Chloé Le Coq

This paper investigates how business cycles and interest rate fluctuations affect cartel dynamics. To do so, we apply a Hidden Markov Model to a unique dataset on a population of (legal) cartels in Sweden, from 1947 to 1993. We find that GDP shocks and higher interest rates, as a proxy for borrowing costs, increase cartel formation and reduce cartel dissolution, with stronger effects in the manufacturing sector. Thus, GDP shocks and higher interest rates lead to an increase in the number of cartels in the economy. These findings highlight how cartels act as shock absorbers, helping firms handle economic instability and reducing the impact of both positive and negative shocks.

Safety performance can vary widely across firms, even in high-risk industries subject to strict regulatory standards. Using administrative data from US nuclear power plants, we study the relationship between regulatory inspectors’ assignment and safety outcomes. We find that less experienced inspectors are more likely to be assigned to nuclear facilities located farther from regulatory offices. This spatial sorting has meaningful economic consequences: doubling inspector experience is associated with 0.3 percentage points lower emergency training scores at the supervised facilities, corresponding to avoided revenue losses of approximately USD 1.2 billion annually for the whole industry.

We conducted a field experiment to identify the causal effect of extrinsic reward cues on the sorting and performance of nascent social entrepreneurs. The experiment, carried out with one of the United Kingdom’s largest support agencies for social entrepreneurs, encouraged 431 nascent social entrepreneurs to submit a full application for a grant competition that provides cash and in-kind mentoring through a one-time mailing sent by the agency. The applicants were randomly assigned to one of three groups: one group received a standard mailing that emphasized the intrinsic incentives of the program, or the opportunity to do good (Social treatment), and the other two groups received a mailing that instead emphasized the extrinsic incentives - either the financial reward (Cash treatment) or the in-kind reward (Support treatment). Our results show that an emphasis on extrinsic incentives has a causal impact on sorting into the applicant pool: the extrinsic reward cues led fewer candidates to apply and “crowded out” the more prosocial candidates while “crowding in” the more money-oriented ones. The extrinsic reward cues also increased application effort, which led these candidates to be more successful in receiving the grant. Yet, the selection resulting from the extrinsic incentive cues led to worse performance at the end of the one-year grant period. Our results highlight the critical role of intrinsic motives in the selection and performance of social enterprises and suggest that using extrinsic incentives to promote the development of successful social enterprises may backfire in the longer run.

Allaz and Vila (1993) show that oligopolists have a strategic motive to sell forward. In their model the possibility of forward trading increases competitiveness between firms, raising consumer surplus and welfare. In this study we examine this prediction in a controlled laboratory environment. We investigate how and to what extent the market institution and the number of firms affect competition, in theory and in our experimental markets. Our findings support the main comparative-static predictions of the model but also suggest that the competition-enhancing effect of a forward market is weaker than predicted. In contrast, entry has a stronger competition-enhancing effect.