Armel Jacques

Endogenous Firms' Organization, Internal Audit and Leniency Programs

When multi-product firms make simultaneous price-fixing agreements on different markets, they may wish to compartmentalize their agreements managing them with different individuals in order to avoid the contagion of antitrust authority investigations. Sometimes the leniency programs are effcient to defeat this strategy and to induce CEO to launch internal investigations and report the obtained hard evidence to the antitrust authority. However these programs may have pro-collusive effects for centralized firms.

Equity Financing and Investment in Technological Flexibility

We study the interactions between debt/equity financing and strategic (duopoly) technological flexibility choices of firms facing costly bankruptcy. We show that a firms level of debt financing or financial hardship is an important determinant of the level and type of investment it chooses, either a less costly inflexible technology or a more expensive flexible technology. The level of financial hardship has a non-monotonic effect: as the level of equity financing increases, the choice of technology may switch and the level of investment may follow a bell-shaped or U-shaped path, depending on the differential investment cost, the bankruptcy cost, and whether or not the less costly technology is the best option for an all equity firm. We also show that the level of external financing (debt) may be used strategically in a non-cooperative tacitly collusive way to increase the expected profits of both firms, a firm may use debt as a commitment device to increase its own expected profit, and higher bankruptcy costs may be beneficial to both firms.

Observability, Product Flexibility and Substitutability in Oligopoly

We study in this paper how technological flexibility choices and equilibrium configurations depend on industry characteristics (demand function and cost parameters specific to the multiproduct flexible technology and to the product dedicated technologies) and on the observability conditions of technologies prevailing in the industry. We show that better observability of technological choices tends to promote the adoption of more flexible technologies. Our main results are as follows. First, the dedicated equilibria are more likely under unobservability that under observability while dedicated and flexible equilibria are equally probable under the both observability conditions. Second, the existence of better substitutes promotes dedicated configurations. Third, mixed configurations never emerge under observability provided that the goods are not too strong substitutes. Fourth, both types of equilibria exist for some parameter values whatever the observability conditions. Fifth, the firms would always earn higher profits in dedicated configurations than in flexible configurations; thus, if a flexible equilibrium emerges, a fortiori if it is the only equilibrium, as it is the case for some values of the parameters, this equilibrium is a flexibility trap.