Oxford University Press, 1995 is a bit frightening, but you really have to read the recommended parts very carefully. Additional useful (and less formal) references are Varian, H., « Microeconomic Analysis » Norton, 1992 Kreps, David M., “A course in Microeconomics Theory”, Prentice Hall, 1990.

Course Outline (with references in MWG):

The class is divided into three parts, each part should represent roughly 8 sessions of 90 minutes. The first part of the class focuses on pure-exchange economies: 1) An analysis of decision-making (Chapter 1; Chapter 2, sections B and C; chapter 3, sections B and C). 2) Prices, revenue, and consumer demand (Chapter 2, sections D, E, F; chapter 3, section D) 3) The Welfare Theorems in an exchange economy 4) Welfare evaluation of economic changes (Chapter 3; read also chapter 4) Then we introduce production, and general versions of the Welfare Theorems: 5) Production and the firm (Chapter 5) 6) Partial equilibrium (Chapter 10) 7) General equilibrium (Chapter 15, 16) and the Welfare Theorems Finally we discuss extensions to the general equilibrium model, and limits to the Welfare Theorems: 8) Time and Uncertainty (Chapter 6 and parts of Chapters 17, 19, 20). 9) Market Failures: Externalities and Public Goods (Chapter 11)

Details: You are strongly advised to read the relevant material in the textbook before attending the lecture. The lectures are completed by a series of tutorials. Attendance is strongly recommended. The tutorials are effective only if you study the material and attempt to solve the exercises before attending the session. There will be a written exam during the week following the end of the class. The exams from previous years are available on CAELUS: ldap.univ-tlse1.fr/index_casier.html The material for this exam includes the lectures and the textbook sections mentioned above. Note that this textbook material (in particular the proofs) is included, even if it has not been presented in class. François Salanié, TSE (INRA, LERNA, IDEI).salanie@toulouse.inra.fr. Building S, office MS117.

Schedule:

Monday 09:30-11:00, room MB II

Tuesday 15.30-17:00, room MB II

Tutorials by Luc Bridet l.bridet@gmail.com and Carlos Cañon cicenator@gmail.com.

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MICROECONOMICS IIA

Patrick REY

OUTLINE AND READING L IST

Textbooks: � Bolton, P. and M. Dewatripont (2005), Contract Theory, MIT Press.

Fudenberg, D., and J. Tirole (1991), Game Theory, MIT Press, Cambridge.

Gibbons, R. (1992), A Primer in Game Theory, Harvester Wheatsheaf, N.Y. Laffont, J.J. (1988), Fundamentals of Public Economics, MIT Press, Cambridge. Laffont, J.J. (1986), Economie de l’Incertain et de l’Information, Economica, Paris.

(English version: The Economics of Unvertainty and Information, MIT Press, Cambrigde).

� Laffont, J.J. and D. Martimort (2002), The Theory of Incentives: The Principal Agent

Model, Princeton University Press. � Mas-Colell, A., M.D. Whinston and J. Green (1995), Microeconomic Theory, Oxford

University Press, New York and Oxford. Salanié, B. (1994), The Economics of Contracts: A Primer, MIT Press, 1997.

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Chapter 1 Introduction: Information economics Textbook:

Mas-Colell, Whinston and Green, Chap. 13. Articles:

Akerlof, G. (1970), « The market for Lemons: Quality uncertainty and the market mechanism », Quarterly Journal of Economics, 89:488-500.

Rothschild, M. and J. E. Stiglitz (1976), “Equilibrium in Competitive Insurance

Markets”, Quarterly Journal of Economics, 90:629-649. Hirshleifer, J. (1971), “The Private and Social Value of Information and the Reward to

Inventive Activity”, American Economic Review, 61:561-574. Spence, M. (1973), “Job Market Signalling”, Quarterly Journal of Economics, 87:355-

374. Wilson, C. (1977), “A Model of Insurance Markets with Incomplete Information”,

Journal of Economic Theory, 16:167-207. Wilson, C. (1980), “The Nature of Equilibrium in Markets with Adverse Selection”, Bell

Journal of Economics, 11:108-130.

I. Arrow-Debreu economics

1. Framework

2. Pareto efficiency

3. Competitive equilibrium

4. Main Theorems

5. Market failures

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II. Asymmetric information and market failures

1. Lemons problems

2. Screening

3. Market disequilibrium

III. Roadmap

Chapter 2 Implementation Textbooks:

Laffont and Martimort, Chap. 1. Laffont 1988, Chap. 5. Fudenberg and Tirole, Chap. 7. Mas-Colell, Whinston and Green, Chap. 23.

I. Introduction � Dasgupta, P., P. Hammond and E. Maskin (1979), “The Implementation of Social Choice

Rules: Some General Results on Incentive Compatibility”, Review of Economic Studies, 46: 185-216.

Green, J., and J.J. Laffont (1979), Incentives in Public Decision Making, North Holland,

Amsterdam.

� Laffont, J.J., and E. Maskin (1982), “The Theory of Incentives: An Overview”, in W. Hildenbrand (ed.), Advances in Economic Theory, Cambridge University Press.

Myerson, R.B. (1979), “Incentive Compatibility and the Bargaining Problem”,

Econometrica, 47: 61-74.

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1. Problem

2. Framework

3. Revelation principle

II. Implementation in dominant strategies � Gibbard, A. (1973), “Manipulation of Voting Schemes: A General Result”,

Econometrica, 41: 587-601.

Groves, T. (1973), “Incentives in Teams”, Econometrica, 41: 617-631.

� Laffont, J.J., and E. Maskin (1980), “A Differential Approach to Dominant Strategy Mechanisms”, Econometrica, 48: 1507-1520.

Satterthwaite, M. (1975), “Strategy-Proofness and Arrow’s Conditions: Existence and

Correspondence Theorems for Voting Procedures and Social Welfare Functions”, Journal of Economic Theory, 10: 187-217.

1. Simple example

2. Negative result

3. Solutions

III. Bayesian implementation Textbook:

Fudenberg and Tirole, Chap. 8.

Articles: � D’Aspremont, C., and L.A. Gérard-Varet (1979), “Incentives and Incomplete

Information”, Journal of Public Economics, 11: 24-45. Laffont, J.J., and E. Maskin (1979), “A Differentiable Approach to Expected Utility

Maximizing Mechanisms”, Chap. 16 in Laffont, J.J. ed., Aggregation and Revelation of Preferences, North-Holland, Amsterdam.

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� Myerson, R., and M. Satterthwaite (1983), “Efficient Mechanisms for Bilateral Trading”,

Journal of Economic Theory, 28: 265-281. Palfrey, T. (1992), “Implementation in Bayesian Equilibria: The Multiple Equilibrium

Problem in Mechanism Design”, in Advances in Economic Theory, Vol. I, Laffont ed., Cambridge University Press.

1. Framework

2. Quasi-linear utilities

IV. Nash implementation

Maskin, E. (1977), “Nash Equilibrium and Welfare Optimality”, mimeo, à paraître dans Journal of Mathematical Economics.

Maskin, E. (1985), “The Theory of Implementation in Nash Equilibrium: A Survey”,

Social Goals and Social Organization, Essays in memory of Elisha Pazner, L. Hurwicz, D. Schmeidler and H. Sonnenschein eds., Cambridge University Press.

� Moore, J. (1992), “Implementation, Contracts, and Renegotiation in Environments with

Complete Information”, in Advances in Economic Theory, Vol. I, Laffont ed., Cambridge University Press.

1. Framework

2. Strong Nash implementation

3. Equilibrium refinement

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Chapter 3 Auctions Textbook:

Bolton and Dewatripont, Chap. 7. Articles:

Laffont, J.J. (1997), “Game Theory and Empirical Economics: The Case of Auction

Data”, European Economic Review, 41: 1-35.

� Klemperer, P. (2004), Auctions: Theory and Practice, Princeton University Press.

McAfee, P., and J. McMillan (1987), “Auctions and Bidding”, Journal of Economic Literature, 25: 699-738.

Milgrom, P. and R. Weber (1982), “A Theory of Auctions and Competitive Bidding”,

Econometrica, 50: 1089-1122.

� Myerson, R. (1981), “Optimal Auctions Design”, Mathematics of Operations Research, 6: 58-73.

� Riley, J., and W. Samuelson (1991), “Optimal Auctions”, American Economic Review,

71: 381-392.

Vickrey, W. (1961), “Counterspeculation, Auctions, and Sealed Tenders”, Journal of Finance, 16: 8-37.

I. Introduction

1. Different auctions

2. Revelation principle

3. Examples

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II. Independent values

1. Framework

2. Revenue equivalence theorem

3. Bidding strategies

4. Optimal auction

5. Risk aversion

6. Asymmetry

III. Common value

1. The Winner’s curse

2. Correlation

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Chapter 4 Adverse selection Textbooks:

Laffont 1991, Chapter 10. Laffont and Martimort Chapters 2-3. Bolton and Dewatripont, Chapter 2. Mas-Colell, Whinston and Green, Chapters 13-14.

General References: Baron, D. (1989), “Design of Regulatory Mechanisms and Institutions”, Chapter 24,

Handbook of Industrial Organization, R. Schmalensee and R. Willig eds, North Holland.

Caillaud, B., R. Guesnerie, P. Rey, and J. Tirole (1988), “Government Intervention in Production and Incentives Theory: A Review of Recent Contributions”, Rand Journal of Economics, Spring 19: 1-26.

Hart, O. and B. Holmstrom (1987), “The Theory of Contracts”, in Advances in Economic Theory, Fifth World Congress, T. Bewley ed., Cambridge University Press.

Laffont, J.J., and J; Tirole (1993), A Theory of Incentives in Procurement and Incentives, MIT Press.

Basic Articles: � Baron, D., and R. Myerson (1982), “Regulating a Monopolist with Unknown Costs”,

Econometrica, 50: 911-930. � Guesnerie, G., and J.J. Laffont (1984), “A Complete Solution of Principal-Agent

Problems with an Application to the Control of a Self-Managed Firm”, Journal of Public Economics, 25: 329-369.

Maskin, E., and J. Riley (1984), “Monopoly with Incomplete Information”, Rand Journal of Economics, 15: 171-196.

Mussa, M., and S. Rosen (1978), “Monopoly and Product Quality”, Journal of Economic Theory, 18: 301-317.

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I. Introduction

II. Simple example

1. Price discrimination

2. Complete information

3. Incomplete information

III. A more general analysis

1. Framework

2. Implementation

3. Optimization

4. Examples

IV. Variations

1. Multiple agents

2. Noisy observation

3. Interim renegotiation

4. Countervailing incentives

5. Stochastic contracts

6. Dynamics

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Chapter 5 Moral hazard

Textbooks:

Laffont 1991, Chapter 11. Laffont and Martimort, Chapters 4-5. Bolton and Dewatripont, Chapter 4. Mas-Colell, Whinston and Green, Chapter 14.

General References: Baron, D. (1989), “Design of Regulatory Mechanisms and Institutions”, Chapter 24,

Handbook of Industrial Organization, R. Schmalensee and R. Willig eds., North Holland.

Hart, O., and B. Holmstrom (1987), “The Theory of Contracts”, in Advances in Economic

Theory, Fifth World Congress, T. Bewley ed., Cambridge University Press. Basic Articles: � Grossman, S., and O. Hart (1983), “An Analysis of the Principal-Agent Problem”,

Econometrica, 51: 7-45. � Holmstrom, B. (1979), “Moral Hazard and Observability”, Bell Journal of Economics,

10: 74-91.

Rogerson, W. (1985), “The First-Order Approach to Principal-Agent Problems” Econometrica, 53: 1357-1368.

Shavell, S. (1979), “Risk-Sharing and Incentives in the Principal and Agent

Relationship”, Bell Journal of Economics, 10: 55-73. Jewitt, I. (1988), “Justifying the First-Order Approach to Principal-Agent Problems”,

Econometrica, 56(5): 1177-1190. Sappington, D. (1983), “Limited Liability Contracts between Principal and Agent”,

Journal of Economic Theory, 29: 1-21. Holmstrom, B., and P. Milgrom (1987), “Aggregation and Linearity in the Provision of

Intertemporal Incentives”, Econometrica, 55: 303-328.

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Holmstrom, B., and P. Milgrom (1991), “Multi-Task Principal-Agent Analyses:

Incentives Contracts, Asset Ownership and Job Design”, Journal of Law, Economics and Organization, 7: 26-52.

I. Introduction

1. Efficiency versus risk-sharing

2. Efficiency versus informational rent

II. The role of statistical inference

1. The inference problem

2. Full inference

3. Limited inference

4. Valuable signals

III. Effort levels

1. A simple example

2. Risk-sharing, incentives and participation constraint

3. Multi-tasks

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IV. Applications

1. Partial insurance

2. Efficiency wage

3. Credit rationing

4. Group lending

5. Moral hazard in teams

6. Career concerns

7. Commitment

École d’économie de Toulouse - TSE

MACROECONOMICS 1

G. Saint-Paul

The purpose of this course is two-fold : first, introduce to the students to a number of tools in dynamic

optimization, equilibrium derivation, and welfare analysis. Second, present the main theories of

macroeconomics in the long run, i.e. the theory of economic growth and unemployment.

Prerequisites : Kuhn-Tucker optimization theory ; standard calculus and linear algebra ; standard micro price

theory.

Some textbooks :

Blanchard and Fischer, Lectures on macroeconomics, MIT Press

Romer, Advanced Macroeconomics, McGraw Hill

Pissarides, Equilibrium Unemployment Theory

Aghion and Howitt, The Economics of Growth, MIT Press

Acemoglu, Introduction to modern economic growth

Layard-Nickell-Jackman, Unemployment, Oxford

1. The Ramsey growth model

Tool : optimal control

Readings :

Blanchard/Fischer, chapter 2

Acemoglu, chapter 7

Acemoglu, chapter 8

Ramsey (1928), « A mathematical theory of saving », Economic Journal

2. Innovation and endogenous growth

Tool : the Dixit-Stiglitz aggregative model

Readings :

Acemoglu, chapters 12 and 13

Dixit-Stiglitz, « Monopolistic Competition and Optimum Product Diversity” The American Economic Review,

Vol. 67, No. 3 (Jun., 1977), pp. 297-308

Romer, Paul, “.Endogenous Technological Change “, Journal of Political Economy, Vol. 98, No. 5 (Oct., 1990),

pp. S71-S102

Grossman-Helpman, « Quality Ladders in the Theory of Growth” Review of Economic Studies, Vol. 58, No. 1

(Jan., 1991), pp. 43-61

Aghion-Howitt, « A Model of Growth Through Creative Destruction” Econometrica, Vol. 60, No. 2 (Mar., 1992),

pp. 323-351

3. Empirical growth

Tool : Log-linearization around steady state, computing a speed of convergence

Readings :

Acemoglu, chapter 3

Acemoglu, chapter 4

Mankiw, Romer, and Weil (1992), « A contribution to the empirics of economic growth », Quarterly Journal of

Economics

Barro and Sala-i-Martin (1991), « Convergence », Journal of Political Economy

Jones (1995) « Time Series Tests of Endogenous Growth Models” Quarterly Journal of Economics, Vol. 110, No.

2 (May, 1995), pp. 495-525

Acemoglu, Johnson and Robinson (2001), « The Colonial Origins of Comparative Development: An Empirical

Investigation” The American Economic Review, Vol. 91, No. 5 (Dec., 2001), pp. 1369-1401

4. Unemployment I : Insider-Outsiders and efficiency wages

Tools: Dynamic programming, discrete and continuous time

2-state Markov models ; Poisson processes

Asset-pricing interpretation of Bellman equations

Readings :

Lindbeck and Snower, Insiders versus Outsiders The Journal of Economic Perspectives, Vol. 15, No. 1 (Winter,

2001), pp. 165-188

Grout (1984), « Investment and Wages in the Absence of Binding Contracts: A Nash Bargaining Approach”

Econometrica, Vol. 52, No. 2 (Mar., 1984), pp. 449-460

Shapiro and Stiglitz (1984) « Equilibrium unemployment as a worker’s discipline device », American Economic

Review

Blanchard and Summers (1986), « Hysteresis and the European Unemployment problem », NBER

Macroeconomics Annual

Layard and Nickell (1990), Unemployment, Oxford U. Press

5. Unemployment II : The Mortensen/Pissarides matching model

Tools : Comparing optimum and equilibrium in dynamic models with market failures

Readings :

Pissarides, C. (1990) Equilibrium Unemployment Theory, 2nd edition, MIT Press, 1998

Mortensen, D. and C. Pissarides, (1994) "Job Creation and Job Destruction in the Theory of Unemployment",

Review of Economic Studies; 61(3), pages 397-415.

Hosios, Arthur (1990), « On the Efficiency of Matching and Related Models of Search and Unemployment”

Review of Economic Studies, Vol. 57, No. 2 (Apr., 1990), pp. 279-298

Moen, Ragnar (1995), « Competitive search equilibrium », Journal of Political Economy

6. Empirical Unemployment

Readings :

Nickell, Stephen. 'Labour Market Institutions and Unemployment in OECD Countries.' CESifo DICE Report 1, no.

2 (2003), pp. 13-26

Blanchard, Olivier, “the medium run”, Brookings Papers on Economic Activity, Vol. 1997, No. 2 (1997), pp. 89-

158

O. Blanchard and J. Wolfers. (2000), “The Role of Shocks and Institutions in the Rise of European

Unemployment: the Aggregate Evidence”. Economic Journal, (462), 2000.

7. Overlapping generations

Readings :

Acemoglu, Chapter 9

Allais, Maurice (1947), Economie et Intérêt

Blanchard, Olivier (1985), “Debts, Deficits, and Finite Horizons”, Journal of Political Economy, 93:223-247

Diamond, Peter (1965), “National debt in a neo-classical growth model”, American Economic Review, 55: 1126-

1150

Malinvaud, Edmond (1987), “The overlapping generations model in 1947”, Journal of Economic Literature

Samuelson, Paul (1958), “An exact consumption-loan model of interest with or without the social contrivance

of money”, Journal of Political Economy 66: 467-482

Econometrics I

Nour Meddahi (Toulouse School of Economics)

Outline:

Part I: Linear Model

1. Examples

2. Finite Sample Properties

3. Asymptotic Theory

4. Bootstrap

5. Serially Correlated Errors

Part II: Generalized Method of Moments

1. Examples

2. GMM: Single Equation

3. GMM: Multiple Equation

4. GMM for Serially Correlated Data

5. Minimum Distance Estimator

6. Bootstrap

Part III: Univariate Time Series

1. Stationary Processes

2. Estimating and Testing Time Series Models

3. Non-Stationary Time Series and Unit-Root Econometrics

4. Forecasting Time Series Data

5. Bootstrap

Part IV: Panel Data

1. Examples

2. Estimators

3. Bootstrap

References:

• Hayashi, F., Econometrics, Princeton University Press, 2000.

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École d’économie de Toulouse - TSE

Econometrics II

Jean-Pierre Florens

This course addresses two topics : stastistical methods for econometric estimation and structural econometrics.

The different chapters of the course will be the following :

I – Estimation by maximization and GMM

Parametric models and maximum likelihood method

Bayesian analysis of parametric models

Non parametric methods

II – Identification

Simultaneity

Non observable variables

References : Econometric modeling and inference by J.P. Florens, V. Marimoutou and A. Peguin-Feisolle. Cambridge University Press 2007.

SyllabusAdvanced Econometrics 2

Time SeriesSpring 2012

Instructor: Irene Botosaru, Offi ce: MF 403, Email: irene.botosaru@tse-fr.eu

The course examines the models and statistical techniques used in the study of time series in finance andeconomics. The objective is to lay out the econometric theory of nonlinear univariate and linear multivariatetime series. The focus will be mostly theoretical. The topics covered will focus on: ARCH/GARCH models,VARMA, state space models and the Kalman filter, markov switching models, and cointegration. Timepermitting: continuous time financial modeling and panel data models.

Grading: The grade will be based on homework assignments that will be distributed throughout the class.They will count for 50% of the grade. A final exam will cover the other 50%. The final exam could be eitherwritten or oral (i.e. a presentation of several papers assigned by me that deal with a topic of your choicebut related to what we have covered in class).

Textbooks and Articles:Required : Hamilton, J. (1994). Time Series Analysis. Princeton University Press.

A list of useful textbooks and a preliminary list of articles are included below. A set of articles toaccompany the lectures will be posted online (website to be announced).

Optional textbooks:Arellano, M. and B. Honore (2001). Panel Data Models: Some Recent Developments, Handbook of

Econometrics, Volume 5, Chapter 55. Online.Brockwell, P.J. and R.A. Davies (1991). Time Series: Theory and Methods. 2nd ed, Springer.Cont, R. and P. Tankov (2004). Financial Modelling with Jump Processes, Chapman & Hall/CRC.Dielbold, F.X. andG.D. Rudebusch (1999). Business Cycles: Durations, Dynamics, and Forecasting.

Princeton University Press.Engle, R. andW.J. Granger (1991). Long-Run Economic Relationships: Readings in Cointegration.

Oxford University Press.Lutkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. 1st ed, Springer.Mills, T.C. (1990). Time Series Techniques for Economists, Cambridge University Press.Tsay, R.S. (2010). Analysis of Financial Time Series. 3rd ed, Wiley.Zivot, E. and J. Wang (2006). Modelling Financial Time Series with S-Plus. Online.

ARCH/GARCH and VARs:Andersen, T.G. and T. Bollerslev (1998). Answering the Skeptics: Yes, Standard Volatility Models

Do Provide Accurate Forecasts. International Economic Review, 39(4) 885-905.Engle, R.F. (2001). GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics. The

Journal of Economic Perspectives 15(4) 157-168.Engle, R.F. and T. Bollerslev (1986). Modeling the Persistence of Conditional Variances. Econo-

metric Reviews 1-50.Fernandez-Villaverde, J., J.F. Rubio-Remirez, T.J. Sargent, and M.W. Watson (2007).

ABCs (and Ds) of Understanding VARs. Review of Economic Studies 1021-1026.Rubio-Remirez, J.F., D.F. Waggoner, and T. Zha (2010). Structural Vector Autoregressions:

Theory of Identification and Algorithms for Inference. Review of Economic Studies 77 665-696.Sims, C.A. (1980). Macroeconomics and Reality. Econometrica 48(1) 1-48.Yang, L. (2005). A Semiparametric GARCH Model for Foreign Exchange Volatility. Journal of Econo-

metrics 130 365-384.

Cointegration and Unit Roots:

Engle, R.F. and C.W.J. Granger (1987). Co-Integration and Error Correction: Representation,Estimation, and Testing. Econometrica 55 73-107.Granger, C. (1986). Developments in the Study of Cointegrated Economic Variables. Oxford Bulletin

of Economics and Statistics 48 213-228.Granger, C. and P. Newbold (1974). Spurious Regressions in Econometrics. Journal of Econometrics

26 1045-1066.Granger, C. (1981). Some Properties of Time Series Data and Their Use in Econometric Model Spec-

ification. Journal of Econometrics 28 121-130.Harvey, D.I., S.J. Leybourne, and A.M.R. Taylor (2009). Unit Root Testing in Practice: Dealing

with Uncertainty over the Trend and Initial Conditions. Econometric Theory 25 587-636.Hendry, D. (1986). Econometric Modelling with Cointegrated Variables: An Overview. Oxford Bulletin

of Economics and Statistics 48 201-212.Phillips, P.C.B. (1987). Time Series Regression with a Unit Root. Econometrica 55 277-301.Phillips, P.C.B. and Z. Xiao (1998). A Primer on Unit Root Testing. Journal of Economic Surveys

12(5) 423-469.Stock, J. and M. Watson (1988). Variable Trends in Economic Time Series. Journal of Economic

Perspectives 2 147-174.

Markov Regime Switching Models:Hamilton, J.D. (2005) Regime-Switching Models. The Palgrave Dictionary of Economics.

2

Helmuth Cremer Fall 2011�2012M2, TSE

Public Economics I

Scope and objectives

Public economics studies the role of the government in a market economy and the impli-cations of its actions for the citizenry. The underlying structure is one of a decentralizedeconomy wherein economic decisions are coordinated through prices (which in turn aredetermined by free, but sometimes regulated, markets). Additionally, the public sec-tor itself typically plays a signi�cant role in these market economies. Public economicsexamines why the government may have to supplement the market mechanism. It evalu-ates the e¢ ciency and equity justi�cations for an intervention and their rami�cations forindividuals�incentives and welfare. It also studies what form the interventions shouldtake and how policies ought to be designed.

The course provides and introduction to public economics. It is designed for �rstyear graduate students (with a good background in microeconomic theory). We shallcover a good deal of �classical�material (you need to know the foundations) but alsosome more recent developments (to see some of the contemporary research in publiceconomics). Similarly, we shall combine methodological with more applied issues.

Textbooks

The main references are Public Economics by Gareth Myles, Cambridge UniversityPress, 1995 and my lecture notes (slides). Additional references are given below.

Course outline

1. Foundations (Myles, Ch. 1�2; Varian, Ch. 17�18; Mas-Collel et al.)

(a) Some facts and data

(b) The role of the government in a market economy

i. General equilibrium and welfare economics: de�nitions and review of the�welfare theorems�

ii. Market failures and rationale for government interventioniii. Redistribution: lump-sum transfers and taxes

1

2. Public goods (Myles, Ch. 9; Cremer and La¤ont (2003), Bergstrom et al. (1986))

(a) Introduction

(b) Pareto-e¢ ciency with public goods

i. Pure public goodii. Public good with costly access

(c) Equilibrium/decentralization

i. Lindhal equilibriumii. Voluntary contributions

(d) Excludable public good

3. Taxation and e¢ ciency (Auerbach and Hines, Section 2)

(a) Deadweight loss of taxation: de�nition and measurement

(b) Illustrations:

i. Partial equilibrium, single competitive marketii. Single household, two goodsiii. Labor supply, savings, etc.

4. Commodity taxation (Myles, Ch. 4; Atkinson and Stiglitz, Ch. 12; Auerbach andHines, Sections 3�5)

(a) Introduction

(b) Identical individuals

(c) Heterogenous households

(d) Ramsey-Boiteux prices

(e) Application: access pricing in the postal sector

5. Income taxation (Myles, Ch. 5; Stiglitz (1987), Atkinson and Stiglitz, Ch. 13,Diamond (1998))

(a) Introduction: income tax schedules (tax functions), marginal and averagetax rates, progressivity

(b) Linear income tax

(c) Non-linear income tax

(d) Applications and special cases

2

6. Income vs. commodity taxation (Stiglitz (1987); Atkinson and Stiglitz Ch. 14;Cremer, Pestieau and Rochet (2001))

(a) Introduction: the direct vs. indirect tax controversy

(b) The Atkinson and Stiglitz (AS) result (non-linear and linear commoditytaxes)

(c) Attacks on AS

(d) Multi-dimensional heterogeneity and the design of tax policy: an example

(e) Other instruments: social insurance, in-kind transfers, etc.

7. Externalities: the basics (Myles, Ch. 10, La¤ont, Ch. 1)

(a) Introduction

(b) De�nitions and examples

(c) E¢ cient allocation and market equilibrium

(d) Remedies

(e) Example: Pigouvian tax in a partial equilibrium setting

8. Externalities and optimal taxation (Salanié, Ch. 10)

(a) Introduction: environmental taxation in second-best

(b) Linear taxation: Sandmo�s analysis

(c) General taxation: Cremer and Gahvari

i. Taxation of �nal goodsii. Taxation of inputs and emissions

(d) Empirical illustration: taxation of energy

9. [Under construction] Dynamic aspects of taxation (Myles, Ch. 7; Sandmo (1985),Cremer, Pestieau and Rochet (2003), Cremer and Pestieau (2004))

(a) Tax treatment of savings and wealth

(b) Intergenerational transfers

3

Additional references

Textbooks

Atkinson, A. and J. Stiglitz, �Lectures on Public Economics�, McGraw Hill :New York, 1980.

Cornes, R and T. Sandler, �The Theory of Externalities, Public Goods andClub Goods�, Cambridge University Press, Cambridge UK, 1996 (secondedition).

Jha, R. �Modern Public Economics�, Routledge, London, 1998.

Kaplow, L., The Theory of Taxation and Public Economics, Princeton Uni-versity Press, 2008.

La¤ont, J-J., �Fundamentals of Public Economics�, MIT Press, CambridgeMassachusetts, 1988.

Mas-Colell, A., M. Whinston and J. Green, �Microeconomic Theory �, Ox-ford University Press, 1995.

Salanié B., �The Economics of Taxation�, MIT Press, 2003.

Varian, H, �Microeconomic Theory� , Norton (third edition).

Surveys

Auerbach, A. �The Theory of Excess Burden and Optimal Taxation�, inAuerbach, A. and M. Feldstein, eds., Handbook of Public Economics,Vol.1, 1985, 61�86.

Auerbach, A. and J. Hines �Taxation and Economic E¢ ciency�, in Auer-bach, A. and M. Feldstein, eds., Handbook of Public Economics, Vol.3,2002, 1347�1422.

Boadway, R. and M. Keen, �Redistribution�, in Atkinson, A. and F. Bour-guignon, eds., Handbook of Income Distribution, Vol.1, 2000, 677�790.

Cremer, H. and P. Pestieau, �Wealth transfer taxation: a survey of thetheoretical literature�, in: Handbook on the Economics of Giving, Reci-procity and Altruism, Editors: L.-A. Gerard-Varet, S.C. Kolm and J.Mercier-Ythier, North-Holland, 2004, 1108�1134.

Sandmo, A. �The E¤ects of Taxation on Saving and Risk-Taking�, in A.Auerbach and M. Feldstein, Eds., Handbook of Public Economics, Vol.1,Amsterdam : North Holland, 1985, 265�293.

Sandmo, A. �The theory of tax evasion: A retrospective view�, mimeo, 2004.

4

Stiglitz, J.�Pareto E¢ cient and Optimal Taxation and the New New WelfareEconomics�, in Auerbach, A. and M. Feldstein, Eds., Handbook of PublicEconomics, Volume 2, Amsterdam : North Holland, 1987, 991�1041.

Papers

Atkinson, A. and J. Stiglitz, �The Design of Tax Structure : Direct VersusIndirect Taxation�, Journal of Public Economics, 1976, 6, 55�75.

Atkinson, A. �Optimal Taxation and the Direct Versus Indirect Tax Con-troversy�, Canadian Journal of Economics, 1977, 590�606.

Atkinson, A. and A. Sandmo, �Welfare Implications of the Taxation of Sav-ings,�Economic Journal, 90, 1980, 529�549.

Bergstrom, T., L. Blume and H. Varian, �On the private provision of publicgoods,�Journal of Public Economics, 29, 25�49.

Cremer, H. and F. Gahvari, �Uncertainty, optimal taxation and the directversus indirect tax controversy,�Economic Journal, 105, 1995, 1165�79.

Cremer, H., F. Gahvari and JM Lozachmeur, �Tagging and income taxation:theory and an application�, American Economic Journal: Economic Pol-icy, 2, 2010, 31�50.

Cremer, H. and F. Gahvari, �Second-best taxation of emissions and pollutinggoods,�Journal of Public Economics, 80, 2001, 169�197.

Cremer, H. and J.J. La¤ont, �Public goods with costly access,�Journal ofPublic Economics, 87, 2003, 1985�2012.

Cremer, H., N. Ladoux and F. Gahvari, �Externalities and optimal taxa-tion,�Journal of Public Economics, 70, 1998, 343�364.

Cremer, H., N. Ladoux and F. Gahvari, �Tax reform versus tax design in thepresence of consumption and production externalities (with Applicationsto France)�, Journal of Environmental Economics and Management, 59,2010, 82�93.

Cremer, H. and P. Pestieau, �Redistributive taxation and social insurance,�International Tax and Public Finance, 3, 1996, 281�295.

Cremer, H. and P. Pestieau, �Piracy prevention and the pricing of informa-tion goods�, Information Economics and Policy, 21, 2009, 34�42.

Cremer, H., P. Pestieau and J.C. Rochet, �Direct versus indirect taxation:the design of the tax structure revisited�, International Economic Re-view, 42, 2001, 781�799.

5

Cremer, H., P. Pestieau and J.C. Rochet, �Capital income taxation wheninherited wealth is not observable,� Journal of Public Economics, 87,2003 2475�2490.

Diamond, P., �Optimal income taxation: an example with a U-shaped pat-tern of optimal marginal tax rates,�American Economic Review, 1998,83�95.

Diamond, P. and J. Mirrlees, �Optimal Taxation and Public Production :I,�American Economic Review, 1971, 8�27.

Diamond, P. and E. Saez, �The Case for a Progressive Tax: From Basic Re-search to Policy Recommendations�, forthcoming, Journal of EconomicPerspectives, 2011.

Gahvari, F. �Review of Ruud A. de Mooij: Environmental Taxation and theDouble Dividend,�Journal of Economic Literature, 40, 2002, 221�223.

Goulder, L. �Environmental taxation and the double dividend : A reader�sguide,� International Tax and Public Finance, 2, 1995, 157�183.

Mirrlees, J. �An Exploration in the Theory of Optimum Income Taxation,�Review of Economic Studies, April 1971.

Naito, H., �Re-examination of uniform commodity taxes under a non-linearincome tax system and its implications for production e¢ ciency�, Journalof Public Economics, 71, 165�188.

Course requirements

� There will be a written examination at the end of the term. The material for theexam covers the lectures plus the required readings.

� The readings mentioned in the course outline and my slides are required for allstudents.

� Additional readings are optional (but strongly recommended).

� Course material (slides, problem sets and solutions, readings, etc.) is available onCAELUS under Université Toulouse 1 Capitole /Helmuth Cremer.

6

Public Economics II

Philippe De Donder (dedonder@cict.fr) and Karine Van der Straeten (karine.van-der-straeten@tse-fr.eu)

Master 2, second semester, 2011-1012 Outline: In a democracy, some institutions are in charge of aggregating the possibly diverging opinions and interests of citizens. This course presents the economic approach of collective decision, both from the normative point of view of social choice theory, and from the positive point of view of public decision models. Regarding this second approach, the main tool will be game theory, applied to political actors and institutions. The course is divided in two parts. The first part (taught by Karine Van der Straeten) studies collective decision making in an abstract framework, and compares the properties of various political regimes or electoral systems. The second part (taught by Philippe De Donder) studies the political economy of social insurance and redistribution, including income redistribution, retirement, health insurance and unemployment policies. The following topics will be covered: First Part: Collective decision making in abstract frameworks Topic 1: Justification of the majority rule: information aggregation and the Condorcet Jury theorem Topic 2: Axiomatization of the majority rule and Arrow’s impossibility theorem Topic 3: Single-dimension politics, The median voter theorem. Topic 4: Multi-dimension politics, Models of political competition. Topic 5: Comparison of electoral institutions and voting rules Second Part: The political economy of social insurance and redistribution Topic 6: Income taxation Topic 7: (Early) retirement and public pensions Topic 8: Health insurance Topic 9: Unemployment policies

Teaching Method : Presentation and discussion of research papers, organized by broad topics. Each topic covers about four or five papers, and their general context. It is strongly recommended that students read at least one or two papers before each session. Assessment Method : Students, alone or in pairs, choose a couple of research papers related to one topic (A list from which they might pick is provided by the instructors). They read the papers, make a presentation of the main questions, models, and results, and critically comment upon those articles. They are required to make a 30 minute long presentation of this work and to hand write a short (5-page) paper summarizing it. Bibliography: Textbooks: Ordeshook, P., Game Theory and Political Theory, (Cambridge, 1986). Persson, T. and G. Tabellini, Political Economics (MIT, 2000). Articles by topic: Topic 1: Justification of the majority rule: information aggregation and the Condorcet Jury theorem David Austen-Smith and Jeffrey S. Banks (1996), "Information Aggregation, Rationality, and the Condorcet Jury Theorem", American Political Science Review. (*) Timothy J. Feddersen and Wolfgang Pesendorfer (1998), "Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts under Strategic Voting", American Political Science Review. Laslier et Van der Straeten, « Electoral competition, information and a strategic electorate », 2004, Economic Theory, 24, 419-446 Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, vol. 42(1), pages 48-74, January. Topic 2: Axiomatization of the majority rule and Arrow’s impossibility theorem Arrow, K. Social Choice and Individual Values, Wiley : New York 1952. (*) Geanakoplos, J., (2005), "Three Brief Proofs of Arrow's Impossibility Theorem", Economic Theory, 26(1): 211-215. May, 1952. A set of independent necessary and sufficient conditions for simple majority decisions. Econometrica 20 (1952), pp. 680–684. Topic 3: Single-dimension politics, The median voter theorem (*) Black, Duncan. 1948. On the Rationale of Group Decision Making. Journal of Political Economy 22-34. Downs, A. An Economic Theory of Democracy, Harper : New York 1957.

Hotelling, H., 1929, Stability in Competition, Economic Journal. Laslier, Trannoy et Van der Straeten, « Voting under ignorance of job skills of unemployed: the overtaxation bias », 2003, Journal of Public Economics, 87, 595-626 Roberts, K.W.S., 1977. Voting over income tax schedules. Journal of Public Economics 8, pp. 329–340 Topic 4: Multi-dimension politics, Models of political competition (*) McKelvey, Richard. 1979. “General Conditions of Global Intransitivities in Formal Voting Games.” Econometrica, 47: 1085-1111. Plott, Charles R., and Michael E. Levine. 1978. A Model of Agenda Influence on Committee Decisions. American Economic Review 68:146-60. Lee, Roemer et Van der Straeten, Racism, Xenophobia and Distribution, A Study of Multi-issue Politics in Advanced Democracies, 2007, Harvard University Press & Russell Sage Foundation Press Topic 5 : Comparison of electoral institutions and voting rules (*) Myerson, Roger. 1993. "Incentives to cultivate favored minorities under alternative electoral systems." American Political Science Review 87:856-869. Laslier, J.-F. et K Van der Straeten, 2008, « Approval voting in the French 2002 presidential election: A live experiment », Experimental Economics, vol. 11, p. 97-105. Blais, Laslier, Sauger and Van der Straeten, “Strategic, sincere and heuristic Voting under for voting rules: An experimental study”, IDEI WP Topic 6: Income taxation Gans, J.S. and M. Smart, 1996, "Majority Voting with Single-Crossing Preferences", Journal of Public Economics, 59, 219-237. Romer, T., 1975, "Individual welfare, majority voting and the properties of a linear income tax", Journal of Public Economics, 7, 163-68. Roberts, K., 1977, "Voting over income tax schedules", Journal of Public Economics, 8, 329-40. Meltzer, A. H. and S. F. Richard, 1981, "A Rational Theory of the Size of Government", Journal of Political Economy, 89, p. 914-27. Topic 7: (Early) retirement and public pensions Galasso, V. and P. Profeta, “The Political Economy of Social Security: a Survey” European Journal of Political Economy, 18(1), 2002, pp. 1-29. Browning, E. K., 1975, "Why the social insurance budget is too large in a democracy", Economic Inquiry, 13, p. 373-388. Boldrin, M. and A. Rustichini, 2000, "Political Equilibria with Social Security", Review of Economic Dynamics, vol. 3(1), pages 41-78. Galasso, V. and P. Profeta, 2002, "The political economy of social security: a survey", European Journal of Political Economy, vol. 18(1), pages 1-29. Topic 8: Health insurance Epple D. and R. Romano, 1996, "Public Provision of Private Goods", Journal of Political Economy, 104, 57-84. Gouveia, M., 1997, "Majority rule and the public provision of private good", Public Choice, 93, 221-244.

Moreno-Ternero, J. and J. Roemer, 2007, "The political economy of health care finance", available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1006807. Topic 9: Unemployment policies Anesi, V. and Ph De Donder, “A Positive Theory of Unemployment Insurance and Employment Protection”. CEPR Discussion Paper 7333. Boeri, T., Conde-Ruiz, J.I., Galasso, V., 2003. The Political Economy of Flexicurity. FEDEA Working Paper 2006-15. Lee, W., Roemer, J.E., 2005. The Rise and Fall of Unionised Labour Markets: A Political Economy Approach. Economic Journal 115, 28-67. Saint-Paul, G., 1996. Exploring the Political Economy of Labor Market Institutions. Economic Policy 23, 265-315. Wright, R., 1996. The Redistributive Role of Unemployment Insurance and the Dynamics of Voting. Journal of Public Economics 31, pp. 377-399.

Advances in Behavioral Economics: Behavioral Finance Sébastien Pouget

Professor of Finance, Institut d’Administration des Entreprises Member of the Toulouse School of Economics

Université Toulouse 1 Capitole

Contact : E-mail : spouget@univ-tlse1.fr Web : http://spouget.free.fr Course description: Traditional finance typically considers that financial markets are efficient because populated by rational investors who maximize their expected utility from consumption. This course departs from this view by showing how inefficiencies can arise due to investors’ psychology and limits to arbitrage. Psychology shapes investors’ preferences: Anticipatory utility, others-regarding preferences and mood are important in understanding investors’ behavior. Psychology also affects investors’ perception: Overconfidence, confirmation bias and several heuristics may impair their judgment. Whether these psychological factors have an impact on financial markets ultimately depends on arbitrageurs’ ability to fight against mispricings. We will show that limits to arbitrage may arise due to trading costs, fundamental risk, noise trader risk... These topics will be covered through lectures and class games and will trigger discussions of issues such as predictability of the stock market and other markets, delayed arbitrage, bubbles and crashes. The evaluation for this part of the course on “Advances in Behavioral Economics” will be based on a presentation of an original research idea (experimental, theoretical or empirical) that will take place on Friday, March 9. Tentative outline: Introduction 1) Limits of arbitrage 2) Financial market simulation 3) Investor psychology: Beliefs 4) Investor psychology: Preferences 5) Speculative Bubbles Bibliography:

• Introduction: 

Camerer C., 1997, “Taxi Drivers and Beauty Contests”, Engineering & Science, No. 1. Camerer C. and G. Lowenstein, 2003, “Behavioral Economics: Past, Present, Future”, Advances in Behavioral Economics, Camerer, Lowenstein, and Rabin Eds., Princeton University Press.

Lou D., 2010, “Maximizing Short-Term Stock Prices through Advertising”, http://personal.lse.ac.uk/loud. Saunders E., 1993, “Stock Prices and Wall Street Weather”, American Economic Review, 83, No. 5.

• Limits of Arbitrage ­ Evidence: 

Froot K. and E. Dabora, 1999, “How are stock prices a!ected by the location of trade?”, Journal of Financial Economics, 53. Hwang B.-H., 2011, “Country-specific sentiment and security prices”, Forthcoming Journal of Financial Economics Lamont O. and R. Thaler, 2003, “Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs”, Journal of Political Economy, 111. Lamont O. and R. Thaler, 2003, “Anomalies: The Law of One Price in Financial Markets”, Journal of Economic Perspectives, 17. Mitchell M., T. Pulvino, and E. Stafford, 2002, “Limited Arbitrage in Equity Markets”, Journal of Finance, 56. Ross S., 1987, “The Interrelations of Finance and Economics: Theoretical Perspectives”, The American Economic Review, 77, Papers and Proceedings of the Ninety-Ninth Annual Meeting of the American Economic Association. Scruggs J., 2007, “Noise trader risk: Evidence from the Siamese twins”, Journal of Financial Markets, 10.

• Limits of Arbitrage ­ Theory: 

Abreu D. and M. Brunnermeier, 2002, “Synchronization Risk and Delayed Arbitrage”, Journal of Financial Economics, 66. Abreu D. and M. Brunnermeier, 2003, “Bubbles and Crashes”, Econometrica, 71. Brunnermeier M. and S. Nagel, 2004, “Hedge Funds and the Technology Bubble”, Journal of Finance, 59. Boyer B., 2011, “Style-related Comovement: Fundamentals or Labels?”, Journal of Finance, 66. Chen H., G. Noronha, and V. Singal, 2004, “The price response to S&P 500 index additions and deletions: evidence of asymmetry and a new explanation”, Journal of Finance, 59 Cooper M., O. Dimitrov, and P.R. Rau, 2001, “A Rose.com by Any Other Name”, Journal of Finance, 56. Cooper M., A. Khorana, I. Osobov, A. Patel, and P.R. Rau, 2005, “The Game Of The Name: Valuation Effects Of Name Changes In A Market Downturn”, Journal of Corporate Finance, 11. DeLong B., A. Shleifer, L. Summers, R. Waldmann, 1990, “Noise trader risk in financial markets”, Journal of Political Economy, 98. Flynn S., 2005, Noise-trading, Costly Arbitrage, and Asset Prices: Evidence from US Closed-end Funds, Vassar College Department of Economics Working Paper 69.

Gromb D. and D. Vayanos, 2010, “Limits of Arbitrage”, Annual Review of Financial Economics, 2. Lamont O. and R. Thaler, 2003, “Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs”, Journal of Political Economy, 111. Lee C., A. Shleifer, and R. Thaler, “Investor Sentiment and the Closed-end Fund Puzzle”, Journal of Finance, 46. Malkiel B., 2007, A Random Walk Down Wall Street, W.W. Norton & Company. Mitchell M., T. Pulvino, and E. Stafford, 2002, “Limited Arbitrage in Equity Markets”, Journal of Finance, 56. Scruggs J., 2007, “Noise trader risk: Evidence from the Siamese twins”, Journal of Financial Markets, 10. Shleifer A. and R. Vishny, 1997, “The limits of arbitrage”, Journal of Finance, 52. Weiss K., 1989, “The post-offering price performances of closed-end funds,” Financial Management , 18.

• Financial Market Game: 

Plott C., and S. Sunder, 1988, “Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets”, Econometrica, 56.

• Investor Psychology – Beliefs: 

Barber B. and T. Odean, 2000, “Trading is hazardous to your wealth: The common stock investment performance of individual investors”, Journal of Finance, 55. Barber B. and T. Odean, 2001, “Boys will be boys: Gender, overconfidence, and common stock investment”, Quarterly Journal of Economics, 116. Barber B. and T. Odean, 2008, “All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors”, Review of Financial Studies, 2008. Barberis N., A. Shleifer and R. Vishny, 1998, “A Model of Investor Sentiment”, Journal of Financial Economics, 49. Ben-David I., J. Graham, and C. Harvey, 2010, "Managerial Miscalibration", NBER Working Papers 16215, National Bureau of Economic Research, Inc. Biais B., D. Hilton, K. Mazurier, and S. Pouget, 2005, “Judgemental overconfidence, self-monitoring and trading performance in an experimental financial markets”, Review of Economics Studies, 72. Bisiere C., S. Pouget, and S. Villeneuve, 2010, “Price Confirmation with Confirmation Bias”, Working Paper, http://spouget.free.fr/Confbias.pdf. Bodenhausen G., 1988, “Stereotypic biases in social decision making and memory: Testing process models of stereotype use”, Journal of Personality and Social Psychology, 55. Chen J., H. Hong, and J. Stein, 2002, "Breadth of ownership and stock returns”, Journal of Financial Economics, 66. Choi D. and D. Lou, 2010, “A Test of the Self-Serving Attribution Bias: Evidence from Mutual Funds”, Working Paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1100786.

Daniel K., D. Hirshleifer, and A. Subrahmanyam, 1998, “Investor Psychology and Security Market Under- and Overreactions”, Journal of Finance, 53. Darley J. and P. Gross, 1983, “A hypothesis confirming bias in labeling effects”, Journal of Personality and Social Psychology, 44. Diether K., C. Malloy, and A. Scherbina, 2002, “Differences of Opinion and the Cross Section of Stock Returns”, Journal of Finance, 57. Ditto P., D. Pizarro, E. Epstein, J. Jacobson, T. MacDonald, 2006, “Motivational myopia: Visceral influences on risk taking behavior”, Journal of Behavioral Decision-Making, 19. Edwards W., 1968, “Conservatism in human information processing”, in B. Kleinmuntz (ed.), Formal Representation of Human Judgment, pp.17-52, New York: John Wiley. Fisher K. and M. Statman, 2002, “Blowing Bubbles”, Journal of Psychology and Financial Markets, 3. Gervais S. and T. Odean, 2001, “Learning to be Overconfident”, Review of Financial Studies, 14. Goel V., J. Shuren, L. Sheesley, and J. Grafman, 2004, “Asymmetrical involvement of the frontal lobes in social reasoning”, Brain, 127. Graham J. and C. Harvey, 2001, “Expectations of equity risk premia, volatility and asymmetry from a corporate finance perspective”, Working Paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=292623. Green C. and R. Jame, 2011, “Company Name Fluency, Investor Recognition, and Firm Value”, Working Paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1777256. Griffin D. and A. Tversky, 1992, “The Weighing of Evidence and the Determinants of Confidence”, Cognitive Psychology, 24. Griggs R. and J. Cox, 1982, “The elusive thematic-materials effect in wason's selection task”, British Journal of Psychology, 73. Grullon G., G. Kanatas, and J. Weston, 2004, “Advertising, Breadth of Ownership, and Liquidity”, Review of Financial Studies, 17. Hirshleifer D., and T. Shumway, 2003, “Good Day Sunshine: Stock Returns and the Weather”, Journal of Finance, 58. Ho T. and Michaely R. , 1988, “Information quality and market efficiency”, Journal of Financial and Quantitative Analysis, 23. Huberman G., 2001, “Familiarity breeds investment”, Review of Financial Studies, 14. Kahneman D., P. Slovic, and A. Tversky, 1982, Judgment Under Uncertainty: Heuristics and Biases, New York: Cambridge University Press. Kahneman D. and A. Tversky, 1973, “On the psychology of prediction”, Psychological Review, 80. Kaustia M. and S. Knupfer, 2008, “Do Investors Overweight Personal Experience? Evidence from IPO Subscriptions”, Journal of Finance, 63. Kaustia M. and S. Knupfer, 2011, “Peer Performance and Stock Market Entry”, Working Paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1359006. Klibanoff P., O. Lamont, and T. Wizman, 1998, “Investor Reaction to Salient News in Closed-End Country Funds”, Journal of Finance, 53.

Malmendier U., E. Moretti, and F. Peters, 2011, “Winning by Losing: Evidence on Overbidding in Mergers”, October 2010, Working Paper. Malmendier U. and S. Nagel, 2011, “Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?”, Quarterly Journal of Economics, 126. Malmendier U. and G. Tate, 2005, “CEO Overconfidence and Corporate Investment”, Journal of Finance, 60. Miller E., 1977, “Risk, Uncertainty, and Divergence of Opinion”, Journal of Finance. Moeller S., F. Schlingemann, and R. Stulz, 2005, “Wealth destruction on a massive scale: A study of acquiring firm returns in the merger wave of the late 1990s”, Journal of Finance, 60. Nickerson R., 1998, “Confirmation Bias: A Ubiquitous Phenomenon in Many Guises”, Review of General Psychology, 2. Roll R., 1986, “The Hubris Hypothesis of Corporate Takeovers”, Journal of Business, 59. Shiller R., 2005, Irrational Exuberance, Princeton University Press. Tversky A. and D. Kahneman, 1974, “Judgment under uncertainty: Heuristics and biases”, Science, 185. Vissing-Jorgensen A., 2003, “Perspectives on Behavioral Finance: Does "Irrationality" Disappear with Wealth? Evidence from Expectations and Actions”, NBER Macroeconomics Annual 2003. Wason P., 1966, “Reasoning”, in B. Foss, New Horizons in Psychology, Harmondsworth: Penguin.

• Investor Psychology – Preferences: 

Allais M., 1953, “Le comportement de l’homme rationnel devant le risque: critique des postulats et axiomes de l’école Américaine”, Econometrica, 21. Barberis N. and W. Xiong, 2009, “What Drives the Disposition Effect? An Analysis of a Long-standing Preference-based Explanation”, Journal of Finance, 64. Barnea A., H. Cronqvist, S. Siegel, 2010, “Nature or nurture: What determines investor behavior?”, Journal of Financial Economics, 98. Benabou R and J. Tirole, 2006, “Incentives and Prosocial Behavior”, American Economic Review, 96. Benartzi S. and R. Thaler, 1995, “Myopic Loss Aversion and the Equity Premium Puzzle”, Quarterly Journal of Economics, 110. Boyer B., T. Mitton, K. Vorkink, 2010, “Expected Idiosyncratic Skewness”, Review Financial Studies, 23. Boyer B. and K. Vorkink, 2010, “Stock Options as Lotteries”, Working paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1787365. Brunnermeier M., 2004, “Learning to Re-optimize Consumption at New Income Levels: A Rationale for Prospect Theory”, Journal of European Economic Association, 2. Brunnermeier M. and J. Parker, 2005, “Optimal Expectations”, American Economic Review, 95. Camerer C., 2005, “Three cheers —psychological, theoretical, empirical— for loss aversion”, Journal of Marketing Research, 42.

Cesarini D., C. Dawes, M. Johannesson, P. Lichtenstein, and B. Wallace, 2009, “Genetic Variation in Preferences for Giving and Risk Taking”, Quarterly Journal of Economics, 124. Chabris C., D. Laibson, and J. Schuldt, 2008, “Intertemporal Choice”, Palgrave Dictionary of Economics. Chen M., Lakshminaryanan V., and L. Santos, 2006, “How basic are behavioral biases? Evidence from capuchin monkey trading behavior”, Journal of Political Economy, 114. Chen M., Lakshminaryanan V., and L. Santos, 2011, “The Evolution of Decision-Making Under Risk: Framing Effects in Monkey Risk Preferences”, Journal of Experimental Social Psychology, 47. Choi J., D. Laibson, B. Madrian, and A. Metrick, 2004, “For Better or For Worse: Default Effects and 401(k) Savings Behavior”, David Wise Ed., Perspectives in the Economics of Aging, University of Chicago Press. Della Vigna S. and U. Malmendier, 2006, “Paying Not To go To The Gym”, American Economic Review, 96. Gneezy U., E. Haruvy, and H. Yafe, 2004, “The Inefficiency of Splitting the Bill”, Economic Journal, 114. Green C. and B.-H. Hwang, 2011, “IPOs as Lotteries: Skewness Preference and First-Day Returns” , Working paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1374993. Harbaugh W., 1998, “What Do Donations Buy?”, Journal of Public Economics, 67. Hong H. and M. Kacperczyk, 2009, “The price of sin: The effects of social norms on markets”, Journal of Financial Economics, 93. Kahneman D. and A. Tversky, 1979, “Prospect theory: An analysis of decisions under risk”, Econometrica, 47 Kirby K., and R. Herrnstein, 1995, “Preference reversals due to myopic discounting of delayed reward”, Psychological Science, 6. Laibson David, 1997, “Golden Eggs and Hyperbolic Discounting”, Quarterly Journal of Economics, 62. Loewenstein G., 1987, “Anticipation and the valuation of delayed consumption”, Economic Journal, 97. Madrian B. and D. Shea, 2001, "The power of suggestion: Inertia in 401(k) participation and savings behavior”, Quarterly Journal of Economics, 116. Mitton T. and K. Vorkink, 2007, “Equilibrium Underdiversification and the Preference for Skewness”, Review Financial Studies, 20. Monat A., J. Averill, and R. Lazarus, 1972, “Anticipatory stress and coping reactions under various conditions of uncertainty”, Journal of Personality and Social Psychology, 24. Odean T., 1998, “Are Investors Reluctant to Realize Their Losses?”, Journal of Finance, 53. Samuelson W. and R. Zeckhauser, 1988, “Status Quo Bias in Decision Making”, Journal of Risk and Uncertainty, 1. Shapira Z. and I. Venezia, 2001, “Patterns of behavior of professionally managed and independent investors”, Journal of Banking and Finance, 25. Shui H. and L. Ausubel, 2005, “Time inconsistency in the credit card market”, Working paper, http://www.ausubel.com/creditcard-papers/time-inconsistency-credit-card-market.pdf.

Thaler R. and S. Benartzi, 2004, "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving”, Journal of Political Economy, 112. Tversky A. and D. Kahneman, 1981, “The framing of decisions and the psychology of choice”, Science, 211.

• Speculative Bubbles: 

Allen F. and G. Gorton, 1993, “Churning Bubbles”, Review of Economic Studies, 66. Blanchard O., 1979, “Speculative bubbles, crashes and rational expectations”, Economics Letters, 3. Camerer C., T.-H. Ho, and J.-K. Chong, 2004, A cognitive hierarchy model of one shot games, Quarterly Journal of Economics, 119. Harrison M. and Kreps D., 1979, “Martingales and arbitrage in multiperiod security markets”, Journal of Economic Theory, 20. Lamont O., 2003, “Go Down Fighting: Short Seller vs. Firms”, Yale ICF Working Paper No. 04-20. Moinas S. and S. Pouget, 2010, “Rational and Irrational Bubbles: An Experiment”, Working paper, http://spouget.free.fr/Bubbles.pdf. McKelvey, R. D. and T. R. Palfrey, 1995, Quantal Response Equilibrium for Normal Form Games, Games and Economic Behavior, 10. Scheinkman J. and W. Xiong, 2003, “Overconfidence and Speculative Bubbles", Journal of Political Economy, 111.

Master 2 TSE - ”Economics and Competition Law” (ECL ) Industrial Organization: Theoretical and Applied

Instructors:

Fabian Bergès, Chargé de Recherche INRA – 18 h,

and Céline Bonnet, Chargée de Recherche INRA – 18 h.

This course aims to give students an introduction to the theoretical and empirical analysis of market power and competition policies by preparing them to understand economic mechanisms, econometric methods and to interpret results. I – IO and Competition Policy (18h)

1. Competition Policy and market definition: (2h)

(a) Competition Policy vs. Regulation; (b) The history of competition policy in the European Union and the United States; (c) The objective of competition policy; (d) The relevant market definition: SSNIP test, diversion ratio, etc. (e) The substitutability on the supply side, essential facilities doctrine;

2. Monopoly, Monopsony and Bilateral Monopoly: (4h30)

(a) Private Monopoly with an homogenous good, deadweight loss and technology inefficiency; (b) Private Monopoly in presence of a negative externality, like pollution; (c) The durable goods monopoly and its intertemporal inability to commit; (d) The natural monopoly (public); (e) The monopsonist (input market and buyer's power); (a) The bilateral monopoly. (f) Number of firms, market shares and market power;

3. Strategic behaviors by firms: (3h)

(a) Price predation; (b) Strategic investment as a barrier-to-entry; (c) Vertical integration and foreclosure.

4. Vertical restraints: (2h30)

(a) The double marginalization issue and two-part tariffs; (b) Resale Price maintenance; (c) Exclusive territories.

5. Networks and standards: (3h)

(a) Network effects and consumers’ choice; (b) Strategies in the network standard choices; (c) Network and public policies ; (d) Network and supporting services.

6. Advertising: informative and persuasive (3 h).

II – Competition Econometrics (18h)

1. Introduction (motivation, organization of the course and background needed): (1h30)

2. Market definition (concentration: Lerner index, relevant market: SSNIP tests): (1h30)

3. Measurement of market power with differentiated products: (9h)

(a) Continuous demand, AIDS model

(b) Discrete choice models

(c) Estimation methods (Instrumental variable Method, generalized method of Moments, Maximum Likelihood Method, Simulation Method)

4. Competition analysis: (3h)

(a) Oligopolistic competition

(b) Vertical integration (double marginalization, two-part tariffs)

5. Merger Effects: (3h)

(c) Merger simulation

(d) Welfare and surplus effects

References: Paul Belleflamme and Martin Peitz, 2010, "Industrial Organization: Markets and Strategies", Ed. Cambridge

University Press, 724 pages, (ISBN-10: 0-521-68159-6 / ISBN-13: 978-0-521-68159-9) Carlton Denis and Perloff Jeffrey, 2005, “Modern Industrial Organization”, Ed. Addison-Wesley, 800 pages,

(ISBN-10: 0-321-18023-2 / ISBN-13: 978-0-321-18023-0) - also available in French ; Motta Massimo, 2004, “Competition Policy”, Ed. Cambridge University Press, 616 pages, (ISBN-10: 0-521-

01691-6 / ISBN-13: 978-0-521-01691-9) ; Oz Shy, 1996, "Industrial Organization: Theory and Applications", Ed. MIT Press, 488 pages, (ISBN-10: 0-

262-69179-5 / ISBN-13: 978-0-262-69179-6) Jean Tirole, 2002, “The Theory of Industrial Organization”, Ed. MIT Press, 479 pages, (ISBN-10: 0-262-

20071-6 / ISBN-13: 978-0-262-20071-4) Werden G. J., and L. M. Froeb (2006), “Unilateral Competitive Effects of Horizontal Mergers”, Handbook of

Antitrust Economics Reiss, P., and F. Wolak (2006), “Structural Econometric Modelling: Rationales and Examples from

Industrial Organization”, Handbook of Econometrics, Volume 6 Bishop, S. And Walker, M. “The Economics of EC Competition Law”, Sweet and Maxwell

Master 2 TSE - ”Economics and Competition Law” (ECL ) Innovation and product differentiation

Instructors:

Zohra Bouamra-Mechemache, Chargée de Recherche INRA – 9 h,

Isabelle Dubec, Maître de Conférences – 18 h, And Sylvette Monier-Dilhan, Chargée de Recherche INRA – 9 h.

I : Intellectual property (I. Dubec), 18h

1. The economic problems that motivates interest in IP protection 2. Static and dynamic efficiency 3. The principal IP regimes 4. Optimal patent design for stand-alone and cumulative innovation 5. Patent licensing and pooling for stand-alone and cumulative innovation 6. The digital economy

II : Quality Strategies (18h)

7. Introduction to the economics of quality (3h) (a) Product differentiation (Vertical/Horizontal differentiation) (b) Market of Lemons

8. Labeling (6h) (a) Private versus Public Labeling (b) Geographic Indications: US System versus European system, Private Incentives

and Public Intervention 9. Standards (9h)

(a) International Trade Implications (b) Consumer’s Protection versus Technical barrier to trade.

References : The main references for this introductory course on IP are : • P.Belleflamme and M.Peitz, Industrial Organization, Markets and Strategies,chapter 19. • S.Scotchmer, Innovation and Incentives, Cambridge, MA : MIT press

Chapter 16 in Luis Cabral ”Introduction to Industrial Organization”, Chapter 9 in Oz Shy, ”Industrial Organization, Theory and Application”, Chapters 22 and 23 in Pepall and alii, ”Industrial Organization, contemporary theory and empirical Applications”.

• Further readings :

Gilbert and Shapiro (1990), optimal patent length and breadth, Rand Journal of Economics, 23,106-112

Nordhaus (1969), Invention,Growth and Welfare, Cambridge,MA :MIT press

Katz and shapiro (1985), on the licencing of innovation, Rand Journal of Economics, 16, 504-520

Klemperer (1990), How broad should the scope of patent be ? , Rand Journal of Economics, 21, 213-230.

Denicolo (1996) Patent races and Optimal patent breadth and length, Journal of Industrial Economics,44, 249-265

Takalo (2001) On the optimal patent policy, Finnish Economic papers,14,33-40

Liebowitz and Margolis(2004) Seventeen famous Economists Weigh in on copyright: the role of theory, Empirics and Network effects.,bepress Legal, series , paper 397

Bessen (2004) Holdup and licensing of cumulative innovations with private information , Economics Letters 82 ,321–326

O’Donnell, O’Malley J. Huis, Halt “Intellectuel Property in the Food Technology Industry”.

Hobbs J. E. “Safety and Quality: International Trade Implications”, The Estey Centre Journal of International Law and Trade Policy, Volume 11 Number 1 2010/p. 136-152.

Josling T. “What’s in a Name?” The economics, law and politics of Geographical Indications for foods and beverages, Freeman-Spogli Institute for International Studies, Stanford University.

Korinek J., Melatos M. and M-L. Rau “A Review of Methods for Quantifying the Trade Effects of Standards in the Agri-Food Sector”. OECD Trade Policy Working Paper No. 79

Marette S. and J. Beghin, “Are Standards Always Protectionist?”, Review of International Economics, 18(1), 179–192, 2010

Zago A. M. and D. Pick. “Labeling Policies in Food Markets: Private Incentives, Public Intervention, and Welfare Effects”, Journal of Agricultural and Resource Economics 29(1): 150-165

1

M2-TSE-EMO

Competition and Market Strategies (2011-12) - Doh-Shin Jeon, Patrick Rey and Jean Tirole -

It is an introductory class of advanced industrial organization with particular emphasis on the interface between industrial organization theory and practice of competition policies. There will be a total of 36 hours of which 30 hours will be covered by Jeon. Each of Rey and Tirole will teach 3 hours: their teaching schedule can be different from the regular schedule. Schedule Monday 11:00-12:30 (MD103), Thursday 15:30-17:00 (MD103) Evaluation Final Exam: 100 % Main texts Motta, Massimo. Competition Policy: Theory and Practice. Cambridge University Press, 2004 Tirole, Jean. The Theory of Industrial Organization, MIT, 1988 Other references Fuderberg, Drew and Jean Tirole. Game Theory, MIT, 1992 Kwoka, J. E; White, L.J. The Antitrust Revolution, Harper Collins College Publishers, 1994 (2nd edition), 1999 (3rd edition), 2004 (4th edition) Teaching Plan

1. Competition Policy: History and definition (Motta, Chap 1) - Brief History of Competition Policy - Objectives of Competition Policy 2. Monopoly: Durable good and intertemporal price discrimination (Tirole, Chap

1.5.2) 3. Market definition and Horizontal Mergers (Motta. Chap 3, 5) - Incentives to merge: Cournot vs Bertrand - Benefit-Cost analysis of horizontal merger - Merger guideline and market definition - Cases: Coca-Cola and Dr Pepper (Kwoka and White, 1994)

Nestle and Perrier (Motta)

2

• Deneckere, R. J. and C. Davidson (1985). “Incentive to Form Coalitions with Bertrand Competition.” The RAND Journal of Economics, 16: 473-86. • Salant, S., S. Switzer and R. Reynolds (1983). “Losses from Horizontal Merger: the Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium.” Quarterly Journal of Economics, 98:185-199.

4. Collusion and Horizontal agreements (Motta. Chap 4, Tirole, Chap 6)

- Relevant factors for collusion: Theory with application to Nestle and Perrier case (Motta) - Coordination and the role of communication: Sugar Institute (AER, 2001), ATP case (Motta) - Standard of proofs (What should be legal or illegal?) and Wood Pulp case (Motta) - Leniency program • Bernheim, Douglas and Michael Whinston (1990). "Multimarket Contact and Collusive Behavior." The RAND Journal of Economics, 21(1), 1-26. • Genesaove David and Wallace P. Mullin. “Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case”, American Economic Review, Vol 91, 379-98, 2001 • Green, E and R. Porter (1984), “Non-Cooperative Collusion Under Imperfect Price Information”, Econometrica 52:87-100 5. Vertical agreements (Motta. Chap 6, Tirole, Chap 4) - Terms of vertical restraints and Basic vertical externalities - Intrabrand and interbrand competition - Contract as Barrier to entry - First Microsoft case (Kwoka and White, 1999) - Advanced topics

a. Vertical Foreclosure b. Exclusive dealing

• Aghion, P and G. Bolton (1987). “Contracts as a Barrier to Entry”, American Economic Review 77: 388-401 • Bernheim, Douglas, and Michael Whinston. (1998). "Exclusive Dealing." Journal of Political Economy, 106(1): 64-103 • Fumagalli, Chiara and Massimo Motta, (2006). “Exclusive Dealing and Entry, when Buyers Compete,” 96(3): 785-795. • Ordover, J., S. Saloner and S. C. Salop (1990), “Equilibrium Vertical Foreclosure,” American Economic Review 80: 127-142

3

• Rey, Patrick and Jean Tirole (1986). “The Logic of Vertical Restraints,” American Economic Review 76; 921-939 • Rey, Patrick and Jean Tirole (2005). “A Primer on Forecloure,” Handbook of Industrial Organization, vol. III, North Holland, 2005, p. 2145-2220. • Segal, Ilya and Michael Whinston (1997), “Nake Exclusion: Comment.” American Ecoomic Review 90: 296-309 6. Tying and Bundling with application to Microsoft case (Motta, Chap 7.3.2) • Bakos, Yannis, and Eric Brynjolfsson. (1999). "Bundling Information Goods: Pricing, Profits and Efficiency." Management Science, 45(12): 1613-1630. • Choi, Jay P., and Chris Stefanadis. (2001). "Tying, Investment, and the Dynamic Leverage Theory." RAND Journal of Economics, 32(1): 52-71. • Nalebuff, Barry. (2004). "Bundling as an Entry Barrier." Quarterly Journal of Economics, 119(1): 159-188. • Whinston, Michael D. (1990). "Tying, Foreclosure and Exclusion." American Economic Review, 80(4): 837-859. 7. Predation (Motta Chap 7, Fudenberg and Tirole, Chapter 9) (covered by Patrick

Rey during the week of November 7-11) • Bolton, G. and D. Scharfstein. (1990). “A Theory of Predation Based on Agency Problem in Financial Contracting”, American Economic Review, 80: 93-106 • Kreps, D. and R. Wilson. (1982). “Reputation and Imperfect information”, Journal of Economic Theory, 27: 253-279 • Milgrom, Paul, and John Roberts. (1982). “Predation, Reputation and Entry deterrence”, Journal of Economic Theory, 27: 280-312 8. IT and compatibility • Crémer, Jacques, Patrick Rey and Jean Tirole. (2000) "Connectivity in the Commercial Network" Journal of Industrial Economics, 48(4): 433-72 • Katz, Michael L. and Carl Shapiro (1985). "Network Externalities, Competition, and Compatibility", American Economic Review, 75, 424-440. • Laffont, Jean-Jacques, Patrick Rey and Jean Tirole (1998a). "Network Competition I: Overview and Nondiscriminatory Pricing." Rand Journal of Economics, 29: 1--37. • Laffont, Jean-Jacques, Patrick Rey and Jean Tirole (1998b). "Network Competition II: Price Discrimination." Rand Journal of Economics, 29: 38--56. 9. Two-sided markets (covered by Jean Tirole during the week of November 21-25) • Anderson, Simon and Stephen Coate (2005). "Market Provision of Broadcasting: A Welfare Analysis", Review of Economic Studies, 72: 947-972 • Armstrong, Mark (2006). "Competition in Two-Sided Markets", RAND Journal of Economics, 37: 668-691. • Caillaud, Bernard and Bruno Jullien (2003). "Chicken and Egg: Competition Among Intermediation Service Providers", RAND Journal of Economics, 34: 309-329.

4

• Rochet, Jean-Charles and Jean Tirole (2002). "Cooperation among Competitors: Some Economics of Payment Card Associations", RAND Journal of Economics, 33: 549-570. • Rochet, Jean-Charles and Jean Tirole (2003). "Platform Competition in Two-Sided Markets", Journal of the European Economic Association, 1: 990-1029. • Rochet, Jean-Charles and Jean Tirole (2006). "Two-Sided Markets: A Progress Report", RAND Journal of Economics, 35: 645-666

Doh-Shin Jeon Office, MF410

dohshin.jeon@gmail.com

1  

                Toulouse School of Economics

Advanced Environmental and Natural Resource Economics

Winter 2012

Stefan Ambec E-mail: stefan.ambec@tse-fr.eu Office: MS 113 Ingela Alger E-mail: ingela.alger@tse-fr.eu Office: MS 202 Objective The course contains advanced theory in environmental and natural resource economics. It focuses on some of the mechanisms whereby human beings allocate and share natural resources. The two main topics are: fair allocation of natural resources and evolution of co-operation in social dilemmas. The first topic examines how to allocate fairly scarce natural resources among users. It relies on an axiomatic approach: fairness is defined as general principles. From those principles, we derive a fair way to share natural resource. We then discuss its implementation by regulation, markets, and negotiation rules among users. The second topic casts sharing and management of natural resources as a social dilemma, and examines theoretical, experimental, and empirical literature on behavior in social dilemmas. It discusses the potential for evolutionary forces and institutional mechanisms to help achieve efficient outcomes. The main goals of the course are to enhance the ability of the student to understand the literature and to conduct research in the field. Tentative Course Outline Part 1: Fairness in the management of natural resources (Stefan Ambec) 12/01: The fair division problem -Thomson (2008) section 3 and 4 19/01: Dividing a good with single-peak preferences -Thomson (2008), section 11 Date to be defined: Intergenerational sharing of a natural resource -Asheim (2005)

2  

Part 2: The environment as a collective resource and social dilemmas (Ingela Alger) 26/01: Background: the environment and social dilemmas

Common social dilemmas and game theory Experimental and empirical evidence - Readings from Ostrom (1990) and Ostrom, Gardner, and Walker (1994) - Weibull (1995) Chapter 1

2/02 : Common social dilemmas and evolutionary game theory - Weibull (1995) Chapters 2 and 3 8/02: Recent research on the evolution of preferences in social dilemmas 16/02: Winter break 23/02, 1/03: Paper presentations by students 8/03, 15/03, 22/03, 29/03: More presentations by students (if needed) and/or a deeper presentation of the literature and related topics. Evaluation Each student will make a presentation in class. The presentation will introduce and discuss a paper in the literature. Paper suggestions will be provided by the instructors. Each student will then write a short paper related to the paper he or she presented in class. The short paper should include (i) a review of some papers on the same topic/model, (ii) some analytical work (an extension of the model, dropping one assumption, examining other axiomatic principles, adding more structure to the model, comparing formally models, etc.). The evaluation will be based on the presentation (1/3) and the short paper (2/3). References Asheim G. (2005) Intergenerational ethics under resource constraints Swiss Journal of Economics and Statistics, 141, 313-330 Moulin, H. (2005) Fair Division and Collective Welfare, MIT Press Ostrom, Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press. Ostrom, Elinor, Roy Gardner, and James Walker. 1994. Rules, Games, & Common-pool Resources. Michigan: University of Michigan Press. Thomson, W (2008) Fair allocation rules, in Handbook of Social Choice and Welfare (K. Arrow, A. Sen, and K. Suzumura, eds), North-Holland, Amsterdam, New York, working paper available at: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_539.pdf Weibull, J.W. (1995) Evolutionary Game Theory. Cambridge: MIT Press.

Air Transport Economics- 2009

Nathalie Lenoir

Estelle Malavolti

Steve Lawford

Nicolas Gruyer

Gilles Saint-Paul

1

1 Introduction to Air Transport Market

1.1 Outlook on the airline industry and tra�c

1.2 The air transport system

2 Organization of the Air transport Market

2.1 Main Actors of the sector

2.2 Regulation/deregulation in the air transport market

3 Air Transport Market and Competition Policy

3.1 Vertical agreements

3.2 Horizontal agreements

3.3 Essential Facility

3.4 Network externalities

4 Empirical Methods

4.1 The Econometrics of Discrete Choice

4.2 Models of Entry - An Applied Example

5 Impact of the Capacity constraint

5.1 Capacity allocation and grand father rule

6 Spatial Economics applied to air trransport sector

6.1 Airport location

7 References

� Barla P. and C. Constantatos "Strategic interactions and airline network morphology

under demand uncertainty", European Economic Review, march 2003.

2

� Basso " Airport deregulation : E�ects on pricing and capacity", International Journal

of Industrial Organization, 2008.

� Berry, S. T., " Estimation of a model of entry in the airline industry", Econometrica,

1992.

� Berry, S. T. and Jia, P.," Tracing the woes : an empirical analysis of the airline

industry", Yale/MIT working paper, 2008.

� Brueckner J., "Airport Congestion When Carriers Have Market Power", The Amer-

ican Economic Review, 2002.

� Brueckner J., "The economics of international codesharing : an analysis of airline

alliances", International Journal of Industrial Organization, 2001.

� Brueckner J., "Network Structure and Airline Scheduling",The Journal of Industrial

Economics, 2004.

� Brueckner J., "International Airfares in the age of Alliances : the e�ect of codesharing

and Antitrust Immunity", Review of Economics and Statistics, 2001.

� Chen Y. and P. Gayle , "Vertical contracting between airlines : An equilibrium anal-

ysis of codeshare alliances", International Journal of Industrial Organization, 2007.

� Dana J. "Equilibrium price dispersion under demand uncertainty : the roles of costly

capacity and market structure", Rand Journal of Economics, 1999.

� Dana J. "Using yield management to shift demand when the peak time is unknown"

Rand Journal of Economics, 1999.

� Goolsbee, A. and Syverson, C. " How do incumbents respond to the threat of entry ?

Evidence from the major airlines", Quarterly Journal of Economics, 2008.

� Richard K. Green, � A note on airports and economic development �, mimeo, U.

Wisconsin-Madison, 2002

� Paul Krugman Anthony J. Venables, 1995. "The Seamless World : A Spatial Model

of International Specialization," NBER Working Papers 5220

� Januszewski, S. I., " The e�ect of air tra�c delays on airline prices", UCSD working

paper, 2004.

� Stephen Redding , Daniel M. Sturm, Nikolaus Wolf, � History and Industry Location :

Evidence from German Airports �, 2007, Centre for Economic Performance DP 809

3

Applied Corporate Finance

M2 Economics of Markets and Organizations

Roberta Dessí Course outline The course will cover the following topics: Firms’ financial structure and performance Innovation and Venture Capital Corporate Finance, Competition and Product Markets Students will have the opportunity to select and present a recent applied paper in Corporate Finance in class, covering topics from the course or other topics they are particularly interested in.

Academic Year 2011-2012

MASTER 2 PUBLIC POLICY and DEVELOPMENT

Applied Trade and Tax Policy

Analysis

Charles Vellutini

This course focuses on a particularly important applied modeling technique in

development economics: computable general equilibrium (CGE) modeling. CGE are used

routinely by donors, governments and advisers to assess, ex ante, tax and trade policy

changes.

A review of concepts and underlying theory will be provided; practical implementation

issues (including software and coding) will be covered based on actual case studies and

data from assignments with the European Commission and the World Bank.

Student evaluation will be based on a CGE project, for which CGE GAMS code will be

provided, together with actual data sets.

An outline of the course is provided below.

1) Introduction: what role for modern economic analysis in solving real-world

development problems?

- The demand: the clients, the needs, the trends.

- The competition: professional economics and economic consulting.

- Bridging the gap between Academia and consulting.

2) Applying general equilibrium: CGE modeling for trade and tax policy analysis

3.1 CGE modeling: review of principles and experience

- Underlying theory

- Review of international practice

- Introduction of dynamics

- Software and programming issues: introduction to GAMS

2.2 Implementing CGE

- Getting the data

- Compiling and processing the data: the social accounting matrix, estimation of

key elasticities, processing trade and fiscal data, setting dynamic exogenous

data.

- Adjusting/building the model; calibration, sensitivity analysis,

- Running the model and reporting: shocked scenarios against base case.

2.3 Case study: evaluating the impact of the EU’s Economic Partnership Agreement in

Cameroon.

3°

3) Student projects based on real data

3.1 More GAMS

3.2 Reviewing the standard CGE GAMS code

3.3 GAMS exercise: balancing the social accounting matrix

3.4 Model calibration

3.5 Policy change analysis: free-trade agreements and tax reforms

3.6 Reporting: get the message across, professionally

ACADEMIC YEAR 2010-2012 MASTER ERNEA

APPLIED WATER MANAGEMENT

ARNAUD REYNAUD, ALBAN THOMAS AND VERA ZAPOROZHETS

LEARNING OBJECTIVES

Upon completion of this course, students are expected to be able to:

• demonstrate knowledge of the general structure of the water sector and to describe particular characteristics and interrelation between different players of this industry

• provide an overview of specific economic aspects that are characteristic to the water sector

• demonstrate a good understanding of water sharing issues including on international rivers and irrigation networks, in particular on the fairness properties of water sharing agreements.

SYLLABUS

“An introduction to water economics”. We present the main characteristics of water as an economic, a public and a common good. We present the key economic factors of the water industry (supply and demand patterns, market players, market structure). We discuss the main economic specificities of the water industry.

“Economics of water demand”. We present the main economic characteristics of the residential, agricultural and industrial water demands. We discuss the rationale for water demand-side management, and the issue of managing water quality. Several applications of demand-side management policies are provided, to illustrate the importance of evaluation and implementation issues.

“Economic analysis of the water supply chain”. We formally define the water industry as a network industry. We breakdown the supply chain of the water sector as far as reasonable from an economic point of view and analyse the economic rationalities at each stage of the chain. We discuss the issue of the existence of a natural monopoly for this industry.

“Competition and regulation in the water industry”. We discuss the issue of introducing competition into the water industry by making the distinction between direct and indirect competition. Then we analyse how economic regulation of this industry can be conducted. We distinguish the regulation of price, of service quality and of investment.

“Designing the water industry”. The first part of the lecture deals with the issue of private versus public ownership of water services. We then discuss the question of the horizontal structure of the water industry in particular with respect to the possibility to introduce direct competition (through common carriage, cross-border competition of fringe area competition) or competition by comparison. The third part deals with the

vertical structure of the water industry. We conclude by a case study on vertical integration of the water services in the Wisconsin.

“Cost allocation and water management”. We apply the economic principles of optimal cost allocation among users, to the case of quantitative water management. This involves a formal representation of the technology with the definition of joint cost functions. Principles of equity are then discussed, by introduced the economic concept of the core, and methods to extend this concept. The Shapley value is then introduced to help defining optimal allocation rules, and we apply the theoretical analysis to a problem of municipal cost-sharing.

COURSE OUTLINE

Part I. Economics of Water Demand (Alban Thomas)

10.5 hours

I.1 A Brief Introduction to Water Economics

I.2. Economic Analysis of Water Demands

I.3. Management of Water Quality: Pollution and Regulation

Part II. Cost Allocation. Application to Water Resources Development (Vera Zaporozhets)

10.5 hours

II.1. Introduction

II.2. Joint Cost functions

II.3. Principles of Equity: The Core

II.4. Methods Extending the Core

II.5. The Shapley Value

II.6. A Swedish Municipal Cost-Sharing problem

Part III. The Water Supply Chain, Competition and Regulation (Arnaud Reynaud)

10.5 hours

III.1. Economic Analysis of the Water Supply Chain

III.2. Competition and Regulation in the Water Industry

III.3 Designing the Water Industry

Evaluation

Each student will pick a paper on a list. Students are required (i) to write a two pages evaluation report on the paper, (ii) to present the paper in class during the last sessions. The final mark will be based on both the report and the presentation.

List of Papers

Ansink E. and A. Ruijs (2008) Climate Change and the Stability of Water

Allocation Agreements, Environmental and Resource Economics, 41, 133-187. Ansink E. and H.P. Weikard (2011) Sequential sharing rules for river sharing

problems, Social Choice and Welfare, http://www.springerlink.com/content/d18p22k67136m734/fulltext.pdf

Dayton-Johnson, J. (2000) Choosing rules to govern the commons: a model with evidence from Mexico. Journal of Economic Behavior and Organization 42, 19–41.

Chong, E., F. Huet, S. Saussier and F. Steiner. 2006. Public-Private Partnerships and Prices: Evidence from Water Distribution in France. Review of Industrial Organization 29, 146-169.

Olmstead, S.M., W.M. Hanemann and R.N. Stavins. 2007. Water Demand under Alternative Price Structures. Journal of Environmental Economics and Management 54, 181-198.

Jacoby, H.G., R. Murgai and S.U. Rehman. 2004. Monopoly Power and Distribution in Fragmented Markets: The Case of Groundwater. Review of Economic Studies 71(3), 783-808.

McConnell, V.D. and G.E. Schwarz. 1992. The Supply and Demand for Pollution Control: Evidence from Wastewater Treatment. Journal of Environmental Economics and Management 23, 54-71.

Murgai, R., P. Winters, E. Sadoulet and A. de Janvry (2002) Localized and incomplete mutual insurance, Journal of Development Economics, 67, 245–274.

Peterson, J.M. and Y. Ding. 2005. Economic Adjustments to Groundwater Depletion in the High Plains: Do Water-Saving Irrigation Systems Save Water? American Journal of Agricultural Economics 87(1), 147-159.

Ray, I and J. Williams (2002), Locational asymmetry and the potential for cooperation on a canal, Journal of Development Economics, 67, 129–155.

Renwick, M.E. and R.D. Green. 2000. Do Residential Water Demand Side Management Policies Measure Up? An Analysis of Eight California Water Agencies. Journal of Environmental Economics and Management 40, 37-55.

Renzetti, Steven, 1992. "Evaluating the welfare effects of reforming municipal water prices," Journal of Environmental Economics and Management, vol. 22(2), pages 147-163,

Roibas, D., García-Valiñas, M.A. and Wall, A. (2007), “Measuring welfare losses from interruption and pricing as responses to water shortages: An application to the case of Seville”, Environmental and Resource Economics, 38(2), 231-243.

Wang, Yutong (2011). “Trading water along a river”, Mathematical Social Science, 61(2): 124-130.

Koundouri, P., C. Nauges and V. Tzouvelekas, 2006. Technology adoption under production uncertainty: Theory and application to irrigation technology. American Journal of Agricultural Economics 88, 657-670.

UE 1: Asset Pricing

Valuation of financial assets and arbitrage

ECTS: H CM :

Responsable du Cours : Ekaterina VOLTCHKOVA

Contenu pédagogique :

1. Fundamental concepts of arbitrage pricing

Cox-Ross-Rubinstein model Introduction to option pricing

2. Continuous time models

Itô formula Geometric Brownian motion Arbitrage pricing in continuous time Black-Scholes model Change of probability measure

3. Advanced option pricing Foreign exchange Forward, futures Exotic options American options

Pré-requis : Basic probability theory Evaluation : final written exam Bibliographie : Björk T., Arbitrage Theory in Continuous Time, Oxford University Press, 2004 Hull J., Options, futures and other derivatives, Prentice Hall, 1999 Lamberton D., Lapeyre B., Introduction au calcul stochastique appliqué à la finance, Ellipses marketing, 1997 Back K., A course in derivative securities, Springer, 2005

Non Life Insurance

ECTS : 2,5 H CM : 20H

Responsable du Cours : Rachid AIT-MANSOUR

Contenu pédagogique :

1– Généralités sur l’assurance non-vie Ce premier chapitre est consacré à une présentation rapide de l’assurance non vie et ses

particularités 2– Tarification

Ce second chapitre traite de la problématique de fixation d’un tarif pour un produit d’assurance non-vie : sur quels critères se calcule un tarif ? comment établir la tarification ?

3– Provisionnement

Dans ce chapitre, la question de la constitution de réserves est abordée, tant pour répondre à une exigence comptable que pour respecter les engagements pris envers les assurés.

4– Réassurance Les divers dispositifs de réassurance sont abordés dans ce chapitre : réassurance proportionnelle et réassurance non proportionnelle.

5– Eléments de comptabilité des assurances

Dans ce chapitre, nous abordons les principes d’établissement des comptes d’assurance non-vie (bilan et compte de résultat)

6– Solvabilité Les règles prudentielles en vigueur (norme Solvency I) sont décrites dans ce chapitre. Les grandes orientations des futures règles (Solvency II) sont abordées en fin de chapitre.

Les différents chapitres comportent des applications numériques permettant d’illustrer les divers concepts abordés dans le cours.

Pré-requis : Cours de Statistiques et de Probabilités de Licence. Bibliographie : TOSETTI Alain et Al. – « Assurance, Comptabilité, Réglementation, Actuariat », Economica DENUIT Michel et CHARPENTIER Arthur – « Mathématiques de l’assurance non-vie », Economica PETAUTON Pierre – « Théorie de l’assurance dommages », Dunod

Business StrategyProfessor Margaret Kyle Economics of Markets and Organizations Master 2 Professional

This course examines various drivers of firm performance, or elements of business strategy. We discuss the roles of market structure (barriers to entry, concentration, rivalry, etc.) and organizational structure (the scale and scope of firm activities, divisional structure, incentives, etc.), and conclude with a unit on innovation. The material is of use to managers and consultants across a broad range of industries, and cases are selected from a diverse set of industries and geographic settings.

We focus on the practical application of economic tools to business strategy. Accordingly, you are expected to develop skills in case analysis, and the group project is an opportunity to use the skills that are required to complete an internship or typical consulting assignment.

Preparing cases:You are expected to do more than merely read the case. Where possible, you should attempt to use the financial information in the case appendices to estimate costs, market demand, etc. You should restrict yourself to the information provided in the case itself; i.e., do NOT search for articles or websites that tell you the outcome of the case or that do the analysis for you. This may seem somewhat artificial, but many top consulting firms include case analysis (with these restrictions) as part of the interview process.

Group project:Working in groups of 4-5, I would like you to analyze the market for antiretroviral drugs (HIV treatments) in developing countries. There are two deliverables: a written report that is 15-20 pages of text plus exhibits, and an oral presentation of 25 minutes. I will assign each group to one of the following tasks:

A) Determine the optimal product portfolio of antiretroviral treatments for Cipla, a drug firm based in India. For example: how many different antiretrovirals; how much capacity in each; etc.B) Determine the optimal pricing or licensing strategy for Abbott Laboratories with its heat-stable ritonavir.C) Determine the best procurement strategy for UNITAID for pediatric antiretrovirals.

I will provide additional information during the first lecture.

MaterialsAssigned readings and cases can be downloaded from margaretkyle.net/EMO2011.

Requirements:Midterm: 25%Group project: 50%Exam: 25%

Calendar:

IntroductionLecture 1: Firm performance and “competitive advantage” ! Readings: BDSS Chapter 1! Case Assignment: Global Wine Wars

Organizational structure and firm performance Lecture 2: Boundaries of the firm ! Readings: ! Coase, "The Nature of the Firm," Economica 4 1937 386-405! Holmstrom, Bengt and Jean Tirole. 1989. "TheTheory of the Firm," in Handbook of ! Industrial Organization.! Case Assignment: AraucoLecture 3: Internal organization ! Readings: Gibbons, “Incentives in Organizations,” Journal of Economic ! Perspectives, 12 (1998): 115-32! Case Assignment: Philips vs. Matsushita

Market structure and firm performanceLecture 4: Rivalry, barriers to entry, dimensions of competition ! Readings: ! Fudenberg and Tirole "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and ! Hungry Look" AER 74(2) 1984, 361-366.! Schmalensee "Interindustry Studies of Structure and Performance" Handbook of ! IO 951-1010 ! Case Assignment: Airbus vs. Boeing

Lecture 5: Applications of game theory! Readings: Chapter from Ghemawat, “Games Businesses Play”! Case: British Satellite Broadcasting vs. Sky Television

Lecture 6: Collaborative strategies ! Readings: Nalebuff and Brandenburger Chapters 1-6 (pp. 1-192)! Case Assignment: Wintel (A): Cooperation or Conflict

Lecture 7: Midterm exam

Innovation and firm performanceLecture 8: Innovation strategies ! Readings: Acs, Z., and Audretsch, D. 1988. Innovation in Large and Small Firms: ! An Empirical Analysis. American Economic Review 78, 678-690! Case Assignment: Kodak and the Digital Revolution

Lecture 9: Markets for technology

! Readings: Arora, Fosfuri and Gambardella (2001), Markets for Technology: The ! Economics of Innovation and Corporate Strategy, pp. 1-14, 91-142! Case Assignment: Merck and LABLecture 10: Strategic use of intellectual property!! Shapiro, C. (2001), “Navigating the Patent Thicket: Cross Licenses, Patent Pools, ! and Standard Setting,” in Jaffe, A., J. Lerner and S. Stern (eds.), Innovation Policy ! and the Economy Vol. 1, pp. 119-150! Case Assignment: AT&T vs. MicrosoftLecture 11: Overview of business models in two-sided markets and open source! Readings: ! Rochet and Tirole, "Two-Sided Markets: A Progress Report", RAND Journal of ! Economics, vol. 35, n. 3, 2006, p. 645-667.! Raymond, The Magic Cauldron http://catb.org/~esr/writings/magic-cauldron/! Case Assignment: Nintendo

Lecture 12: group project presentations.

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École d’économie de Toulouse - TSE

CORPORATE FINANCE Augustin LANDIER

This course will cover the traditional core questions in corporate finance: investment and capital

structure. In a second part, we will present this growing literature that explores the interrelations

between corporate finance and other economic subfields: political economy, industrial organization,

labor economics, organization theory etc. We will cover both theoretical and empirical research articles.

On the theoretical side, we will try to make use of the most parsimonious models needed to highlight the

intuitions underlying the papers we will be discussing. On the empirical side, we will put a major

emphasis on the methodological aspect of the papers, by trying to screen clean empirical strategies from

more dubious ones.

TEXTBOOK: Tirole, The theory of Corporate Finance– 1st

edition, PUP, 2005.

COURSE GRADING:

30% Referee Report 70% Final Exam

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Course Outline: Here is a tentative outline for the course. It contains the core materials we will necessarily cover

(investment and capital structure) as well as some more advanced topics. Depending on your interests

and the pace of the course, we will select and then go through some of these more advanced topics.

There will therefore necessarily be some drastic changes to this syllabus over time. I will thus update it

as time goes by.

For the theoretical parts of the lectures, we will mostly use Tirole’s book, “The Theory of Corporate

Finance”, (2006), Princeton University Press.

The following reading list provides the required readings only. A supplemental reading list with papers

that will be covered during the course is provided separately.

1. Frictionless Corporate Finance: Modigliani-Miller, The neoclassical model of investment and its empirical applications

� Hayashi (1982), “Tobin's Marginal q and Average q: A Neoclassical Interpretation”, Econometrica,

Vol. 50, No. 1.pp. 213-224.

� Kaplan & Zingales (1997), “Do Investment-Cash Flow Sensitivities Provide Useful Measures of

Financing Constraints?” Quarterly Journal of Economics 112, pp. 159-216.

� Rauh (2006), “Investment and Financing Constraints: Evidence from the Funding of Corporate

Pension Plans,” Journal of Finance 61, pp. 33-71.

2. Models of credit constraints

� (*) Tirole, Chapters 3 and 6.

� Hart & Moore, (1994), "Theory of Debt Based on the Inalienability of Human Capital," The

Quarterly Journal of Economics, vol. 109(4), pages 841-79.

� Malmendier & Tate, (2005). "CEO Overconfidence and Corporate Investment," Journal of Finance,

vol. 60(6), pages 2661-2700.

3. Capital structure: theories and evidence

� Aghion & Bolton (1989), ““The Financial Structure of the Firm and the Problem of Control,” European Economic Review

� Baker & Wurgler (2002), “Market Timing and Capital Structure,” Journal of Finance 57, pp. 1-32.

� Nini, Smith & Sufi, (2009), “Creditor control rights and firm investment policy”, Journal of finance

92(3): 400-420

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4. IPOs and Payout Decisions

� Jay Ritter (1991), “The long-run performance of initial public offerings,” Journal of Finance 42,

pp.365-394.

� Jagannathan, Stephens & Weisbach, “Financial Flexibility and The Choice Between Dividends and

Stock Repurchases”, Journal of Financial Economics, vol. 57(3), pages 355-384

5. Corporate Finance and Product Markets

� Chevalier & Scharfstein, “ Capital Market Imperfections and Counter-Cyclical Mark-ups: Theory

and Evidence”, American Economic Review, 86, 1996

� Tirole, chapter 7.1

6. Corporate Finance and Development

� Rajan & Zingales, “Financial Dependence and Growth,” American Economic Review 88, 1998

� Jayaratne & Strahan, "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation,"

Quarterly Journal of Economics 111, 1996.

7. Corporate Finance institutions

Colonial or Legal Origin? � La Porta, Lopez de Silanes, Schleifer & Vishny, «Legal Determinants of External Finance », Journal

of Finance 52, 1997.

� Acemoglu & Johnson, “Unbundling Institutions”, Journal of Political Economy, 113, 2005

Dynamics of Institutions: The Political Economy View � Rajan & Zingales, “The Great Reversals: The Politics of Financial Development in the 20

th Century”,

Journal of Financial Economics, 69, 2003

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8. Corporate Finance and the Labor Market

Corporate Ownership/ Capital Stucture and the Wage-Setting Process � Matsa, “Capital Structure as a Strategic Variable: Evidence from Collective Bargaining”, Mimeo

2007.

� Bertrand & Mulhainattan, “Is there discretion in wage setting? A test using takeover legislation”,

Rand Journal of Economics, 30, 1999.

CEO Compensation � Bertrand & Mullainathan, "Are Ceos Rewarded For Luck? The Ones Without Principals Are," The

Quarterly Journal of Economics, 116, 2001

� Gabaix et Landier, « Why has CEO Pay Increased so Much ? », Quarterly Journal of Economics,

Forthcoming.

9. Public Policies: Improving Access to Finance

� Paravisini, “Local Bank Financial Constraints and Firm Access to External Finance”, Journal of

Finance, Forthcoming.

10. Forensic Finance / “Crookonomics”

� Bergstresser & Philippon, “CEO incentives and Earnings Management”, Journal of Financial

Economics, 2005.

Benefit-Cost Analysis

Course meets:

Thursday, 17.00 – 20.00, MC202

Faculty:

James K Hammitt (james.hammitt@tse-fr.eu)

Nicolas Treich (ntreich@toulouse.inra.fr)

Outline of topics 1- Introduction to benefit-cost analysis

1.1 Principles & theory 1.2 Policy use

2- Benefits (theory and empirical issues) 2.1 Willingness to pay

2.2 Value per statistical life

2.3 QALYs 2.4 Revealed preference

2.5 Stated preference 3- Costs (concepts and empirical methods) 3.1 Opportunity costs

3.2 Compliance costs

3.3 Distorted markets

3.4 General equilibrium

4- Difficult issues

4.1 Equity

4.2 Discounting

4.3 Uncertainty

4.4 Bounded rationality 4.5 Altruism & social preferences

5- Applications

5.1 Mobile telephones and traffic safety

5.2 Environmental pollution

Requirements:

Students should attend all sessions and participate in class discussion. At the end of the term, each

student will make a presentation of a benefit-cost analysis or of a paper discussing some topic

relevant to benefit-cost analysis. Topics must be approved in advance by one of the instructors.

Presentations will be approximately 20 minutes with 10 minutes discussion. Grade will be based on

presentation (10 points), discussion of other students’ presentations (5 points), and class discussion

(5 points).

Useful references

Pearce, Atkinson and Mourato, 2006, “CBA and the Environment, Recent Developments”, OECD.

[broad, precise, up to date, and accessible with technical annexes]

Boardman et al., 2006, “CBA: Concepts and practices”, Pearson. [broad, good basic economics]

Kopp, Krupnick and Toman, 1997, “CBA and Regulatory Reform: An Assessment of the Science and

the Art”, RFF. [nontechnical economic paper summarizing state of knowledge on BCA]

Viscusi, 1998, “Rational Risk Policy”, Oxford UP. [summary of the author’s empirical work on risk

policies]

Adler and Posner, 2001, “CBA, Legal, Economic and Philosophical Perspectives”, Chicago UP.

[collected papers by top social scientists, critical toward BCA]

Layard and Glaister, 2003, “CBA”, Cambridge UP. [reprinted papers by top economists, technical]

Sunstein, 2002, “Risk and Reason: Safety Law and the Environment”, Cambridge UP. [legal

perspective on BCA]

Bateman et al., 2002, “Economic Valuation with Stated Preference Techniques”, Edward Elgar. [for

survey techniques]

Fuguitt and Wilcox, 1999, “CBA for Public Sector Decision Makers”, Quorum Books. [economic,

nontechnical]

Treich, 2005, “L’ACB de la Prévention des Risques”, see author’s webpage. [in French, for some

references]

Hammitt, 2007, “Risk Assessment and Economic Evaluation,” Chapter 112 (1696-1711) in W.N. Rom

(ed.), Environmental and Occupational Medicine (fourth edition), Lippincott–Raven Publishers

[introductory overview]

US Environmental Protection Agency, National Center for Environmental Economics, “Guidelines for

Preparing Economic Analyses,” http://yosemite.epa.gov/ee/epa/eed.nsf/pages/Guidelines.html

[EPA guidance for conducting BCA]

Graham, 2008, “Saving Lives through Administrative Law and Economics,” University of Pennsylvania

Law Review 157: 395-540. [overview of US procedure and recommendations for improvement;

Graham was head of OIRA 2001-2006]

Blogs:

http://www.law.upenn.edu/blogs/regblog/

http://regulation2point0.org/

DATA MINING Jean-Michel LOUBES

Voici les mots clefs: analyse de données, apprentissage statistique, aide à la décision Le cours cherche à étudier l'analyse de données et l'apprentissage tant d'un point de vue théorique que pratique. Nous étudierons dans un premier temps les algorithmes de classification (K-means, arbres de classification), les méthodes de représentation des données (ACP) ainsi que les techniques de réduction de dimension. Puis nous nous intéresserons aux méthodes d'aide à la décision automatique au moyen des méthodes SVM, réseaux de neurones, CART et Random Forest. Nous montrerons que ces méthodes dépendent de la théorie de la sélection de modèles et d'étude de la complexité.

M2 & DEEQA 2011-12: Political Economy and Development, Jean-Paul Azam. Why do rich countries give so much money to poor ones as foreign aid? This course describes a research program spanning more than a decade that tried to answer this question. It suggests that philanthropy might not be the main motive. Reading List : Foreign Aid vs. Poverty (1) Jean-Paul Azam and Jean-Jacques Laffont (2003): “Contracting for Aid”, Journal of Development

Economics 70 (1), 25-58, February 2003. Foreign Aid vs. Oppression and Violence (2) Jean-Paul Azam and Tahsin Saadi-Sedik (2004): “Aid v. Sanctions for Taming Oppressors: Theory

and Case Study of the Iraqi Kurds”, Defence and Peace Economics, 15 (4), 343-364, August 2004.

(3) Jean-Paul Azam (2006): “The Paradox of Power Reconsidered: A Theory of Political Regimes in

Africa”, Journal of African Economies, 15 (1), 26-58, March 2006. Peace and Redistribution without Aid (4) Jean-Paul Azam (2010): A State is Born: Transport Infrastructure and Democracy in Somaliland,

TSE-Working Paper No.10-229, September 2010: Toulouse School of Economics. (5) Jean-Paul Azam and Sandrine Rospabé (2007): “Trade Unions vs. Statistical Discrimination:

Theory and Application to Post-Apartheid South Africa”, Journal of Development Economics, 84 (1), 417-444.

Foreign Aid vs. Immigration from the South (6) Jean-Paul Azam and Flore Gubert (2006): “Migrants’ Remittances and the Household in Africa: A

Review of Evidence”, Journal of African Economies, 15 (Supplement 2), 426-462, December 2006.

(7) Jean-Paul Azam and Ruxanda Berlinschi (2010): “The Aid-Migration Trade-Off”, in Justin Yifu

Lin and Boris Pleskovic (Eds.): Annual World Bank Conference on Development Economics 2009, Global: People, Politics, and Globalization, 147-171, World Bank: Washington, D.C.

Foreign Aid vs. Transnational Terrorism (8) Jean-Paul Azam (2005): “Suicide-Bombing as Inter-Generational Investment”, Public Choice, 122

(1-2), 177-198, January 2005. (9) Jean-Paul Azam (forthcoming): “Why Suicide-Terrorists Get Educated, and What to Do About it”,

Public Choice. (10) Jean-Paul Azam and Véronique Thelen (2010): “Foreign Aid vs. Military Intervention in the War

on Terror”, Journal of Conflict Resolution, 54 (2), 237-261, April 2010. (11) Jean-Paul Azam and Véronique Thelen (work in progress): “Where to Spend Foreign Aid to

Counter Terrorism”.

Cours optionnel Durees de vie, M2 Statistique et Econometrie

Enseignant : Eve LeconteCours : 7h30TD sur ordinateur (SAS et R) : 10h30

Contexte

Le terme “durees de vie”, issu originellement du milieu medical, designe tout type dedonnees ou l’on s’interesse a modeliser une duree, c’est-a-dire le delai entre une dated’origine et la date d’apparition d’un evenement d’interet. De multiples domaines sontconcernes selon l’evenement considere : domaine medical (deces, apparition d’une mal-adie,...), fiabilite (panne d’un composant), economie (fin d’un episode de chomage), assu-rance (arrivee d’un sinistre), psychologie (apprentissage d’une tache), sociologie (mariage,naissance, divorce,...),... La specificite des durees de vie est la presence de donnees cen-surees, c’est-a-dire d’individus pour lesquels l’evenement d’interet ne s’est pas encore pro-duit a la date de l’analyse. La prise en compte de telles donnees necessite une methodologiespecifique.

Objectif du cours : savoir reconnaıtre une situation ou apparaissent des donnees cen-surees, pouvoir analyser de tels jeux de donnees en mettant en œuvre une modelisationappropriee.

Plan du cours :

• Les distributions de survie : fonctions specifiques et lois usuelles,

• La notion de censure,

• Estimation non parametrique de la fonction de survie et la fonction de risque :estimateurs de Kaplan-Meier et de Nelson-Aalen,

• Comparaison de la survie de plusieurs groupes : tests du logrank ponderes,

• Les modeles de regression parametriques : modeles a risques proportionnels etmodeles a duree de vie acceleree,

• Le modele semi-parametrique de Cox : modelisation, vraisemblance partielle, esti-mation et tests des parametres, interpretation des parametres, estimation du risquecumule de base, validation du modele.

Empirical Analysis of Infrastructure Industries

Farid GASMI Toulouse School of Economics (Arqade & Idei)

farid.gasmi@tse-fr.eu

Description

The objective of this course is to emphasize the applied side of a set of topics in industrial organization and regulatory economics that are particularly relevant when thinking about the reforms that infrastructure industries have experienced during the last two to three decades in both developed and developing countries. These topics include the issues of natural monopoly, price regulation, access pricing, universal service, competition policy, and some political economy aspects of infrastructure industries’ reforms. The main ingredients of some theoretical frameworks within which important facets of these issues can be highlighted and some empirical analyses that further explore them are discussed. Students are expected to actively participate in class by presenting empirical papers concerning with some of these issues as they are raised in various infrastructure industries (telecoms, energy, transport, etc.).

January 2012

École d’économie de Toulouse - TSE

ENERGY AND CLIMATE CHANGE N.LADOUX

Introduction to public policy of the environment

− Main reference: Sandmo A. (2000), The Public Economics of the Environment, Oxford University Press)

Optimal taxation in a second best world: theoretical and empirical analysis Main references:

− Sandmo A. (1975), Optimal Taxation in the Presence of Externalities, Swedish journal of Economics, 77

− Cremer H., Gahvari F. and Ladoux N. (2003), Environmental Taxes with Heterogeneous Consumers: An Application to Energy Consumption in France", Journal of Public Economics, vol. 87

− “Environmental Tax Design with Endogenous Earning Abilities (with Applications to France)”, Journal of Environmental Economics and Management Vol. 59, n°1, 2010, 82-93 (en collaboration avec Helmuth CREMER et Firouz GAHVARI)

Global warming: the necessity to introduce the time dimension in the analysis Main references:

− Nordhaus, W., Managing the Global Commons: The Economics of Climate Change, MIT Press, Cambridge, MA., 1994.

− Edenhofer O., Grubb M., Köhler J. and Popp D., Comparison of Climate Policies in the Entice-BR Models, Energy Journal, 2006, 17-55

Policy instruments to mitigate climate change in practice: The EU CO2 market and the Green certificates (Presentation by Ph. Girard)

Environmental Evaluation∗

36h (31.5h teaching, 4.5h seminar) Toulouse School of EconomicsHenrik Andersson Phone: 05.61.12.85.28Office: MS210 E-mail: henrik.andersson@tse-fr.eu

Course description The objectives of the course are to introduce the theoretical foundations of envi-ronmental evaluation, present and describe the empirical methods used, and to discuss the imple-mentation of estimated values in policy making. The main focus of the course will be the applicationof different evaluation methods, such as hedonic pricing, contingent valuation, choice experiments,recreation values, etc. The aim is to provide the students who intend to pursue environmental- orhealth-related research or policy decision making with an understanding and knowledge on prefer-ence elicitation for non-marketed goods. The outline of the course is as follows, where section 2 isthe central part of it:

1. Introduction to environmental evaluation

2. Non-market evaluation

(a) Revealed preference methods

(b) Stated preference methods

3. Health evaluation

4. Experiments

5. Developing countries

6. Further topics

Main text Hanley, N. and E. B. Barbier: 2009, Pricing Nature: Cost-Benefit Analysis and Environ-mental Policy. Cheltenham, UK: Edward Elgar.

Other readings The required reading is mainly based on per-reviewed and published articles. Readingsare in general available online through the University of Toulouse library, but those that are notwill be made available in class.

Grades Students are required to complete two tasks during the class. Each task is worth 50% of thegrade. To pass the class, students are required to pass both tasks.

Paper One paper of about five to eight pages critically discussing one or more articles from thereading list or other articles approved by the instructor. The paper is to be presented anddiscussed by another student at a seminar. The grade will be based on:

1. Quality and originality of the paper.

2. The role of discussant in the seminar.

3. Active participation in the seminar.

Exam A take-home exam in which students will analyze data sets and answer specific questions.

∗Master 2, in the module Economie de l’environnement des ressources naturelles et de l’agriculture, “Bloc Evaluation”.This version of the syllabus provides a general and preliminary description of the course and its requirements. The moredetailed syllabus with the reading list will be provided in class.

1

Financial Markets and Financial Intermediaries� Syllabus2011�2012

The course will cover the following topics:

A. Financial Markets

1. Arbitrage Theory

1.1 Static Arbitrage1.2 Dynamic Arbitrage

2. Portfolio Choice

2.1 Mean Variance Analysis2.2 Utility Gradient Approach

3. Equilibrium

3.1 The CAPM3.2 The C-CAPM

B. Financial Intermediaries

1. Why Do Financial Intermediaries Exist?

2. The Lender-Borrower Relationship

1

1

Models of Financial Markets

Alexander Guembel M2 Actuariat

MIF 2011 – 12

In perfect markets equilibrium prices reflect the information and preferences of all potential investors and the corresponding allocation of the asset is efficient. We focus on the alternative case, where information asymmetries and strategic behaviour or cognition impair market efficiency. In this context the institutional arrangements governing the trading process can affect market outcomes. Against this backdrop, we will study the formation of prices, the trades conducted by market participants and the welfare properties of the resulting allocations. This will provide you with an introduction to a field of research in finance called “market microstructure.” If you want to read a survey on this topic you can use Biais, Glosten and Spatt, 2005, “Market microstructure: A survey of microfoundations, empirical results and policy implications”, Journal of Financial Markets, 217-264. The course will be organized as follows.

First, we will briefly review the actual organization of financial markets in practice, so as to understand the rules of the game (class 1).

Second we will study some of the major models of price formation under information asymmetry (classes 2 and 3).

Third, we will extend these models to study two applications (manipulation and herding) (class 4)).

The final exam (100% of overall grade) will be based on questions about the material

covered in the lectures. These can be based on multiple choice questions, short answer questions or simple models.

Course Outline I) Introduction (Class 1)

Introduction: Overview and institutional details

An illustration of a simple model of market microstructure: bid-ask spreads in the Glosten – Milgrom model

Reference article: Glosten, L. and P. Milgrom, 1985, “Bid, Ask and Transactions Prices in a Specialist Market with Heterogenously Informed Agents,” Journal of Financial Economics, 17, 71-100. II) Fundamental principles of financial markets with privately informed traders II.1) Competitive equilibrium in a financial market with private information The benchmark model (Class 2)

2

Reference articles: Grossman, S. and J. Stiglitz, 1980, “On the Impossibility of Informationally Efficient Markets,” American Economic Review, 70, 393-408. II.2) Strategic traders Informed traders with market power (Class 2) Reference articles: Kyle, A., 1985, “Continuous auctions and insider trading”, Econometrica, 1315—1335. Hedging as a trading motive for uninformed traders (Class 3) Reference article: Spiegel, M, and A. Subrahmanyam, 1992, “Informed speculation and hedging in a non-competitive securities market,” Review of Financial Studies, 5, 307 – 329. Limit orders and liquidity supply by risk averse agents (Class 3) Kyle, A., 1989, "Informed Speculation with Imperfect Competition," Review of Economic Studies, 56, 317-355. III) Applications Manipulation (Class 4) Reference articles: Goldstein, I. and A. Guembel, 2008, “Manipulation and the Allocational Role of Prices,” Review of Economic Studies, 75, 133-164.

Herding (Class 4) Reference articles: Avery, C. and P. Zemsky, 1998, “Multidimensional Uncertainty and Herd Behavior in Financial Markets,” American Economic Review, 88, 724-748.

École d’économie de Toulouse - TSE

Foreign Aid: Organization and Effectiveness

Instructor: Pepita Miquel-Florensa Email: pepita.miquel@tse-fr.eu Office: MF123bis This course aims to study the organization and effectiveness of foreign development aid. We will study the different players on the aid game: on the one side, the aid recipients, and on the other side the aid donors. On the aid donors, we will study the behaviour of multilateral agencies (like the World Bank or the Inter-American Development Bank), of bilateral agencies (like the AFD, GTZ, USAid, ...) and of Non-Governmental organizations. We will study the comparative advantage of each of these institutions, how they allocate funds, how they interact, and how their behaviour affects the aid recipients' behaviour. We will also look in detail into the effectiveness of aid flows, and the factors that affect this effectiveness.

This is a suggested list of papers and books, that will be updated during the course.

1. Introduction

Easterly, William (2009), “Can the West Save Africa?”, Journal of Economic Literature Radelet, Steven (2006), “A primer on foreign aid”, Center for Global Development

2. The market for aid: participants

Klein and Harford (2005), “The market for aid”, International Finance Corporation Easterly, William and Tobias Pfutze, “Where Does the Money Go? Best and Worst Practices in Foreign Aid”, Journal of Economic Perspectives, Spring 2008. Powell and Bobba (2006), “Multilateral intermediation of foreign aid: What is the trade-off for donor countries?”, IADB Working paper. Dreher, Molders, Nunnenkamp (2007), “Are NGO’s better donors? A case study of aid allocation for Sweeden“, Kiel Working paper Koch, Dreher, Nunnenkamp, Thiele (2008), “Keeping a low profile: What determines the allocation of aid by NGOs?” Kiel Working paper Werker and Ahmed (2007) “What do non-governmental institutions do?” Journal of Economic Prospectives. Humphrey, C. and Michaelowa, K. (2010) "The bussiness of Development: Trends in Lending by Multilateral Development Banks to Latin America, 1980-2009", CIS Working Paper

3. Aid allocation

Alesina and Dollar (2000), “Who gives aid to whom and why?”Journal of Economic Growth

Werker, Eric, Faisal Z. Ahmed, and Charles Cohen (2009) "How Is Foreign Aid Spent? Evidence from a Natural Experiment." American Economic Journal: Macroeconomics Nunnenkamp and Ohler (2011), "Aid Allocation through various official and private channels: Need, Merit and Self-interest as motives of German donors" World Development Neumayer (2006) "What factors determine the allocation of aid by Arab countries and Multilateral agencies?" Journal of Development studies.

4. Aid Effectiveness Rajan, Raghuram G. and Arvind Subramanian (2007), “Aid and Growth: What Does the Cross-Country Evidence Really Show?”, Review of Economics and Statistics Djankov, Simeon, Jose Montalvo and Marta Reynal-Querol (2009), “The Curse of Aid”, Journal of Economic Growth. Burnside, Craig and David Dollar (2000), “Aid, Policies, and Growth,” American Economic Review Easterly, William, Ross Levine, and David Roodman (2004) "New Data, New Doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth", American Economic Review, Kilby and Dreher (2010), “The impact of Aid on growth revised: Do donors motives matter?” Economic Letters Denizer, Kaufmann and Kraay (2011). "Good countries or good projects? Macro and Micro correlates of World Bank Project Performance. WB Policy Research Working Paper Kilby, C. (2000) "Supervision and performance: the case of world bank projects", Journal of Development Economics Dollar and Svensson (1998) "What explains the success or failure of structural adjustment programs?" World Bank working paper.

5. Donor fragmentation Knack, S. and Rahman, A. (2007) 'Donor fragmentation and bureaucratic quality in aid recipients' Journal of Development Economics Roodman, D.(2006) 'Aid Project Proliferation and Absortive Capacity' Working paper, Center for Global Development. Roodman, D. (2006) 'Competitive Proliferation of Aid projects: A Model', Center for Global Development. Torsvik, G. 'Foreign Economic Aid; Should donors cooperate?' Journal of Development Economics

6. Aid contracts: Conditionality and Tied aid

Temple (2010) “Aid and Conditionality”, Handbook of Development Economics. Azam and Laffont (2003) "Contracting for aid." Journal of development economics Svenson, Jakob (2000) "When is foreign aid policy credible? Aid dependence and conditionality." Journal of development economics Svenson, Jakob (2003) "Why conditional aid does not work and what can be done about it?." Journal of development economics

7. Suggested books

Dambisa Moyo (2009) "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa" William Easterly (2007) "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good"

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Toulouse School of Economics

Green Business Strategies and Socially Responsible Investments

Fall 2011

Instructors  Stefan Ambec , INRA Research fellow, e‐mail: sambec@toulouse.inra.fr Philippe Bontems, INRA Research fellow, e‐mail:  bontems@toulouse.inra.fr Sébastien Pouget, Professor of Finance, e‐mail :  spouget@univ-tlse1.fr   Objective  The course describes corporate strategies regarding the protection of the environment. We analyze different ways for firms to enjoy a competitive advantage by improving environmental performance. These  are:  improving  the  environmental  quality  of  a  product;  adopting  greener  technologies; complying  with  and  preempting  environmental  regulations,  adopting    through  the  adoption  of greener technologies; changing management and business practices, for example by as adopting an environmental  management  system;  gaining  access  to  needed  financial  capital  like  socially responsible  investment  funds. We  also  investigate  the  firms’  localization  strategies  depending  on countries’ environmental  regulations. The course discusses how  socially  responsible  investing  (SRI) integrates environmental  aspects  into  finance.  It  then  studies how  SRI affects  corporate  financing and the functioning of financial markets. This course has been developed as part of the activities of a research center on SRI: Chaire Finance Durable et  Investissement Responsable  (see  the website of the center at http://www.idei.fr/fdir for more information).    Tentative Course Outline  Part 1: Socially Responsible Investment (SRI) ‐ Sébastien Pouget (14/09, 21/09, 28/09)  What is socially responsible investing?  Social rating agencies, social responsibility and corporate financing, financial performance and socially responsible behavior . 

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 Part 2: Technology, organization and environmental regulation – Stefan Ambec (5/10, 12/10, 19/10)  Green technologies, Environmental Management Systems (EMS), environmental regulation preemption?    Part 3: Environmental quality of products and localization of production – Philippe Bontems  (2/11, 9/11, 16/11)  Green labeling, pollution haven hypothesis, environment and trade  More information (detailed outline, references, papers, slides) will be provided during the course by each teacher.    Evaluation  The course evaluation will be based on statistical analyses (to be assigned in class, 1/3) a case study  (1/3)  and  its presentation  in  class  (1/3). The  case  study  should describe  a  company’s or  an investor’s  green  business  strategies.  It  should  relate  the  facts  with  the  issues  and  mechanisms explained in class. The last three sessions (21/11, 30/11, 7/12) will be devoted to the presentation of case  studies  by  students.  The  deadline  for  providing  the written  document  for  the  case  study  is December 12.     

Bibliography

- Ambec, S. M. A. Cohen, S. Elgie and P. Lanoie (2011) The Porter Hypothesis at 20: can environmental regulation enhance innovation and competitiveness?, Resources for the Future (RFF) discussion paper, http://www.rff.org/rff/documents/rff-dp-11-01.pdf

- Ambec S. and P. Lanoie (2008), Does it pay to be green? A Systematic Overview, Academy of Management Perspectives, 23: 45-62.

- Lanoie, P, J. Laurent-Lucchetti, S. Ambec and N. Johnstone (2011) Environment policy, innovation and performance: New insights on the Porter hypothesis Journal of Economics and Management Strategy, 20(3): 803–841

- Roland Benabou and Jean Tirole, Individual and Corporate Social Responsibility, Economica, pp. 1-19.

- Geoffrey Heal, Corporate Social Responsibility: An Economic and Financial Framework, The Geneva Papers on Risk and Insurance — Issues and Practice, 2005, pp. 387–409.

- Augustin Landier and Vinay Nair, Investing for Change, Oxford University Press, 2009.

- Jean Tirole, Corporate Governance, Econometrica, 2001, pp. 1-35.

Individuals and Households in Developing CountriesToulouse School of Economics

Fall 2011

Priscila Souzapriscila.souza@tse-fr.euO¢ ce: MF 121

Stéphane Straubstephane.straub@univ-tlse1.frO¢ ce: MF 125

1st half: Priscila Souza, Tuesdays and Thursdays, 14-15:30pm.2nd half: Stéphane Straub, Mondays, 11-12:30pm and 3:30-5pm.

This course covers the application of microeconomic tools to economic de-velopment issues in poor countries and the poorest sections of middle-incomecountries, with a focus on the study of individual and household behavior.The main topics are household economics, saving, risk and incomplete mar-kets, philanthropy and non-pro�t organizations, health and education, micro-�nance, infrastructure and property rights. We emphasize a critical readingof relevant papers on the selected topics.

Readings (marked with *) will be covered in detail during lectures and weexpect you to read them beforehand in order to participate in class discussion.Non-starred readings will not be discussed but are listed here as a guide forfurther study.

Reference books in development economics and a short description ofeach of them are provided below. You are not required to buy these booksfor the course, but we recommend you to search and consider acquiring someof them, specially if you intend to pursue your studies in the area.

1) BARDHAN, Pranab and UDRY, Christopher, Development Microeco-nomicsThis is an excellent graduate level book that synthesizes important topics

in development microeconomics. The focus is largely theoretical though some

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empirical work is also discussed. It provides lots of intuition for the modelsand economic problems and it is not technically di¢ cult.

2) RAY, Debraj, Development EconomicsThis undergraduate textbook provides a great insight into the literature

of development economics. The book is well-written, with clear and rigorousarguments that require minimum math skills.

3) BASU, Kaushik, Analytical Development Economics: The Less Devel-oped Economy RevisitedThis is a graduate-level book on theoretical development economics with

a good coverage of topics in macro (e.g., growth, in�ation, trade, debt), thedual economy (e.g., migration, rural-urban wage gap) and the rural economy(e.g., tenancy, rural credit markets).

4) ERMISCH, John, An Economic Analysis of the FamilyThis book focus on intra-household allocation and decision making, show-

ing how standard microeconomics methods can be applied to understandfamily behavior. It highlights the importance of this analysis to understandthe distribution of welfare within the family and the implications of publicpolicy,

5) DEATON, Angus, The Analysis of Household Surveys: A Microecono-metric Approach to Development PolicyFocusing on microeconometric empirical techniques, this book study is-

sues that arise in the construction and analysis of household survey datafrom poor countries. It emphasizes policy questions from several di¤erentdeveloping economies.

6) BANERJEE, Abhijit and DUFLO Esther, Poor Economics: A RadicalRethinking of the Way to Fight Global PovertyThis book focus on research that investigates the behavior of poor people

and how antipoverty programs and �nancial aid impact their lives. It empha-sizes the contribution of randomized control trials to the �eld of developmenteconomics.

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For Econometrics reference:

1) WOOLDRIDGE, Je¤rey, Econometric Analysis of Cross Section andPanel DataA graduate-level book on microeconometric methods with a well-organized

and clear text. This is one of the most used book by researchers doing appliedwork with cross section and panel data.

2) CAMERONA. Colin and TRIVEDI Pravin, Microeconometrics: Meth-ods and ApplicationsThis graduate-level book is oriented to researchers doing empirical work,

as it covers a broad range of topics frequently encountered during micro-econometrics applications.

3) GREENE, William H, Econometric AnalysisThis is a widely used graduate-level book in econometrics that covers a

vast number of topics.

Course Requirements

Students are expected to actively participate in class discussions. A setof home assignment (groups of up to 3 students) will constitute 40% of thegrade. Also, there will be a �nal exam (60%).

PART 1 - Priscila Souza (Sep. 13th to Oct. 20th)

1) Household economics (unitary household model, collectivemodel and beyond) - 3 Lectures

*Becker, Gary S., "A Theory of Social Interactions", Journal of PoliticalEconomy, Vol. 82, No. 6, Nov.-Dec. 1974, 1063-1093.

*Bergstrom, Theodore C., "A Fresh Look at the Rotten Kid Theoremand Other Household Mysteries", Journal of Political Economy, Vol. 97, No.5, Oct. 1989, 1138-1159.

*Browning, Martin and Chiappori, Pierre-Andre, "E¢ cient Intra-Household Allocations: A General Characterization and Empirical Tests",Econometrica, Vol. 66, No. 6, Nov., 1998, 1241-1278.

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*Duflo, Esther, "Grandmothers and Granddaughters: Old Age Pensionand Intra-household Allocation in South Africa", World Bank Economic Re-view, 17(1), 2003, 1-25.

*Udry, Christopher. 1996. "Gender, Agricultural Productivity and theTheory of the Household", Journal of Political Economy

Becker, Gary S., "A Treatise on the Family", Cambridge, MA: HarvardUniversity Press, 1981.

Bergstrom, Theodore C., "A Survey of Theories of the Family", InHandbook of Population and Family Economics,. Ed. Mark Rosenzweig andOded Stark, Elsevier, 1997, 21-79.

Bruce, Neil andWaldman, Michael, "The Rotten-Kid Theorem Meetsthe Samaritan�s Dilemma", Quarterly Journal of Economics, Vol. 105, No.1, (Feb., 1990), pp. 155-165

Browning, Martin, Bourguignon, Francois, Chiappori, Pierre-Andre andLechene, Valerie, "Income and Outcomes: A Structural Model of Intrahouse-hold Allocation", Journal of Political Economy, Vol. 102(6), Dec. 1994,1067.96.

Chiappori, Pierre-Andre, "Rational Household Labor Supply", Econo-metrica, Vol. 56(1), Jan. 1988, 63.90.

Chiappori, Pierre-Andre, "Collective Labor Supply and Welfare", Jour-nal of Political Economy, Vol. 100(3), Jun. 1992, 437.67.

Schultz, T. Paul., "Testing the neoclassical model of family labor supplyand fertility", Journal of Human Resources 25, 1990, 599.634.

Souza, Priscila Z., "Moral Hazard in the Family", Job Market Paper,https://sites.google.com/site/priscilazsouza/.

2) Saving, Risk and Incomplete Markets - 4 Lectures

*Paxson, Christina H. 1992. "Using Weather Variability to Estimate theResponse of Savings to Transitory Income in Thailand", American EconomicReview,.Vol. 82, No. 1 (Mar., 1992), pp. 15-33.

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*Townsend, Robert M., "Risk and Insurance in Village India", Econo-metrica, Vol. 62, No. 3, (May, 1994), pp. 539-591

*Udry, Christopher, "Risk and Insurance in a Rural Credit Market: AnEmpirical Investigation in Northern Nigeria", Review of Economic Studies,Vol. 61, No. 3 (Jul., 1994), pp. 495-526

*Ligon, Ethan, Thomas, Jonathan P. and Worrall, Tim, "InformalInsurance Arrangements with Limited Commitment: Theory and Evidencefrom Village Economies", Review of Economic Studies, Vol. 69, No. 1, Jan.2002, 209-244.

*Foster, Andrew D. and Rosenzweig, Mark R., "Imperfect Commit-ment, Altruism, and the Family: Evidence from Transfer Behavior in Low-Income Rural Areas", Review of Economics and Statistics, Vol. 83, No. 3,Aug. 2001, 389-407.

Attanasio, Orazio. andRios-Rull, Jose-Victor, �Consumption smooth-ing in island economies: Can public insurance reduce welfare?,�EuropeanEconomic Review, 2000, 44 (7), 1225�1258.

Besley, Timothy, "Nonmarket Institutions for Credit and Risk Sharingin Low-Income Countries", Journal of Economic Perspectives, Vol. 9, No. 3(Summer, 1995), pp. 115-127.

Dubois, Pierre, Jullien, Bruno and Magnac, Thierry.(2008), "Formaland Informal Risk Sharing in LDCs: Theory and Empirical Evidence", Econo-metrica, 76: 679�725.

Ligon, Ethan, Thomas, Jonathan P. and Worrall, Tim, �Mutualinsurance, individual savings, and limited commitment,�Review of EconomicDynamics, 2000, 3 (2), 216�246

Morduch, Jonathan , "Income Smoothing and Consumption Smooth-ing", Journal of Economic Perspectives, Vol. 9, No. 3, Summer 1995, pp.103-114.

Udry, Christopher, "Risk and Saving in Northern Nigeria", AmericanEconomic Review, Vol. 85, No. 5 (Dec., 1995), pp. 1287-1300

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3) Philanthropy and Non-pro�t organizations: Altruism andOther Motivations - 2 Lectures

*Benabou, Roland and Tirole, Jean, "Incentives and Prosocial Behav-ior", American Economic Review, (December, 2006)

*Besley, Timothy and Ghatak, Maitreesh, "Competition and Incen-tives with Motivated Agents", American Economic Review, Vol. 95, No. 3(Jun., 2005), pp. 616-636

Benabou, Roland and Tirole, Jean, "Intrinsic and Extrinsic Motiva-tion", Review of Economic Studies, 2003, 70: 489�520.

Frey, Bruno, "Not Just for the Money: An Economic Theory of PersonalMotivation", Cheltenham, UK: Edgar Elgar Publishing, 1997.

Frey, Bruno S. and Meier, Stephan . 2004. "Social Comparisonsand Pro-social Behavior:Testing Conditional Cooperation in a Field Experi-ment.", American Economic Review, 94(5): 1717-1722.

Seabright, Paul, "Continuous Preferences and Discontinuous Choices: How Altruists Respond to Incentives", The B. E. Journal of TheoreticalEconomics (Contributions), vol. 9, n. 1, April 2009.

Schechter, Laura 2007. "Theft, Gift-Giving, and Trustworthiness:Honesty Is Its Own Reward in Rural Paraguay", American Economic Re-view, 97(5): 1560�1582.

4) Human Capital: Health and Education - 3 Lectures

*Miguel, Ted and Kremer, Michael, �Worms: Identifying Impacts onEducation and Health in the Presence of Treatment Externalities�, Econo-metrica, vol. 72(1), 2004, pp. 159-217, 01.

*Strauss, John, �Does Better Nutrition Raise Farm Productivity?�,Journal of Political Economy, 1986, pp. 297-320.

*Behrman, Jere, Sengupta, Pilali and Todd, Petra (2001), "Progress-ing Through Progresa: An Impact Assessment of a School Subsidy Experi-ment", PIER Working Paper, 01-033, Penn Institute for Economic Research,University of Pennsylvania.

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*Skoufias, Emmanuel and Parker, Susan W (2001), "ConditionalCash Transfers and their Impact on Child Work and School Enrollment:Evidence from the PROGRESA program in Mexico", Economia Vol.2, No.1, p. 45-96

*Angelucci, Manuela, De Giorgi, Giacomo, Rangel, Marcos A. andRasul, Imran, "Family Networks and School Enrolment: Evidence From aRandomized Social Experiment", Journal of Public Economics, forthcoming.

*Edmonds, Eric V., "Child Labor and Schooling Responses to Antic-ipated Income in South Africa", Journal of Development Economics, vol.81(2), Dec. 2006, 386.414.

Foster, Andrew D. and Rosenzweig, Mark, "Technical Change andHuman-Capital Returns and Investments: Evidence from the Green Revolu-tion", American Economic Review, Vol. 86, No. 4 (Sep., 1996), pp. 931-953

Strauss, John andThomas, Duncan, "Health, Nutrition, and EconomicDevelopment", Journal of Economic Literature, Vol. 36, No. 2, Jun., 1998,pp. 766-817

Schultz, T. Paul, �School Subsidies for the Poor: Evaluating the Mex-ican Progresa Poverty Program,�Journal of Development Economics 74(1),2004, 199-250

PART 2 - Stéphane Straub (Oct. 25th to Dec. 5th)

1) Micro�nance - 4 Lectures

*Dean Karlan and Jonathan Zinman, "Microcredit in Theory and Prac-tice: Using Randomized Credit Scoring for Impact Evaluation" (June 2011)Science, 332(6035), pp. 1278-1284.

*Dean Karlan and Jonathan Zinman, "Observing Unobservables: Identi-fying Information Asymmetries with a Consumer Credit Field Experiment"(November 2009) Econometrica, 77(6), pp. 1993-2008.

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*D. McKenzie, M. Fafchamps, S. Quinn and C. Woodru¤, "When is cap-ital enough to get female enterprises growing ? evidence from a randomizedexperiment in Ghana", mimeo, June 2011.

De Mel, Suresh, David McKenzie, and Christopher Woodru¤. 2008. �Re-turns to Capital in Microenterprises: Evidence from a Field Experiment�.The Quarterly Journal of Economics, 123(4): 1329-1372.

Book: B. Armendariz de Aghion and J. Morduch, 2005, The Economicsof Micro�nance, MIT Press.

2) Infrastructure - 5 Lectures

*T. Dinkelman, "The e¤ects of rural electri�cation on employment: Newevidence from South Africa", forthcoming, American Economic Review.

*Dimitrios Batzilis, Taryn Dinkelman, Emily Oster, Rebecca Thornton,Deric Zanera, 2010, "New cellular networks in Malawi: Correlates of servicerollout and e¤ects on employment", NBER Working Paper No. 16616.

*Du�o E. and R. Pande (2007), �Dams�, Quarterly Journal of Economics,122(2), 601-646.

*Galiani, S., P. Gertler and E. Schargrodsky (2005), �Water for Life:The Impact of Privatization of Water Services on Child Mortality�, Journalof Political Economy, 113: 83-120.

Jensen R. (2007), �The Digital Provide: Information (Technology), Mar-ket performance, and Welfare in the South Indian Fisheries Sector�, Quar-terly Journal of Economics, 122(3), 879-924.

*Olken B., �Monitoring Corruption: Evidence from a Field Experimentin Indonesia�, mimeo. Journal of Political Economy 115 (2), pp. 200-249,April 2007.

*D. Donaldson, "Railroads of the Raj: Estimating the Impact of Trans-portation Infrastructure", mimeo, MIT.

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Straub, S. (2010), �Infrastructure and Development: A Critical Appraisalof the Macro-Level Literature�, forthcoming The Journal of DevelopmentStudies, 2011.

Straub, S. (2008), �Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges�, World Bank Policy ResearchWorking Paper No.4460.

Bonnet, C., P. Dubois, D. Martimort, and S. Straub, 2011, �EmpiricalEvidence on Satisfaction with Privatization in Latin America�, forthcoming,World Bank Economic Review.

3) Property Rights - 3 Lectures

*Field, E; Torrero M (2004) �Do Property Titles Increase Credit AccessAmong the Urban Poor? Evidence from a Nationwide Titling Program�,mimeo. http://post.economics.harvard.edu/faculty/�eld/papers.html

*Besley, T (1995) �Property Rights and Investment Incentives: Theoryand Evidence from Ghana� The Journal of Political Economy Vol. 103,pp.903-937

*Field, Erica (2007) �Entitled toWork: Urban Property Rights and LaborSupply in Peru�, The Quarterly Journal of Economics, 122 (4): 1561-1602.

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UE : Assurance N° I.D.

Master 2ème année Actuariat

Intitulé du cours : The economics of risk and insurance

ECTS: H CM: 24 H TD:

Responsable du cours : Guillaume Plantin Contenu pédagogique : Sessions 1 – 2

How do individuals make decisions under uncertainty? The economists’ view Expected utility theory, risk aversion, orders on risks Session 3

Design and pricing of insurance contracts: economic criteria Demand for insurance, insurance supply Session 4

Endogenous risk: moral hazard, conflicts between risk sharing and risk mitigation A general formulation of moral hazard, moral hazard in insurance markets, moral hazard elsewhere in finance Session 5

Is risk sharing still feasible when some people know more than others? The lemons problem, insurance in the presence of adverse selection, adverse selection elsewhere in finance Session 6 (if time permits)

Why and how should large corporations manage risks? Introduction to corporate hedging theories, prudential management of insurance companies Session 7

Review session Review key concepts, practice with exercises, answer all students’ questions before the exam Session 8

Final exam.

Closed book. No cheat sheet.

Pré-requis : none Evaluation : Final written exam

Bibliographie : Eeckhoudt, L., C. Gollier et H. Schlesinger, (2005), Economic and Financial Decisions under Uncertainty, Princeton University Press

MATHEMATICAL AND STATISTICAL METHODS

IN INSURANCE Stéphane Villeneuve

1 Some aspect of stochastic analysis - Representation theorem for brownian martingale - Girsanov theorem - stochastic differential equations

2 Stochastic control with application in finance - Portfolio optimization - irreversible investment - Dynamic programming and HJB equation

3- Singular Control in corporate finance - Liquidity management - Introduction to Dynamic moral hazard

École d’économie de Toulouse - TSE

Microfinance, Land and Labor Instructor: Pepita Miquel-Florensa

Email: pepita.miquel@tse-fr.eu Office: MF123bis

The aim of this course is to study the peculiarities of credit, land and labor markets in Developing countries.

The first part of the course will cover the structure of the credit markets in developing countries, and will center on microfinance. We will study the constraints for access to credit in LDC's, and how the contractual arrangements have been influenced by adaptation to problems of information and contract enforcement. On the second part of the course, we will study the different land and labor agreements prevalent in LDC's. We will study the contractual agreements (sharecropping, interlinked contracts, ...) and how they are influenced by information problems and farmer's financial constraints.

The course will cover both theoretical models and empiric papers. Here comes a preliminary reading list of papers. Two of the books suggested (Bardham and Udry and Ray) can be a good support specially for the theoretical part.

Suggested books:

Banerjee and Duflo (2011) "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty"

Armendariz and Morduch (2007) "The Economics of Microfinance"

Bardham and Udry (1999) "Development Microeconomics"

Ray (1998) "Development Economics"

Credit markets in developing countries, Microfinance:

Ghosh, P., Mookherjee, D. and D. Ray (2000), "Credit Rationing in Developing Countries: An Overview of the Theory," Chapter 11 in Readings in the Theory of Economic Development, edited by D. Mookherjee and D. Ray, London: Blackwell.

Ghatak, Maitreesh and Timothy W. Guinnane: "The Economics of Lending with Joint Liability : Theory and Practice" Journal of Development Economics, Vol.60, No.1, October 1999.

Xavier Gine, P. Jakiela, D. Karlan, and J. Morduch (2010) " Microfinance Games," American Economic Journal: Applied Economics

Land and Labor in Developing countries:

Banerjee, A., Gertler, P. and M. Ghatak (2002), "Empowerment and Efficiency: The Economics of Agrarian Reform," Journal of Political Economy

Banerjee, A.V., P. Gertler and M. Ghatak (2002) : "Empowerment and Efficiency - Tenancy Reform in West Bengal", Journal of Political Economy.

Ackerberg, D. and M. Botticini (2002): "Endogenous Matching and Empirical Determinants of Contractual Form", Journal of Political Economy.

Mukherjee, A., and D. Ray (1995). ``Labor Tying,'' Journal of Development Economics

Shaban, R. (1987), “Testing between Competing Models of Sharecropping,” Journal of Political Economy

Optimization

1. Optimization in Hilbert spaces

• Theoretical tools : examples, projection theorem, separation results, Riesz representationtheorem, convex cones, Farkas lemma

• Convex functions : continuity issues, characterizations of convexity, existence and charac-terization of minimizers, second-order conditions for minimization

• Fenchel duality and subdifferentiation

• Convex programming : Lagrange method and KKT conditions, Lagrange multipliers, dualitytheory

• Nonlinear programming : KKT conditions

2. Introduction to the calculus of variations

• Sufficient conditions : Euler-lagrange conditions, transversality condition

• Regularity of the solutions: continuously differentiable solutions, piecewise continuouslydifferentiable solutions, Erdmann-Weierstrass corner condition

• A sketch of an Hilbertian approach : the space H1 = W 1,2

(existence results, duality)

• Problems with infinite horizons.

• Examples

3. Introduction to optimal control

• Pontriagyne maximum principle

• Sufficient conditions

• Dynamic programming : Bellman principle

• Problems with infinite horizons

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Université de Toulouse 1 Capitole

Program Evaluation Methods and Microeconometrics

Pierre Dubois

pierre.dubois@tse-fr.eu

General Presentation

In this course, we will study microeconometrics methods for applied program evaluation and esti-mation of treatment effects. Recent development in microeconometrics improved our understanding ofselection and endogeneity issues in applied economics.The course will be organize in two parts.The first part will be based on formal lectures on treatments effects always with applications and

examples in mind.The second part will be based on the critical reading of recent papers in applied development

economics

Part I: LecturesWe will study several recent developments on the identification and estimation of treatments effects

models. This recent literature helped in understanding the very meaning of estimated coeffi cients, theassumptions needed for their identification, their policy relevance, ... These methods are used in severalcontexts where one can sometimes find what is called natural or controlled randomized experiments.After looking at the definitions of the several parameters of interests generally studied (average

treatment effect, treatment effect on the treated, marginal treatment effect, local average treatmenteffect), we will look at their identification conditions (parametric or non-parametric) and at the differentmethods of estimation (instrumental variables, matching estimators, propensity score matching, ..)according to the selection process, heterogeneity assumptions, ..These methods are used in a large number of research areas generally policy oriented like labor

economics, development economics, health economics, economics of education, public policy evaluationin general, ... For example, they are very useful to evaluate the impact of targeted programs for educa-tion, poverty alleviation, enhancement of access to credit, improvement of labor markets functioning,the impact of training programs, as well as health prevention or therapeutical programs.

Part II:Here is a possible non exhaustive reading list of recent papers for presentation in class.

1. "The Impact of Credit on Village Economies." Joseph P. Kaboski and Robert M. Townsend.American Economic Journal, Forthcoming

2. "A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative." JosephKaboski and Robert M. Townsend. Econometrica 79(5), September 2011: 1357-1406.

3. "Measuring the Impact of Financial Intermediation: Linking Contract Theory to EconometricPolicy Evaluation." Robert M. Townsend and Sergio Urzua. Macroeconomic Dynamics 13 (S2),September 2009: 268-316.

4. "Comparing IV With Structural Models: What Simple IV Can and Cannot Identify" Sergio Urzuaand J. Heckman. Forthcoming Journal of Econometrics, 2009.

5. "Education Choices in Mexico: Using a Structural Model and a Randomized Experiment toEvaluate Progresa" (2011), Orazio Attanasio Costas Meghir and Ana Santiago. Forthcoming inReview of Economic Studies.

6. "The Demand for Food of Poor Urban Mexican Households: Understanding Policy Impacts usingStructural Models", Orazio Attanasio Manuela Angelucci. Draft September 2011.

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7. "The impact of Oportunidades on Consumption, Saving and Transfers", Orazio Attanasio ManuelaAngelucci and Vincenzo Di Maro. Draft October 2011.

8. "Subsidizing Vocational Training for Disadvantaged Youth in Colombia: Evidence from a Ran-domized Trial" (2011), Orazio Attanasio Adriana Kugler and Costas Meghir. American EconomicJournal. Applied Economics. July, 3(3): 188-220

9. “Class-Size Caps, Sorting, and the Regression Discontinuity Design.” Eric Verhoogen, MiguelUrquiola. American Economic Review, v. 99 no. 1, pp. 179-215, March 2009.

10. "Modern Medicine and the 20th-Century Decline in Mortality: Evidence on the Impact of SulfaDrugs" Seema Jayachandra A. Lleras-Muney and K. Smith, American Economic Journal: AppliedEconomics, April 2010, vol. 2 (2), pp. 118-146.

11. "The Price Effects of Cash Versus In-Kind Transfers" Seema Jayachandra J. Cunha and G. DeGiorgi, September 2011

12. “Generalized Roy Model and the Cost-Benefit Analysis of Social Programs,”Ed Vytlacil, PhilippEisenhauer and James J. Heckman, 2010.

13. Pedro Carneiro & James Heckman & Edward Vytlacil, 2010. "Estimating marginal returns toeducation," CeMMAP working papers CWP29/10

14. "Does Staying in School (and not Working) prevent Teen Drinking and Smoking?" February 2010.Adriana Lleras-Muney and Rob Jensen

15. Miriam Bruhn and David McKenzie (2009), "In Pursuit of Balance: Randomization in Practice inDevelopment Field Experiments", American Economic Journal: Applied Economics, 1(4):200-32

16. Dubois P. A. de Janvry and E. Sadoulet (2011) "Effects on School Enrollment and Performanceof a Conditional Transfers Program in Mexico", forthcoming Journal of Labor Economics.

2

RISK MANAGEMENT

Stéphane Villeneuve

Content: 1°) Risk Management Tools Basics of Risk Modeling Value at Risk Risk measures Risk management in Finance and Insurance 2°) Shareholder va lue Financial structure: trade-off theory Default and credit risk Liquidity management - Prerequesite : Strong background in probability an d financial economics References: Beneplanc rochet (2011) Risk Management in Turbulent times. Bjork (2004) Arbitrage theory in Continuous time, Oxford university press Stultz (2003) Risk Management and derivatives, South western Tirole, The theory of Corpora te Finance. Princeton University press

Toulouse School of Economics

Master 2 EMO 2011-2012

Strategic Analysis

Paul Seabright Alban Thomas

First semester, Mondays 15.30-17.00 and Fridays 9.30-11.00

Course Outline  This course examines the principles of decision-making in strategic environments, those where the results of a decision-makers’ actions depend on the actions of other decision-makers. Most of the applications will be to the decisions of firms in imperfectly competitive environments, but we shall also consider possible applications to other strategic decision makers such as governments, international organizations, political parties, central banks… The classes run by Paul Seabright will focus on principles of strategic analysis, essentially the application of game theory to real-world situations. Those run by Alban Thomas will focus on the use of statistical and econometric methods by decision-makers for understanding their own competences and the nature of their strategic environment. Depending on the numbers of students enrolled and their preferences with respect to applications, we may hold some pooled classes later in the semester in which we apply both theory and econometrics to a single problem. This will be decided around two weeks after the beginning of the course.

Topics to be covered: Part I: Paul Seabright (Monday class): This will cover applications of the theory of games. Some previous familiarity with game theory will be assumed, as the object is not to teach the theory, or to find ways to solve elaborate games, but rather to teach by repeated example how to find the game characterization that best captures the essence of a real-world strategic interaction. The aim is to understand strategic interactions between

a) different groups within the firm (these are questions about corporate governance and internal management)

b) The firm, its competitors and the regulatory authorities (these are questions about competitive strategy)

The method is to combine general principles with examples and case studies. The following topics will be covered:

1. Game Theory, Corporate Strategy and Public Policy 2. Business Strategies for Different Games 3. Monopoly and Oligopoly Behavior 4. Collusion – Markets and Auctions 5. Platform Competition and Two-Sided Markets

Examples will be drawn from areas as diverse as software, online auctions, motor vehicles, international diplomacy, and consumer electronics. Preliminary reading: Avinash Dixit and Barry Nalebuff: Thinking Strategically Jean Tirole: The Theory of Industrial Organization, MIT Press 1988, game-theoretical appendix.

Part II: Alban Thomas (Friday class): This part of the course will consist in providing students with a consistent set of statistical techniques for the analysis of firm strategic decisions as well as consumer behaviour on product markets. Particular attention will be paid to the use of econometric tools in the representation of consumer demand for new and differentiated products. Using real-world data and popular software packages, students will estimate demand systems for a variety of goods (especially differentiated ones) and learn techniques of calibrating for strategic price policy models. Flexible demand systems and discrete-choice models in cross-section and panel-data contexts will be the major ingredients of consumer demand analysis in this course. 1.Introduction 2.Efficiency analysis for a competitive firm 2.1 Production analysis 2.2 Primal approach: estimation of production functions 2.3 Panel data econometrics 2.4 Dual approach: cost & profit estimation 2.5 Systems of equations 3.Consumer analysis 3.1 Different ways of measuring consumption 3.2 Basic theory 3.3 Applied consumer analysis 3.4 The AIDS demand model 4.Structural analysis of markets 4.1 Oligopoly and firm’s entry 4.2 Differentiated goods 4.2.1 Consumer valuation & individual-level data 4.2.2 Econometric methods for discrete-choice data 4.3 Market-level econometric analysis of differentiated goods    Reading:    B. Baltagi, 2008. Econometric Analysis of Panel Data. Wiley and Sons. S. Berry and P. Reiss, 2007. Empirical models of entry and market structure. Chapter 29 in Handbook of Industrial Organization, volume 3. Elsevier, Amsterdam. R. Chambers, 1988. Applied Production Analysis: A Dual Approach. Cambridge University Press. A. Deaton and J. Muellbauer, 1980. Economics and Consumer Behavior. Cambridge University Press, Cambridge. W. Greene, 2007. Econometric Analysis. Prentice Hall, London.

Topics in Applied Econometrics and DevelopmentToulouse School of Economics

Spring 2012

Paul Seabrightpaul.seabright@tse-fr.euO¢ ce: MF 509

Priscila Souzapriscila.souza@tse-fr.euO¢ ce: MF 121

Wednesdays, 9.30am-12:30pm, Room MD 102

This course covers some general principles of empirical investigation indevelopment economics. We will discuss both econometric theory as wellas important papers in the development literature with a focus on how theauthors have accomplished identi�cation.

The 2 main questions we will be interested are:- How identi�cation can be achieved?- What are the advantages and disadvantages of each empirical technique?

The main topics are economic experiments, instrumental variables, andpanel data.

Readings (marked with *) will be covered in detail during lectures and weexpect you to read them beforehand in order to participate in class discussion.Non-starred readings will not be discussed in detail but may be referred toand are listed here as a guide for further study.

We also include a number of books, of which some are used for referencepurposes (in which case chapter or page numbers will be indicated) whileothers are for background reading. Do not think that background readingis unimportant! It matters just as much to acquire a rigorous and scienti�coutlook on empirical investigation as to learn speci�c techniques.

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Course Requirements

Students are expected to participate actively in class discussions. A setof home assignments (in groups of up to 3 students) will constitute 50% ofthe grade; these will involve working on a data set, the details of which willbe made available before the end of January. Also, there will be a �nal exam(50%).We shall endeavor to make the reading material available either through

a shared dropbox folder or, for some books, through lending you our personalcopies. The logistics of this will be discussed in the �rst class.

1) Experiments (Jan 4th - Jan 18th)

*Miguel, Ted, and Michael Kremer. 2004. �Worms: Identifying Im-pacts on Education and Health in the Presence of Treatment Externalities�,Econometrica, vol. 72(1), pp. 159-217, 01.

*Cohen, Jessica, and Pascaline Dupas. 2010. �Free Distributionor Cost-Sharing? Evidence from a Randomized Malaria Prevention Experi-ment�, Quarterly Journal of Economics, 125(1), pp. 1-45.

*Du�o, Esther, Michael Kremer, and Jonathan Robinson. 2011."Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence fromKenya." American Economic Review, 101(6): 2350�90.

*Muralidharan, Karthik and Venkatesh Sundararaman. 2011."Teacher Performance Pay: Experimental Evidence from India", Journal ofPolitical Economy, Vol. 119, No. 1, February, pp. 39-77

*Karlan, Dean and Jonathan Zinman. 2009. "Observing Unobserv-ables: Identifying Information Asymmetries With a Consumer Credit FieldExperiment", Econometrica, November, 77 (6), pg. 1993-2008

*Banerjee, Abhijit V. and Esther Du�o. 2009. The ExperimentalApproach to Development Economics, Annual Review of Economics, April,Vol. 1: 151-178.

Books: Poor Economics, Bad Science, The Emperor�s New Drugs

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2) Instrumental Variables (Jan 25th- Feb 15th)

*Wooldridge. Chapter 5

*Angrist, Joshua D., and Alan B. Krueger. 2001. "InstrumentalVariables and the Search for Identi�cation: From Supply and Demand toNatural Experiments." Journal of Economic Perspectives, 15(4): 69�85.

*Acemoglu, Daron, Simon Johnson, and James A. Robinson.2002. "Reversal of Fortune: Geography and Institutions in the Making ofthe Modern World Income Distribution", Quarterly Journal of Economics,117(4): 1231-1294.

*Paxson, Christina H. 1992. "Using Weather Variability to Estimatethe Response of Savings to Transitory Income in Thailand", American Eco-nomic Review,.Vol. 82, No. 1, March, pp. 15-33.

*Butcher, Kristin F. and Anne Case. 1994. "The E¤ect of SiblingSex Composition on Women�s Education and Earnings", Quarterly Journalof Economics, Vol. 109, No. 3, August, pp. 531-563.

*Rosenzweig, Mark and Kenneth Wolpin. 2000 "Natural �NaturalExperiments�in Economics", Journal of Economic Literature, 38(4):827-74.

Angrist, Joshua and Alan Krueger. 1999. "Empirical Strategiesin Labor Economics" in Handbook of Labor Economics, Vol. III, ed. OrleyAshenfelter and David Card, pp. 1277-1366

Angrist, Joshua, Guido Imbens, and Donald Rubin. 1996. �Iden-ti�cation of Causal E¤ects Using Instrumental Variables.� Journal of theAmerican Statistical Association, 91(434):444-455.

Bound, John, David Jaeger and Regina Baker. 1995. �ProblemsWith Instrumental Variables Estimation When the Correlation Between theInstruments and the Endogenous Explanatory Variable is Weak.�Journal ofthe American Statistical Association 90(430):443-450.

Heckman, James J, Sergio Urzua, and Edward Vytlacil. 2006."Understanding Instrumental Variables in Models with Essential Heterogene-ity", Review of Economics and Statistics, 88:3, 389-432.

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Heckman, James and Edward Vytlacil. 2002. �Structural Equa-tions, Treatment E¤ects, and Econometric Policy Evaluation.�, Economet-rica 73(3):669-738.

Imbens, Guido W. and Joshua D. Angrist. 1994. "Identi�cationand Estimation of Local Average Treatment E¤ects", Econometrica, Vol. 62,No. 2, March, pp. 467-475P.

Timothy G. Conley, Christian B. Hansen, and Peter E. Rossi.�Plausibly Exogenous.�, Review of Economics and Statistics, Forthcoming.

3) Regression Discontinuity, Propensity Score Matching, otherQuasi-experiment Designs (Feb 29th)

*Imbens, Guido W. and Thomas Lemieux. 2008. "Regressiondiscontinuity designs: A guide to practice", Journal of Econometrics, 142,615�635.

*Souza, Priscila. "Informality and Labor Supply", working paper avail-able at https://sites.google.com/site/priscilazsouza/home.

Hahn, Jinyong , Petra Todd and Wilbert Van der Klaauw.2001. "Identi�cation and Estimation of Treatment E¤ects with a Regression-Discontinuity Design", Econometrica, Vol. 69, No. 1, Jan, pp. 201-209.

4) Panel Data (March 7th and 14th)

*Woodridge. Chapters 10 & 11

*Townsend, Robert M. 1994. "Risk and Insurance in Village India",Econometrica, Vol. 62, No. 3, May, pp. 539-591.

*Jayachandran, Seema. 2006. Selling Labor Low: Wage Responses toProductivity Shocks in Developing Countries. Journal of Political Economy,Vol. 114, June, pp. 538-575.

5) Students�Presentation (March 21st)

4

6) Discussion (March 28th)

Popper, Karl. 1972. "Conjectural Knowledge: My Solution to theProblem of Induction." In Objective Knowledge: An Evolutionary Approach.pp.1-31.

Friedman, Milton. 1953. "The Methodology of Positive Economics."In Essays in Positive Economics pp. 3-46.

Heckman, James. 2000. �Causal Parameters and Policy Analysis inEconomics: A Twentieth Century Retrospective.�The Quarterly Journal ofEconomics 115(1):45-97.

Manski, Charles F. 1989. "Anatomy of the Selection Problem", Jour-nal of Human Resources, Vol. 24, No. 3, Summer, pp. 343-360.

Manski, Charles F. 1995. �The Re�ection Problem,�In: Identi�cationProblems in the Social Sciences. Cambridge: Harvard University Press, 127-136.

Books:

BANERJEE, Abhijit and DUFLO Esther, Poor Economics: A RadicalRethinking of the Way to Fight Global PovertyThis book focus on research that investigates the behavior of poor people

and how antipoverty programs and �nancial aid impact their lives. It empha-sizes the contribution of randomized control trials to the �eld of developmenteconomics. A summary by the authors of the book�s message can be foundat www.foreignpolicy.com/articles/2011/04/25

CAMERON A. Colin and TRIVEDI Pravin, Microeconometrics: Meth-ods and ApplicationsThis graduate-level book is oriented to researchers doing empirical work,

as it covers a broad range of topics frequently encountered during micro-econometrics applications.

DEATON, Angus, The Analysis of Household Surveys: A Microecono-metric Approach to Development Policy

5

Focusing on microeconometric empirical techniques, this book study is-sues that arise in the construction and analysis of household survey datafrom poor countries. It emphasizes policy questions from several di¤erentdeveloping economies.

GOLDACRE, Ben, Bad ScienceThis excellent and very readable book shows how scienti�c methods and

�ndings can be distorted and abused by those who seek to borrow the credi-bility of science in pursuit of a private agenda. A very good reminder of theimportance of rigor in both the conduct of research and the dissemination ofits �ndings.

GREENE, William H, Econometric AnalysisThis is a widely used graduate-level book in econometrics that covers a

vast number of topics.

6) KIRSCH, Irving, The Emperor�s New Drugs: Exploding the Anti-Depressant MythThis book takes a particular example - the use of controlled trials for an-

tidepressant drugs - and shows how problems of selectivity and experimentaldesign can bias �ndings. Particularly good on placebo e¤ects.

WOOLDRIDGE, Je¤rey, Econometric Analysis of Cross Section and PanelDataA graduate-level book on microeconometric methods with a well-organized

and clear text. This is one of the most useds book by researchers doing ap-plied work with cross section and panel data.

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Topics in Applied IO

Spring 2012

David Salant

Office: MF214

Phone: +33(0) 5 6773 2759

Mobile: +33(0) 6 12 05 80 58

gvoice: +1-415-894-5262

dsalant@gmail.com

Skype: dsalant

The main texts that will be relied upon are:

Paul Klemperer (2004), Auctions: Theory and Practice, Princeton University Press

Paul Milgrom (2004), Putting Auction Theory to Work, Cambridge University Press

Selected Readings:

Allaz, Blaise and Jean-Luc Vila (1993) "Cournot Competition, Forward Markets and Efficiency," Journal

of Economic Theory, Vol 59, Issue 1, pp 1-16.

Borenstein, Severin. (2002) "The Trouble with Electricity Markets: Understanding California's

Restructuring Disaster," The Journal of Economic Perspectives, Vol 16, pp 191

Borenstein, Severin, James Bushnell and Frank Wolak, “Measuring Market Inefficiencies in California's

Restructured Wholesale Electricity Market,” American Economic Review, 92(December 2002).

Bulow, Jeremy and Paul Klemperer (1996), “Auctions vs. Negotiations,” American Economic Review, 86:

180-94.

Capen, E. C., Clapp, R. V., and Campbell, W. M. (1971) "Competitive Bidding in High-Risk Situations,"

Journal of Petroleum Technology, 23, 641-653.

Cramton, Peter, Collusive Bidding: Lessons from the FCC Spectrum Auctions," (with Jesse Schwartz)

Journal of Regulatory Economics, 17, 229-252, May 2000

Cramton, Peter, "Collusive Bidding in the FCC Spectrum Auctions," (with Jesse Schwartz) Contributions

to Economic Analysis & Policy, 1:1, www.bepress.com/bejeap/contributions/vol1/iss1/art11, 2002

Cramton, Peter, “Electricity Market Design: The Good, the Bad, and the Ugly," Proceedings of the

Hawaii International Conference on System Sciences, January, 2003.

Dasgupta, Partha and Eric Maskin, (1986) “Equilibrium in Discontinuous Economic Games I: Theory,”

Review of Economic Studies.53:1-27.

Friedman, James, (1977) Oligopoly and the Theory of Games, North Holland.

Grbik, Paul, “Designing an Auction for QF Generation Resources in California: What Went Wrong,” The

Electricity Journal, Volume 8, Issue 3, April 1995, Pages 14-23

Joskow, Paul and Ed Kahn, (2002) “A Qualitative Analysis of Pricing Behavior in the California’s

Electricity Market During Summer 2000, The Energy Journal, 23(4), at http://econ-

www.mit.edu/faculty/download_pdf.php?id=548

Klemperer, Paul (2004), Auctions: Theory and Practice, Princeton University Press

Milgrom, Paul (2004), Putting Auction Theory to Work, Cambridge University Press

Milgrom, Paul and Robert Weber (1982), “A Theory of Auctions and Competitive Bidding,”

Econometrica 50: 463-83.

Mueller, Milton "New Zealand's Revolution in Spectrum Management," Information Economics and

Policy 5, 2 (July 1993) 159-77.

Riley, John G. and Samuelson, William F. (1981) "Optimal Auctions," The American Economic Review,

71, 381-392.

Rosenthal, Robert W. and Balasz Szentes, (2003) “Three Object, Two Bidder Simultaneous Auctions:

Chopsticks and Tetrahedra,” Games and Economic Behavior, 44:113-33.

Salant, David, “Default Service Auctions,” with Colin Loxley, Journal of Regulatory Economics, Vol. 27,

No. 3, 2004.

Salant, David, “Multi-Lot Auctions: Applications to Regulatory Restructuring.” In Obtaining the Best

from Regulation and Competition, edited by M.A. Crew and S. Spiegel. Boston, MA: Kluwer Academic

Publishers (2004).

Salant, David, “Auctions and Regulation: Reengineering of Regulatory Mechanisms,” introduction to

special issue on Auctions and Regulation, Journal of Regulatory Economics, Vol. 17, No. 3, (May,

2000): 195 - 204

Salant, David, “Up in the Air: GTE’s Experience in The MTA Auction for PCS Licenses.” Journal of

Economics and Management Strategy, Vol. 6, No. 3 (Fall, 1997):

549-72.

van den Berg, Gerard J., Jan C. van Ours, and Menno P. Pradhan, “The Declining Price Anomaly in

Dutch Dutch Rose Auctions” AER 2001.

Vickrey, William. (1961) "Counterspeculation, Auctions, and Competitive Sealed Tenders," Journal of

Finance, 16, 8-37. (html)

van Damme, Eric, (1983) Refinements of the Nash Equilibrium Concept, Springer Verlag.

Weber, Robert (1983), “Multiple-Object Auctions,” in Auctions, Bidding and Contracting: Uses and

Theory,´R. Engelbrecht-Wiggans, M. Shubik and R.M. Stark, (editors), New York: New York University

Press, 165-91.

Wolfstetter, Elmar. (1996) “Auctions: An Introduction,” Journal of Economic Surveys, 10(4), 367-420.

Master 2 TSE - ”Economics and Competition Law” (ECL ) Competition Law in practice

Instructor:

Fabienne Darbin-Lange, Avocate, 36h.

Object: EU competition law principles studied and applied through analyses of practical cases

concerning distribution, intellectual property rights and mergers & acquisitions. French competition law principles studied and applied through analyses of practical cases relating to commercial practices between undertakings (supplier/distributor).

I - Distribution and EU competition law (9 h)

(a) Nature of the operation; (b) Relevant market (product and geographical market); (c) Effect on trade between Members States; (d) Trade restriction;

- The “de minimis” rule; - Hardcore restrictions;

(e) Assessment under article 101§3; - Block exemption? - Individual exemption?

II - Intellectual property versus EU competition la w (9 h)

(a) Intellectual property rights and third party collaboration - Commission regulation n° 1217/2010 of 14 December 2010 (Research and

development agreements) - Commission regulation n° 772/2004 of 27 April 200 4 (Technology Transfer

Agreements) (b) Intellectual property and parallel import

- Exhaustion of rights doctrine (c) Intellectual property and dominant position (art. 102TFUE)

- Establishing dominance - Conduct which can be an abuse

III - Mergers & Acquisitions and the Commission reg ulation n° 139/2004 of 29.01. 2004 (9 h)

(a) Nature of the operation - Merger, acquisition, full function joint venture

(b) Community dimension (c) Appraisal of the concentration (d) Remedies

IV - French competition law - Commercial practices (9 h)

(a) General and specific conditions of sale (b) Commercial cooperation / others services (c) Restrictive practices

École d’économie de Toulouse - TSE

WEB MINING Olivier Teste

- Principes des Systèmes d'Informations et SGBD - Conception de BD : E/A, Relationnel, SQL-LDD/LMD - Interrogation de BD : Algèbre Relationnelle, SQL-LID - Principes des Systèmes Décisionnels - Conception de BD en étoile/constellation : Diagramme Multidimensionnel, R-OLAP, SQL-Oracle10g - Interrogations OLAP : Algèbre OLAP