Raymond Leban

The firm's investment and employment policy through a business cycle

Abstract The paper studies with the help of a model the investment and employment policy through a business cycle for a firm which maximizes its discounted income and assumes that the forecasts are perfectly correct. In addition to investment and wages costs, the firm has to bear recruitment and firing costs; it has at its disposal four control variables: the selling price, the recruitment rate, the firing rate and the investment rate. The firms strategy appears to be generally a sequence of elementary policies. This sequence highly depends on the relative values of parameters like the rate of depreciation of equipment, the natural rate of decrease of employment, the ratio of the unit recruitment and firing cost with respect to the wage rate, the rate of decrease of demand during recession. The results obtained are, on the whole, quite consistent with the behaviours which have been observed in the last years, and explain some of the features of recessions.

Employment and wage strategies of the firm over a business cycle

Abstract By using control theory, we analyze the behaviour of a firm which expects a demand cycle and occupies a monopsonistic position on the labour market. Consequently, the relative wage rate is used as a tool for regulating the flow of applicants and the rate of quits of employees. The dynamic wage policy is governed by the demand trend but the marginal propensity of workers to quit and the level of hiring costs are also relevant factors in setting the wage rate. The recession period is characterized by a relative wage decrease associated with voluntary quits rather than firing. However, the wage rate starts increasing when demand is still declining and labour hoarded.

Adaptive strategies of the firm through a business cycle

Abstract The paper examines the behaviour of a profit-maximizing firm which forecasts a recession and which has at its disposal to regulate its level of equipment and its level of employment three control variables (investment, recruitment, firing), the selling price being held constant. It shows that (i) the expectation of a recession by a firm is enough to launch a real recession in the demand for production factors (equipment and recruitment); (ii) by comparison with a situation in which the firm may manipulate the selling price, price rigidities imply the occurrence of excess capacity — in addition, they do not allow the firm to delay firing and induce a stronger irregularity in recruitment and firing, and (iii) depending on the characteristics of the firm and of the environment a unique model is compatible with a whole variety of behavioural patterns.

Competition and regulation in Europe's network industries from theoretical approach to sectorial application

Abstract The European debate on the role that competition should play in network industries has aroused three interlinked concerns. The first is with the design of a new industrial organization: under what forms can competition through network opening actually enhance efficiency in the sectors involved? The second is with sector mission and mandate other than efficiency: what values might public authorities wish to instil in sector enterprises, and what are their chances of doing so given different industrial designs and the nature of European Union institutions? The third is with the mode of regulation: how should regulatory authorities intervene in the sectors, and how effective can their action be under the different organizational schemes envisioned? The paper proposes an analytic framework to deal with those issues simultaneously. It tries to show the value of conducting precise sectoral analyses when competition is to be defined in concrete terms and fully applies this principle to the electricity sector.

Building a European electricity market: Some lessons from recent US and European experience

Abstract As a result of moves towards building a ‘single market’, a debate has arisen in Europe over the opportunity of instituting ‘generalized competition’ in the electricity sector by providing third party access to the network. A similar debate occurred in the USA during the 1980s, following the energy crisis. This paper attempts to explain why the Americans have until now refused to open-up networks, and, after slightly deregulating wholesale transactions, undertaken to develop a form of ‘regulated competition’ involving new actors at the generation stage, which is seemingly compatible with the traditional organization of the sector. The paper then briefly analyses the evolution of European systems over the period under review and suggests, in the light of the US experiment, that it would be worthwhile studying carefully the same competition pattern for Europe.