Vives, X. (Xavier)
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- Strategic complementarity in games(Elsevier, 2024-05-30) Vravosinos, O. (Orestis); Vives, X. (Xavier)The lattice-theoretic approach has had a significant impact in all fields of economics, being progressively incorporated into the standard toolbox. This paper presents a selective survey with an emphasis on basic tools, some important results, and applications in industrial organization, dynamic games, games of incomplete information, and mechanism design. Frontier theoretical research employing lattice-theoretic methods continues to be developed in areas such as mean-field games and information design.
- Costly interpretation of asset prices(INFORMS, 2021-02-12) Mondria, J. (Jordi); Vives, X. (Xavier); Yang, L. (Liyan)We propose a model in which investors cannot costlessly process information from asset prices. At the trading stage, investors are boundedly rational, and their interpretation of prices injects noise into the price, generating a source of endogenous noise trading. Our setup predicts price momentum and yields excessive return volatility and excessive trading volume. In an overall equilibrium, investors optimally choose sophistication levels by balancing the benefit of beating the market against the cost of acquiring sophistication. There can exist strategic complementarity in sophistication acquisition, leading to multiple equilibria.
- Market power and welfare in asymmetric divisible good auctions(Econometric Society, 2021-07-26) Manzano, C. (Carolina); Vives, X. (Xavier)We analyze a divisible good uniform-price auction that features two groups, each with a finite number of identical bidders, who compete in demand schedules. In the linear-quadratic-normal framework, this paper presents conditions under which the unique equilibrium in linear demands exists and derives novel comparative statics results that highlight the interaction between payoff and information parameters with asymmetric groups. We find that the strategic complementarity in the slopes of traders' demands is reinforced by inference effects from prices, and we display the role of payoff and information asymmetries in explaining deadweight losses. Furthermore, price impact and the deadweight loss need not move together, and market integration may reduce welfare. The results are consistent with the available empirical evidence.
- Common ownership, market power, and innovation(2020) Vives, X. (Xavier)examine the effects of overlapping ownership on market power when there are external effects across firms. This is done in an oligopoly model with cost-reducing innovation with technological spillovers where firms have an overlapping ownership structure based largely on López and Vives (2019). The model allows for Cournot competition with homogeneous product and for Bertrand with differentiated products as well as for strategic effects of R&D investment. It derives positive testable implications and normative results to inform policy
- Overlapping Ownership, R&D Spillovers, and Antitrust Policy(The University of Chicago Press, 2019-08-08) Vives, X. (Xavier); López, A. (Andrés)This paper considers cost-reducing R&D investment with spillovers in a Cournot oligopoly with overlapping ownership. We show that overlapping ownership leads to internalization of rivals’ profits by firms and find that, for demand not too convex, increases in overlapping ownership increase (decrease) R&D and output for high (low) enough spillovers while they increase R&D but decrease output for intermediate levels of spillovers. There is scope for overlapping ownership to improve welfare and consumer surplus, provided that spillovers are sufficiently large. The results obtained are robust when R&D has commitment value and in a Bertrand oligopoly model with product differentiation.
- General equilibrium oligopoly and ownership structure(Econometric Society, 2021-05) Azar, J. (José); Vives, X. (Xavier)We develop a tractable general equilibrium framework in which firms are large and have market power with respect to both products and labor, and in which a firm's decisions are affected by its ownership structure. We characterize the Cournot–Walras equilibrium of an economy where each firm maximizes a share‐weighted average of shareholder utilities—rendering the equilibrium independent of price normalization. In a one‐sector economy, if returns to scale are non‐increasing, then an increase in “effective” market concentration (which accounts for common ownership) leads to declines in employment, real wages, and the labor share. Yet when there are multiple sectors, due to an intersectoral pecuniary externality, an increase in common ownership could stimulate the economy when the elasticity of labor supply is high relative to the elasticity of substitution in product markets. We characterize for which ownership structures the monopolistically competitive limit or an oligopolistic one is attained as the number of sectors in the economy increases. When firms have heterogeneous constant returns to scale technologies, we find that an increase in common ownership leads to markets that are more concentrated.