Papers by Mondello Gerard
European Journal of Law and Economics
This paper analyzes the impact of strict liability on imperfect competition and shows first that ... more This paper analyzes the impact of strict liability on imperfect competition and shows first that it is not an obstacle to achieving a socially optimal level of care. Second, this result is compromised when firms face a scarce generic asset. Under this asset limitation, this paper shows that competition (here a Cournot-Nash duopoly) leads to a lower level of prevention even if more product at lower price is supplied at the equilibrium. Introducing standards linked to operating permits improves the economy's safety level but may lead firms to exit.
This article highlights the importance of the use of credible and non-credible threats. Its main ... more This article highlights the importance of the use of credible and non-credible threats. Its main lesson is that cooperation is even stronger when based on long-term relationships which makes failures implausible. It reasonably well describes the relationships that exist between the Russian Federation and China (players 1 and 3), player 2 for example being Europe. Obviously, one may object that the United States are missing from the picture. In fact, adding a fourth partner would not have changed the global framework of the game but would have add in complexity. All in all, international relationsships analysis can usefully be studied in terms of classical game theory. However, this approach needs adaptations of standard game theory. Indeed, t these games are sequential and they mainly accept pure strategies as solution of the game but not mixed strategies which are non sense in this context. However, mixed strategies can be conceived in the cases of armed conflict. To conclude, even...
This article is an attempt to reassess the relationships between the strict liability regime and ... more This article is an attempt to reassess the relationships between the strict liability regime and the negligence rule under radical uncertainty (ambiguity theory). In an accident model two representative agents (potential injurer and victim) form divergent beliefs about the probability distribution of an accident and the potential damage scale. It issues on the following results: 1) When the injurer's wealth cover the damage cost, then the socially first-best level of care is established by the injurer under strict liability only. When, the injurer's wealth is insufficient, this level is not reach (capped strict liability regime for instance). 2) Under negligence, the authorities (Regulator or Court) can choose as first best level of care either the level that favors the injurer's interests or the victim ones of. No rational rule can justify a choice rather than the other. 3) The efficiency of both regimes cannot be compared because they obey to different logics.
Abstract: This paper reviews the foundations of the unilateral standard accident model under Knig... more Abstract: This paper reviews the foundations of the unilateral standard accident model under Knightian uncertainty. It extends the Teitelbaum (2007)’s seminal article (who introduces radical uncertainty) by expanding it from producers to victims and from the probability distribution of accidents to the scale of damage. Mainly, it also considers a regulator who aggregates the agents’ preferences (Neghisi (1960) type). Under the condition that the troublemakers’ resources are sufficient to cover the damage, the article shows that uncertainty does not preclude, first, the determination of a socially optimal level of care, and second, whatever the civil liability regime (strict liability or negligence) it shows that they determine the same level of socially first-best care. The solution is inefficient only when the polluter’s wealth is insufficient to repair the victim’s losses.
Sciences Po publications, 2018
This paper extends the basic unilateral accident model to allow for Cournot competition. Two firm... more This paper extends the basic unilateral accident model to allow for Cournot competition. Two firms compete with production input and prevention as strategic variables under asymmetric capacity constraints. We find that liability regimes exert a crucial influence on the equilibrium price and outputs. Strict liability leads to higher output and higher risk compared to negligence. We also study the conditions under which both regimes converge.
This paper extends the basic unilateral accident model to allow for Cournot competition. Two firm... more This paper extends the basic unilateral accident model to allow for Cournot competition. Two firms compete with production input and prevention as strategic variables under asymmetric capacity constraints. We find that liability regimes exert a crucial influence on the equilibrium price and outputs. Strict liability leads to higher output and higher risk compared to negligence. We also study the conditions under which both regimes converge.
While in this twenty-first Century (XXIe), questions are rising about the banking system governan... more While in this twenty-first Century (XXIe), questions are rising about the banking system governance and the "post-crisis governance reforms", it is useful to revisit the founding debates of the governance of the twentieth century (XXe). In this area, traditionally, we follow Berle and Means (1932) by tracing separation between shareholders and managers. However, Adam Smith’s banking system view already highlighted the importance of strategic choice of bank executives (risk) in the emergence of crisis phenomena. These strategic choices refer to the relationship between shareholders and managers. From his analysis, one can safely conclude that the way in which ‘Ayr’ bank is managed, that is the role of its governance, constitutes a key determinant of the excessive risk and the fragility of this bank. Specifically, we show that the dispersed Ayr bank’s ownership structure, the asymmetric information between Board and Shareholders and the lack of directors expertise and indepe...
This paper applies to adverse selection theory the advances made in the field of ambiguity theory... more This paper applies to adverse selection theory the advances made in the field of ambiguity theory. It shows that i) a relevant second-best contract induces no production distortion considering the efficient agent as in the standard case. But the principal has to pay a higher information rent compared to the standard case; ii) This is due to the level of transfer paid to the inefficient agent which is higher than under the complete information system. The above results are reached when the agent has neither fully optimistic nor optimistic beliefs. When, he feels an extreme feeling then, the information rent and second best transfers are inside bounds similar to the SEU case; iv) as a consequence, the principal has to adopt a flexible behavior consisting in acquiring new information for becoming either entirely optimistic or pessimistic to minimize transfers and information rent in the proposed delegation contract.
SSRN Electronic Journal, 2016
Until now, most of the growing climate legal litigations mainly concern environmental association... more Until now, most of the growing climate legal litigations mainly concern environmental associations or victims against energy of energy-users firms or States. However, in a near future, because of exacerbating sudden floods linked to climate change, future litigations could (will) concern infrastructure governance versus private companies. Indeed, sues would (will) concern the financial losses these last ones would (will) endure because the infrastructure managers did not made convenient protection choices in due time. This paper particularly investigates the case of coastal airports at the European level. It insists on the importance of climate scientists divergent opinions about the sea level rise and its consequences for decision-takers concerning their potential legal liability for negligence.
Energy Economics, 2015
Starting from the standard analysis of accident theory, this paper shows that determining the fir... more Starting from the standard analysis of accident theory, this paper shows that determining the first-best level of care of ultra-hazardous activities also involves determining the best industrial structure. The analysis assesses the impact of the civil nuclear liability on the organization of given electro-nuclear parks. The object is to know whether these liability rules induce horizontally concentrating the management of nuclear industry or not. In a model extended from two to n plants, we show that the institutional conditions (cap on the operator's liability and the insurance compensation) play a fundamental role in the inducement to centralize or not this management. Hence, a priori, no organization framework is more efficient than the other one.
This paper is an attempt to show how may be linked an interdisciplinary assessment of the impact ... more This paper is an attempt to show how may be linked an interdisciplinary assessment of the impact of Tsunami between geophysical approaches and economics. It aims at showing how should be avoided preconceived ideas of what should be a tsunami from an economic viewpoint. Consequently, this paper is a cautious attempt to bring together physical data and scientific laws and economic approach is so as to build an economic assessment of coastal infrastructure under the threat of catastrophic events as Tsunami. This step is essential to assess how much financial means should be devoted to prevention. We have focused the analysis to the probabilistic part of the analysis, however, this study has to be extended to the Geographical Information System of the considered coastal area to take fully into account the potential impact of a Tsunami. However, once the methodology is clearly expressed it may be extended to other natural hazards as floods, storms, etc. In spite of its apparently applied concerns, the whole approach is quite theoretical because it needs a reappraisal of the real option theory to the case of extreme events.
L'Actualité économique, 2012
Indéniablement, les bailleurs de fonds exercent une responsabilité environnementale par les prêts... more Indéniablement, les bailleurs de fonds exercent une responsabilité environnementale par les prêts qu’ils accordent aux activités risquées. Cependant, en 1996, les amendements apportés à la loi CERCLA ont exempté les prêteurs d’une grande part de leur responsabilité. Cet article montre que cette situation tend à devenir pérenne ce qui pose la question de la normativité de la littérature économique contemporaine consacrée à la responsabilisation des prêteurs. Pour mettre fin au hiatus entre la « pratique » qui exonère les financeurs de responsabilité et la théorie qui la prend pour acquise, il est proposé d’introduire une responsabilité pour faute pour les prêteurs qui ne contrôleraient pas le respect des règles environnementales des opérateurs. Les bailleurs de fond joueraient alors le rôle de principal en permettant de déterminer le montant d’effort de sécurité le plus élevé possible.
SSRN Electronic Journal, 2012
This paper analyzes the difficulties of comparing the respective effectiveness of two among the m... more This paper analyzes the difficulties of comparing the respective effectiveness of two among the most important liability regimes in tort law: rule of negligence and strict liability. Starting from the standard Shavellian unilateral accident scheme, I show that matching up liability regime on their capacity to provide the highest level of safety is ineffective. This demonstration lies on two components. The first one gathers some results drawn from literature that introduces uncertainty. The second one takes into consideration the beliefs of agents and their aversion to ambiguity. The model applies uncertainty to the level of maximum damage. This demonstration reinforces the previous result. Hence, both regimes apply on specific tort question and comparing their individual efficiency needs to call for other components as the transaction costs associated to the burden of evidence, the fairness between victims and injurers, etc.
SSRN Electronic Journal, 2013
This paper analyzes the meaning of comparing the economic performance of strict liability and neg... more This paper analyzes the meaning of comparing the economic performance of strict liability and negligence rule in a unilateral standard accident model under Knightian uncertainty. It focuses on the cost expectation of major harm on which the injurers form beliefs. It shows first that, when the Court agree with the regulator, whatever the liability regime, the first best level of care is never reached but under both regimes the tortfeasors define the same level of care. Second, when, judge and regulator disagree, it is impossible to discriminate among liability standards because the issue depends on the injurer's optimism degree.
Revue économique, 1990
ABSTRACT
Revue économique, 1985
Cet article compare les systèmes de Keynes et du Banking Principle ; trois thèmes étroitement lié... more Cet article compare les systèmes de Keynes et du Banking Principle ; trois thèmes étroitement liés sont abordés : les théories de la monnaie, du revenu et de la demande effective. Ainsi, contrairement aux approches traditionnelles, monnaie externe et monnaie interne ne sont pas juxtaposées mais interdépendantes. La monnaie de banque, monnaie de crédit, est utilisée par les entreprises afin de rémunérer les facteurs et acheter les biens de production ; cette monnaie est soumise à la loi du reflux, lequel est constitué des recettes des entreprises qui, ultimement, correspondent à la dépense du revenu monétaire, tandis que la monnaie externe (Banque centrale) solde les déficits. L'analyse de Tooke montre que la liaison demande effective (formation du revenu) et système de financement enrichit considérablement l'explication du processus de la formation de la production courante.
Sciences Po publications, 2016
This article extends the unilateral accident standard model to allow for Cournot competition. Ass... more This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. However, whatever the current regime, competition leads to lower the global safety level of industry. Indeed, the stronger firm may benefit from safety rents, which they may use to increase production rather that maintaining a high level of safety.
Journal of Applied Economics
The problem that we address in this paper stems from the trend to delegation in the water managem... more The problem that we address in this paper stems from the trend to delegation in the water management field. It refers to the municipality's negotiating disadvantage in the face of cartelized water management firms that makes delegation, once undertaken, virtually irreversible. We show why the characteristics of the delegation auction render is useless as a tool for collective welfare maximization. We also show that the remaining tool for achieving collective welfare maximization, i.e. the municipality's right to revoke delegation and return to direct management, is also ineffective due to a lack of credibility that is essentially financial in nature. Thus, if the credibility of revocation could be restored, the municipality's bargaining power could also be restored. Using standard methods of stochastic calculus, we model the municipality's right of revocation as a call option held by the municipality. We show that the key variable for the value of this option, and thus for the municipality's position, is the exercise price, which is partly determined by objective economic criteria and partly by legal and institutional conventions. We show that community welfare maximisation occurs at the point where the exercise price is determined exclusively by objective economic criteria. Since the delegated firm as a simple agent has the right to abrogate the contract if delegation becomes unprofitable, we then model this right as a put option held by the firm. Its value also depends to a large extent on the exercise price, which is partly determined by objective economic criteria and partly by legal and institutional conventions. Combining the exercise points of the two options enables us to determine the 33 (0)4 93 95 42 28, Fax : 33 (0)4 93 65 37 98; email : [email protected].
In this paper we suggest a framework to interpret the transaction costs concept. We consider tran... more In this paper we suggest a framework to interpret the transaction costs concept. We consider transaction costs as the resource losses due to imperfect information. We relate the concept of transaction costs to the nature of information. According to the information set it belongs to, an information may be redundant or complementary. As a consequence, transaction costs will be different. We have applied this notion of transaction costs to the credit market taking into account the nature of information. We consider a large population of borrowers and lenders who, matching randomly, may or may not incur information costs. These costs may have a positive effect on the probability of success of the project. We emphasize that upon the nature of information, the lenders as the borrowers may behave strategically in order to minimize the transaction cost losses.
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Papers by Mondello Gerard