Economie institutionnelle

Economic institutions (02/10/17)

Institutions:

Decisions about investment in another country:

Market survey:

• size
• competitors (how many)
• market development
• prices/profitability
• existing infrastructure

institutions: is the country a safe place for an investor?

• Political stability/ democracy
• Rule of law

Decisions on contracts:

Do we need a short term or a long-term contract for a given transaction? [pic 3]

Ex                                    Coal[pic 4][pic 5]

[pic 6]

                                             $

• Market exchange
• 1-year contracts
• 50-year contracts

Lecture recommandée : Stéphan SAUSSIER et Anne YVRANDE-BILLON Economie des coûts de transaction ; collection repères, la découverte

Chapter 1: Analyzing institutions in a changing landscape

• Definition of Douglass North

“institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction” (1990)

• Institutions          Organisations[pic 7]

“Institutions can be considered the rules of the game and organizations can be considered the players. The purpose of the rules is to define the way that the game is played.”

Section 1: Transformation of the economical and political “game”

Current changes in the rules of the game are:

• Economical
• Political
• Regulatory
• Technological
• Business

Section 2: The perspective of institutional analysis

v-tableau dropbox

Chapter 2: the economic analysis of contracts. The example of public-private-partnerships

(The velib case: 11/10/17

1. Imperfections in the initial contract?

• About how quality is evaluated and about calculation of penalties
• Should be based on measurable data and easy to verify for the municipality
• Penalties too high
• Under estimation of vandalism (couldn’t be anticipated)

Opportunism of SOMUPI?

• We don’t know for sure
• But there is clearly an information asymmetry

Winner’s curse (malediction du vainqueur); renegotiations

Optimism bias in initial contract

This kind of contract is incomplete:

• Many decisions need to be taken in the implementation phase
• This kind of contracts is often renegotiated ex: municipality pays if bikes are stolen or destroyed.

1. What improvements?

Winners:

• SOMUFI gets 400€ per destroyed bikes
• SOMUFI keeps its informational advantages

Losers:

• Municipality will not receive the penalties
• Municipality still unable to verify information on quality

Incomplete contract:

• Doesn’t specify all possible contingencies
• Incomplete contract need to be completed later (during the implementation phase)

5) motivation of the firm; incentives= incitations

Negative incentives= penalties; positive incentives= bonuses

Ex: a bonus for: additional users, user’s satisfaction, quality

Or create new obligations; ex: to improve the technical regulation, to improve the availability of bicycles: in certain areas; during the night

...