Felipe Balmaceda

Asymmetric Dynamic Pricing in a Local Gasoline Retail Market

Asymmetric-price adjustment is a common phenomenon in many markets around the world, particularly in retail gasoline markets. This paper studies the existence of this phenomenon in the retail gasoline market in the city of Santiago, Chile, using a data set of weekly gas station prices that covers a period of almost four years. We found that prices adjust asymmetrically, and the asymmetry is different for branded gas stations and unbranded stations. In addition, we found that the asymmetry for high-margin stations is statistically equivalent to that for low-margin stations. This evidence is suggestive of collusion as a rationale for the asymmetric pricing policy observed.

Firm‐Sponsored General Training

This article analyzes firm and worker’s incentives to invest in general and specific training when these are separable in the production technology and wages are determined by the outside‐option principle. It is shown that firms pay for general training, while workers receive the full return on it, and firms and workers share both the costs and benefits of specific training. The case of delayed general training is also studied. When general training is delayed, it is shown that the strategic complementarity between specific and general training increases the worker’s incentives to invest in specific training.

Optimal task assignments

This paper studies optimal task assignments in a risk neutral principal-agent model in which agents are compensated according to an aggregated performance measure. The main trade-off is one in which specialization allows the implementation of any possible effort profile, while multitasking constraint the set of implementable effort profiles. Yet, the implementation of any effort profile in this set is less expensive than the equivalent profile under specialization. The principal prefers multitasking to specialization except when tasks are complements and the output after success is small enough so that it is not second-best optimal to implement high effort in each task. This result is robust to several extensions such as the existence of multiple performance measures.

The cost of moral hazard and limited liability in the principal-agent problem

In the classical principal-agent problem, a principal hires an agent to perform a task. The principal cares about the tasks output but has no control over it. The agent can perform the task at different effort intensities, and that choice affects the tasks output. To provide an incentive to the agent to work hard and since his effort intensity cannot be observed, the principal ties the agents compensation to the tasks output. If both the principal and the agent are risk-neutral and no further constraints are imposed, it is well-known that the outcome of the game maximizes social welfare. In this paper we quantify the potential social-welfare loss due to the existence of limited liability, which takes the form of a minimum wage constraint. To do so we rely on the worst-case welfare loss--commonly referred to as the Price of Anarchy--which quantifies the (in)efficiency of a system when its players act selfishly (i.e., they play a Nash equilibrium) versus choosing a socially-optimal solution. Our main result establishes that under the monotone likelihood-ratio property and limited liability constraints, the worst-case welfare loss in the principal-agent model is exactly equal to the number of efforts available.

Task-Specific Training and Job Design

This paper provides a simple theoretical framework based on a new type of human capital introduced by Gibbons and Waldman (2004), called task-specific training, to understand job design. Mainly, in the presence of task-specific training, promotions might result ex-post in the underutilization of human capital and thus firms at the time of designing jobs should attempt to diversify this risk.

Vertical Integration and Shared Facilities in Unregulated Industries

I this paper we consider a market situation in which initially there is an unintegrated monopoly upstream entry and vertical integration. The equilibrium entry mode -sharing the incumbent facility or building a new facility- is derived as well as the equilibrium market structure. Several policy prescriptions are set forth.

Cooperation and Network Formation

The present paper proposes a simple model for studying the interplay between self-enforcing cooperation and network formation. In particular, the model provides an answer to the ancient question of how cooperative behavior emerges in different communities and how the possibility of behaving cooperatively shapes the social structure of a community. In a sense, I provide an explanation of how trust, by which I mean the existence of self-sustainable cooperation, can emerge in a society and how the society is shaped by third-party enforcement.

Mergers and CEO Power

I propose a model of mergers in which synergies and CEO power play a crucial role. A merger is modeled as a bargaining game between the acquiring and the target board of directors, with the gains from a merger divided according to the generalized Nash bargaining solution. The models implications are consistent with the available empirical evidence on stock returns, and yield some new untested implications that are mainly related to the relationship between CEO power, corporate governance, and mergers. Finally, the model sheds light on the relationship between aggregate merger activity, synergies, and CEO power.

Endogenous Cooperative Networks: Social Capital and the Small-World Property

This paper shows that the relationship between social networks and cooperative trading is a two-way street. The possibility of cooperative trading enforced by third-party sanctions provides players with incentives to form costly links, and investing in costly links increases the power of third-party enforcement. In other words, the fact that trading is embedded in the social structure provides players with incentives to form costly links to internalize network externalities that arise from the fact that the structure of the network determines the interaction pattern and the information flows between players The paper also formalizes in game theoretic terms, the insight of Colemans concerning the importance of closure for the emergence of cooperative behavior and explains how and why closure emerges. Based on this a formal definition of social capital is advanced, and it is shown that pair-wise equilibrium networks have the small-world property.

Strategy and Structure: A Repeated Game Approach

According to Williamson (1975), a divisionalized and fully decentralized structure, the so called M-form, is the optimal structure via which firms that pursue diversification gain economic benefits from internalizing transactions. However, empirical evidence shows that a centralized, multi-divisional structure, the so called CM-Form, is the optimal structure when related diversification is the objective, while the M-form is optimal when seeking unrelated diversification. This paper proposes a repeated game model to study the link between strategy and structure. The main prediction of the model is that a related strategy is, overall, better served by a centralized structure, while an unrelated strategy is better served by a decentralized structure.