Blockchain’s Struggle to Deliver Impersonal Exchange

Benito Arruñada (Pompeu Fabra University)

Abstract : With its decentralized peer-to-peer structure, application of the blockchain technology underpinning Bitcoin holds the promise of making impersonal exchange possible for all types of old and new transactions in all types of markets. Such theoretical promise is examined here by identifying what value blockchain adds to the contractual process, exploring its contractual potential and analyzing the main difficulties it is facing. The article argues that blockchain applications will evolve towards dual structures separating causal and formal transactions. Contrary to naive conceptions that proclaim the end of intermediaries and state involvement, such applications will rely on a variety of interface and enforcement specialists, including standard public interventions, especially for property transactions. Without these interventions, blockchain will at most work as an in personam—instead of as an in rem—system, therefore facilitating mere personal instead of impersonal transactions.

Vertical Integration and Downstream Collusion

Sara Biancini (CREM, Universite de Caen)
David Ettinger (LEDa and CEREMADE, Université Paris-Dauphine, PSL)

Abstract : We investigate the effect of a vertical merger on downstream firms' ability to collude in a repeated game framework. We show that a vertical merger has two main effects. On the one hand, it increases the total collusive profits, increasing the stakes of collusion. On the other hand, it creates an asymmetry between the integrated firm and the unintegrated competitors. The integrated firm, accessing the input at marginal cost, faces higher profits in the deviation phase and in the non cooperative equilibrium, which potentially harms collusion. As we show, the optimal collusive profit-sharing agreement takes care of the increased incentive to deviate of the integrated firm, while optimal punishment erases the difficulty related to the asymmetries in the non cooperative state. As a result, vertical integration generally favors collusion.

Promoting a Reputation for Quality

Daniel N. Hauser (University of Pennsylvania)

Abstract : A firm builds its reputation not only by investing in the quality of its products, but also by controlling the information consumers observe. I consider a model in which a firm invests in both product quality and a costly signaling technology in order to build its reputation, defined as the market's belief that its quality is high. The signaling technology influences the rate at which consumers’ receive information about quality: the firm can either promote, which increases the arrival rate of signals when quality is high, or censor, which decreases the arrival rate of signals when quality is low. I study how the firm's incentives to build quality and to signal depend on its reputation and current quality. Whether the firm promotes or censors plays a key role in the structure of equilibria. Promotion and investment in quality are complements: the firm has a stronger incentive to build quality when the promotion level is high. Costly promotion can, however, reduce the firm's incentive to build quality as higher quality will lead to higher promotion expenses; this effect persists even as the cost of building quality approaches zero. Censorship and investment in quality are substitutes. The ability to censor can destroy a firm's incentives to invest in quality, because instead of building quality a firm may simply opt to reduce information about low quality products.

The Left Parties Choices and the Emergence of the Far Right

Maria Snegovaya (Columbia University)

Abstract : I look at the choices made by the ex-Communist left parties following the collapse of the Communist system in the Vyshegard-4 countries. By focusing on the cases of Hungary and Czech Republic I show that where the the left parties chose to move to the center of the economic scale (to become more of a typical western Social democratic party), as in Hungary, the left party discredited itself in the eyes of its traditional constituency (workers, lower middle class), a constituency which was ultimately incorporated by the far right parties. Hence in such countries the far right parties are strong. In the countries where the ex-Communist party preserved their more traditional radical left agenda, as in Czech Republic, it was partly able to retain its traditional workers constituency and in such countries the far right is weak. I prove my argument on the series of experimental and regular surveys within the two countries. On the cross-countries level I show that the far right tends to become more electorally successful in countries where it is able to embrace the economic redistributionist agenda due to the absence of a strong far left competitor. My argument contributes to the understanding of the dynamics of political systems, and the rise of the right populist parties in Europe.