Etienne Billette de Villemeur

Optimal Pricing and Price-Cap Regulation in the Postal Sector

This paper studies the optimal price structure in the postal sector when worksharing is available (e.g., for collection, sorting and transportation) and when the operator faces a break-even constraint. Users differ in opportunity and cost to engage in worksharing. We determine the optimal worksharing discount and provide sufficient conditions (on demand functions) under which it exceeds the ECPR level. Furthermore, we show that the optimal prices can be implemented through a global price cap imposed on a weighted average of the prices of all products. The appropriate weights are proportional to the market demand (evaluated at optimal prices) of the corresponding products.

Access and (Non-)Uniform Pricing in the Postal Sector"

The provision of access and its pricing have been extensively studied for a variety of network industries, including the telecommunications and energy sectors.1 It has received less attention in the postal economics literature. While there exist some studies (see e.g., (1995, 1997)) and, more recently, Crew and Kleindorfer (2002)) a number of issues remain open or have received only partial solutions. On the policy side, however, the appropriate pricing of access appears to occupy a prominent role in the current regulatory debate. Consequently, an in depth study of the underlying issues is of crucial importance. In particular, there is a need for simple and intuitive pricing rules which though possibly relying on restrictive assumptions may provide the required qualitative arguments in the debate. Our aim is to move forward in that direction. To do so, we consider a setting which is sufficiently simple to keep the analysis tractable while capturing some essential stylized facts from the postal sector. We would like to thank Philippe De Donder for his insightful comments and suggestions. The views expressed in this paper are those of the authors and do not necessarily reflect the views of La Poste.

Pricing and Worksharing Discounts in the Postal Sector

This paper builds on Billette de Villemeur et al. (2002) to study optimal pricing and price regulation in the postal sector.1 Specifically, it studies the appropriate structure of worksharing discounts and its decentralization through price cap regulation. The model relies on a styled representation of the postal sector, with two activities (e.g. distribution and a composite activity) and a single operator.2 There are two types of clients and two different products. Households consume single piece mail which uses the entire network. Firms differ in their cost of preparing (worksharing) mail; depending on this cost and on the pricing structure of the operator they may or may not engage in worksharing.

The design of new antidepressants: can formal models help? A first attempt using a model of the hippocampal control over the HPA-axis based on a review from the literature.

Research in the field of depression and antidepressants is hampered by the lack of relevant endpoints. The two most promising targets in this area are hypothalamus–pituitary–adrenal axis dysfunction and defects in hippocampal function. However, there is no available model aimed at providing a relevant description of the relationship of these two endpoints and of their relevance for major depression. Formal models have been used to model biological functions, but few applications have been developed in the field of biological psychiatry and psychopharmacology. Here, we use formal models to integrate the hippocampal and the hypothalamus–pituitary–adrenal dysfunctions in relationship to major depression and antidepressant action. Even if our proposal is an oversimplification, this model generates predictions for the discovery of new pharmacological targets that might be helpful in designing treatments for the future.

Sharing the Cost of Global Warming

Due to meteorological factors, the distribution of the environmental damage due to climate change bears no relationship to that of global emissions. We argue in favor of offsetting this discrepancy, and propose a “global insurance scheme” to be financed according to countries’ responsibility for climate change. Because GHG decay very slowly, we argue that the actual burden of global warming should be shared on the basis of cumulated emissions, rather than sharing the expected costs of actual emissions as in a Pigovian taxation scheme. We characterize new versions of two well-known cost-sharing schemes by adapting the responsibility theory of Bossert and Fleurbaey (1996) to a context with externalities.

Latent variables and the network perspective

We discuss the latent variables construct, particularly in regard to the following: that latent variables are considered as the sole explanatory factor of a disorder; that pragmatic concerns are ignored; and that the relationship of these variables to biological markers is not addressed. Further, we comment on the relationship between bridge symptoms and causality, and discuss the proposal in relationship to other constructs (endophenotypes, connectionist-inspired networks).

Worksharing: A Calibrated Model

This paper studies the price structure in a postal sector with a monopolistic operator when customers can engage in worksharing. It presents simulation results obtained from an empirical model that is calibrated on data from the French postal sector. The optimal worksharing discount is significantly larger than the avoided costs. Consequently, the appropriate pricing structure differs markedly from the often recommended ECPR policy.

One Lab, Two Firms, Many Possibilities: on R&D outsourcing in the biopharmaceutical industry

We draw from documented characteristics of the biopharmaceutical industry to construct a model where two �?rms can choose to outsource R&D to an external unit, and/or engage in internal R&D, before competing in a �?nal market. We investigate the distribution of pro�?ts among market participants, and the incentives to coordinate outsourcing activities or to integrate R&D and production. Consistent with the empirical evidence, we �?nd that the sign and magnitude of an aggregate measure of direct (inter-�?rm) and indirect (through the external unit) technological externalities drives the distribution of industry pro�?ts, with higher returns to the external unit when involved in development (clinical trials) than in early-stage research (drug discovery). In the latter case, the delinkage of investment incentives from industry value, together with the ability of �?rms to transfer risks to the external unit, imply a vulnerability of early-stage investors’ returns to negative shocks, and the likely abandonment of projects with economic and medical value. We also �?nd that competition in the equity market makes a buyout by one of the two �?rms more pro�?table to a research biotech than to a clinical services unit, and can stimulate early-stage investments. However, this long-term incentive can be minimal, notably if the superior ef�?ciency of outsourced operations originates from economies of scope that can hardly be exploited when a �?rm takes control of the external unit exclusively for itself. R&D outsourcing thus does not always qualify as a relevant pathway to address the declining productivity in innovation that has characterized the industry over several decades.

Winner-take-all, take-most or pay-some? Optimal protection of innovation in a dynamic model of product development

In a model of investment in product development in duopoly we study the implications of different costs of innovating and imitating for firm strategies and optimal IP protection, relating these to the dynamic characteristics of a stochastic demand. A critical relative cost is identified that determines whether strategic competition takes the form of attrition or preemption, with industry value being maximized when firms neither stall nor hasten entry. Provided that demand growth and volatility are sufficiently low, as typically arises in mature industries, it is socially desirable to provide innovators with complete protection (winner-take-all), implying a preemption race. But when demand is rapidly expanding and highly unpredictable a social optimum can involve a low level of protection, implying attrition, albeit with a positive lower bound for the optimal level of imitation cost (winner-pays-some). Industry profits increase if firms can commit not to seek stronger IP protection once they have innovated, providing a rationale for open standards. While buyouts have ambiguous welfare effects, simple licensing schemes are welfare improving.We study innovation timing and socially optimal intellectual property rights (IPRs) when firms facing market uncertainty invest strategically in product development. If demand growth and volatility are high, attrition occurs and IPRs should ensure the cost of imitation attains a lower bound we identify. If demand growth and volatility are low then provided that entry is business-stealing, IPRs should set the cost of imitation high enough to induce preemption, and possibly winner-take-all preemption. Moreover, the welfare achieved with optimal IPRs is greater with endogenous innovation than if firm roles are predetermined, illustrating the importance of fostering dynamic competition. In extensions we show that firms benefit from open standards, that takeovers have ambiguous welfare effects and that simple licensing schemes are welfare improving.

Accounting for Needs in Cost Sharing

Abstract We introduce basic needs in cost-sharing problems so that agents with higher needs are not penalized, all the while holding them responsible for their consumption. We characterize axiomatically two families of cost-sharing rules, each favoring one aspect—compensation or responsibility—over the other. We also identify specific variants of those rules that protect small users from the cost externality imposed by larger users. Lastly, we show how one can implement these schemes with realistic informational assumptions; i.e., without making explicit interpersonal comparisons of needs and consumption.