BIAIS Bruno

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This paper analyzes the impact of introducing a non-redundant option on information disclosure and risk sharing. The option changes the interaction between liquidity and information asymmetry. By improving risk-sharing opportunities, the option reduces the risk of market collapse created by information asymmetry. On the other hand, the option does not necessarily lead to an improvement in the informational efficiency of the market, or to an increase in the profits of informed agents.

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This thesis explores several intertwined dimensions of decision research. In particular, while focusing on decisions under risk and uncertainty, this work illustrates the transversality of approaches that characterize this field of investigation by bringing together experimental study, theoretical development and application. The continuous dialogue between these different approaches to decision research is essential to its development, as empirical investigations test and illuminate formal theories and further ensure their meaningful application in theoretical and empirical contexts, thus contributing to a virtuous dynamic of "creative destruction" in the field of study. For example, a large body of empirical evidence shows violations of expected utility theory. In response, decision theory and behavioral economics have provided a wide variety of non-expected utility theories. However, the existing evidence does not clearly distinguish between these theories. In the investigation of the sources of violations, particular attention is traditionally devoted to testing several variants of the independence axiom. Yet, in the domain of earnings, many of the best-known non-expected utility models adhere to the minimal behavioral restrictions traditionally known as Savage's (1954) P3 and P4 axioms, which allow for the separation of tastes, as captured by a utility function, and beliefs, often captured by a distorted probability. In the first chapter of this thesis, we derive a nonparametric procedure for testing the separability hypothesis of tastes and beliefs and apply it to the results of two experiments. Although P3 is rarely violated, our test reveals widespread and pronounced violations of P4, suggesting that the assumption of separability of tastes and beliefs may not hold in empirical settings. On the theoretical side, the question of the separation of tastes and beliefs has apparently been closed by a series of papers by Ghirardato and Marinacci on biseparable preferences. Inspired by the findings of the previous chapter, the second chapter of this thesis aims to reopen this question by investigating whether, or under what theoretical conditions, such a separation actually holds and what its implications are. In particular, we will provide separability conditions in terms of preference midpoints and the new concept of likelihood midpoints. In the third chapter, we use recent developments in decision making criteria to provide an extension of Brandenburger and Stuart's (2007) seminal biform games setup. While biform games provide the theoretical basis for formal work in value-based strategy, our framework helps reconcile observed behavior in applied settings with the theory. In particular, we apply the results of our theory to the choice to involve substitutes for complementors in business ecosystems, a central decision in competitive strategy. Our solution has several advantages. First, it subsumes the original biform game framework and seamlessly integrates recent related work that provides bounds on value capture. In addition, it addresses issues such as the possible non-uniqueness of solutions and the invariance of the structure of the competitive environment while retaining the role of competition in determining value capture. Finally, it allows for richer preference representations that, for example, can include subjective distortions of the objective chances of value capture.

We study the rational behaviors of participants in committee-based blockchains. Committee-based blockchains rely on specific blockchain consensus that must be guaranteed in presence of rational participants. We consider a simplified blockchain consensus algorithm based on existing or proposed committee-based blockchains that encapsulates the main actions of the participants: voting for a block, and checking its validity. Knowing that those actions have costs, and achieving the consensus gives rewards to committee members, we study using game theory how strategic players behave while trying to maximizing their gains. We consider different reward schemes, and found that in each setting, there exist equilibria where blockchain consensus is guaranteed. in some settings however, there can be coordination failures hindering consensus. Moreover, we study equilibria with trembling participants, which is a novelty in the context of committee-based blockchains. Trembling participants are rational that can do unintended actions with a low probability. We found that in presence of trembling participants, there exist equilibria where blockchain consensus is guaranteed. however, when only voters are rewarded, there also exist equilibria where validity can be violated.

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We study the behaviors of participants in a consensus protocol when they exhibit rational or Byzantine behaviors. We draw inspiration from Byzantine fault-tolerant blockchain protocols (such as Tendermint). In these protocols, participants propose blocks and exchange messages. A block is accepted if a majority of participants send the message corresponding to that block (a vote), and the voters are rewarded. In this work, we study the conditions under which this protocol satisfies the following two properties: termination (the system converges to a decision) and validity (any decision is valid), when some participants are rational and the others Byzantine. We assume that Byzantine participants have the most damaging behavior to the system, while the strategies of rational participants form a perfect Bayesian equilibrium. We consider the following parameters: (i) the number of votes needed, ν, for a block to be considered accepted, and (ii) the number of Byzantine participants, denoted f , in the system. We obtain the following results: When f ≥ ν, invalid blocks are accepted, and thus validity cannot be guaranteed . When f < ν, there is an equilibrium where both validity and termination are satisfied, on the other hand, there are other equilibria where termination, and in some cases validity, are not satisfied. This allows us to conclude that there are coordination problems in the studied protocols.

Blockchains are distributed ledgers, operated within peer-to-peer networks. We model the proof-of-work blockchain protocol as a stochastic game and analyze the equilibrium strategies of rational, strategic miners. Mining the longest chain is a Markov perfect equilibrium, without forking, in line with Nakamoto (2008). The blockchain protocol, however, is a coordination game, with multiple equilibria. There exist equilibria with forks, leading to orphaned blocks and persistent divergence between chains. We also show how forks can be generated by information delays and software upgrades. Last we identify negative externalities implying that equilibrium investment in computing capacity is excessive.

In this paper we analyze from the game theory point of view Byzantine Fault Tolerant blockchains when processes exhibit rational or Byzantine behavior. Our work is the first to model the Byzantine-consensus based blockchains as a committee coordination game. Our first contribution is to offer a game-theoretical methodology to analyse equilibrium interactions between Byzantine and rational committee members in Byzantine Fault Tolerant blockchains. Byzantine processes seek to inflict maximum damage to the system, while rational processes best-respond to maximise their expected net gains. Our second contribution is to derive conditions under which consensus properties are satisfied or not in equilibrium. When the majority threshold is lower than the proportion of Byzantine processes, invalid blocks are accepted in equilibrium. When the majority threshold is large, equilibrium can involve coordination failures , in which no block is ever accepted. However, when the cost of accepting invalid blocks is large, there exists an equilibrium in which blocks are accepted iff they are valid.

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My thesis is composed of two independent parts. The first part deals with crypto-economics and the second with theoretical econometrics. In the first chapter, I present a model that predicts the total computing power deployed by miners using the bitcoin/dollar exchange rate. The second chapter uses a simplified version of the previous model to note the inefficiency of the current Bitcoin protocol and proposes a simple way to reduce the electricity consumption generated by this cryptocurrency. The third chapter explains how to identify and estimate the exact bounds of the region of identification of the average marginal effect in a logit model with fixed effects on panel data.

The first chapter studies how the introduction of a steel futures market affects steel producers and their customers. The second chapter asks how import tariffs in upstream industries affect the investment incentives of downstream firms. The third chapter studies how managerial ownership affects performance in the mutual fund industry.

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Derivatives activity, motivated by risk-sharing, can breed risk taking. Bad news about the risk of the asset underlying the derivative increases the expected liability of a protection seller and undermines her risk prevention incentives. This limits risk-sharing, and may create endogenous counterparty risk and contagion from news about the hedged risk to the balance sheet of protection sellers. Margin calls after bad news can improve protection sellers incentives and enhance the ability to share risk. Central clearing can provide insurance against counterparty risk but must be designed to preserve risk-prevention incentives.

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High speed market connections improve investors׳ ability to search for attractive quotes in fragmented markets, raising gains from trade. They also enable fast traders to obtain information before slow traders, generating adverse selection, and thus negative externalities. When investing in fast trading technologies, institutions do not internalize these externalities. Accordingly, they overinvest in equilibrium. Completely banning fast trading is dominated by offering two types of markets: one accepting fast traders, the other banning them. Utilitarian welfare is maximized with (i) a single market type on which fast and slow traders coexist and (ii) Pigovian taxes on investment in the fast trading technology.

Agents choose to acquire skills ranging from simple and transparent tasks to complex and opaque ones. While potentially more productive, the latter generate more severe agency problems. In our overlapping generations model, agents compete with their predecessors. With dynamic contracts, long horizons help principals incentivize agents. Agents with short horizons are more difficult to incentivize than agents with long horizons. Hence, old agents are imperfect substitutes for young ones. This reduces competition between generations. As a result, young managers can opt for more opaque and complex technologies, and therefore larger rents, than their predecessors. Thus, in equilibrium, complexity and rents rise over time. Our theoretical results are in line with the increase in complexity and rents observed in the finance sector.

Information collection and processing in financial institutions is challenging. This can delay the observation by traders of the exact capital charges and constraints of their institution. During this delay, traders face preference uncertainty. In this context, we study optimal trading strategies and equilibrium prices in a continuous centralized market. We focus on liquidity shocks, during which preference uncertainty is likely to matter most. Preference uncertainty generates allocative inefficiency, but need not reduce prices. Progressively learning about preferences generate round–trip trades, which increase volume relative to the frictionless market. In a cross section of liquidity shocks, the initial price drop is positively correlated with total trading volume. Across traders, the number of round–trips is negatively correlated with trading profits and average inventory.

This thesis consists of three papers. The first two papers study how firms should be structured to facilitate their access to funds when there are agency conflicts between borrowers (firms) and lenders (investors). Chapter 1 studies the relationship between firm scope and financial constraints. Chapter 2 uses an optimal contracting approach to analyze the development of an innovative product through strategic alliances of both firms. Chapter 3 analyzes whether traders' experience can reduce their propensity to speculate.

A forced asset sale occurs when a firm needs to sell assets to generate cash and, because potential buyers face financial constraints, assets are traded at a price below fundamental value. In the first chapter, I show that a policy designed to support asset prices aggravates agency problems within firms. In the second, I establish that asset prices in the decentralized economy are socially too low if liquidity shocks dominate, but are too high if solvency shocks are prevalent. In the third chapter, co-authored with David Thesmar, we show using a theoretical model that we test on hedge fund data, that funds with contractual provisions limiting outflows, such as lock-in periods, buy assets when the rest of the industry experiences outflows and must liquidate their positions.

This thesis is composed of three essays. The first essay focuses on the link between capital market frictions and information acquisition by entrepreneurs. I show that an anti-selection problem between entrepreneurs and investors can alter the incentives of the former to invest in the acquisition of skills or experience. There are two inefficient regimes. When investors are a priori pessimistic, access to financing is restricted to experienced entrepreneurs, few projects are financed and they are on average very profitable. When investors are a priori optimistic, all entrepreneurs have access to financing, the number of projects financed is high, and their average profitability is low. These effects suggest a mechanism for amplifying business cycles. A second test models the financing of innovative projects as a sequential investment problem. A first investment generates a flow of information about the profitability of a second investment. The entrepreneur has ex ante private information about the profitability of the project, which creates an anti-selection problem for investors. Optimal contracts can be implemented using locked-in stock options and a golden parachute. They also include the timing of the second investment which is used as an instrument to signal the quality of the project. This mechanism creates a distortion in the learning process: the second investment occurs too early or too late compared to the first-order optimum. Internal financing affects the timing of the second investment. The model generates empirical predictions about the relationship between the performance sensitivity of the entrepreneur's compensation contract and the firm's investment policy. A third test focuses on certification or rating agencies whose compensation depends on the potentially conflicting interests of buyers (investors) and sellers (security issuers). By providing more accurate information, the agencies increase buyer participation but may also discourage seller participation. Sellers also take into account the probability of obtaining a positive rating. In a dynamic game, we examine how the attempt to establish a reputation on both sides of the market affects information production. We show that reputation concern can have an ambiguous effect. When the perceived reliability of ratings is low, reputation has a disciplining effect and the accuracy of ratings improves. When perceived reliability is high, agencies become lax to increase their future revenues. This effect does not require that the agency's remuneration be contingent on the rating.

This thesis proposes an empirical study of the influence of socio-cultural variables on the internal organization of the firm and their consequences on its performance. The focus is on the problems of information asymmetry and collusion. The first chapter summarizes the reference models of incentive theory proposed by Laffont (2000) and Martimort (1999) respectively. These theoretical frameworks allow us to formally and rigorously analyze the problem of information asymmetry in the firm. We are then able to understand how the formation of coalitions between employees can influence the effectiveness of incentive mechanisms, and modify the Principal-Agent relationship. The second chapter allows us to show empirically how the socio-cultural context modifies incentive contracts and how this influence is reflected in the performance of the firm. In the context of industrial firms in Côte d'Ivoire, we show that certain sociocultural variables can modify the transaction costs incurred by employees and managers. The results of our empirical study suggest that, in the firms in our sample, the effectiveness of collusion among subordinates differs according to their degree of socio-cultural affinity. Thus, a culturally homogeneous network of subordinates appears more difficult to supervise than a culturally heterogeneous network of subordinates, ceteris paribus. Similarly, the technology for supervising a culturally homogeneous network of supervisors appears to be more effective than that of a culturally heterogeneous network of supervisors, ceteris paribus. In this case, our results suggest a positive relationship between the supervisory technology of Ivorian coaches and labor productivity.

Theoretical study of financial relations between a firm and its financial backers on the one hand, and within the firm on the other, based on the presence of informational problems between executives, shareholders or managers.

The comparison of the financial structures of French firms reveals a gap between large firms and SMEs, which are permanently subject to credit rationing. This thesis is part of an approach aimed at reducing adverse selection effects linked to the unobservable nature of borrower quality and proposes a mixed financing solution combining internal financing by employee savings and external financing by bank debt.

This thesis studies price formation in experimental financial markets, with common value and asymmetric information, inspired by Plott and Sunder (1982, 1988). The first chapter presents the interest of the experimental method in finance related to the control of the environment and the quality of the observation, and proposes a review of the literature on experimental finance (CAPM, price efficiency, microstructure, market rationality). In the second chapter, I) a double auction, II) a fixing followed by a double auction, and III) a pre-opening period and a fixing followed by a double auction are experimented. Equilibrium strategies are computed. In our experimental markets, the pre-opening facilitates the discovery of equilibrium strategies. This discovery is improved by the experiment when subjects are given the right incentives. The relationship between the psychological traits of investors and their behavior is analyzed in the third chapter. The traits (impulsivity, social intelligence, overconfidence, availability and representativeness rules, and confirmation bias) are measured by administering a questionnaire to subjects. These subjects then participate in experimental financial markets. Impulsive subjects place more orders but do not suffer more losses than other individuals. Overconfident subjects realize more losses than others, and confirmation bias and the use of the representativeness rule slow down the learning of equilibrium strategies. The fourth chapter compares a Walrasian trial and error (TW) and a fixing market (MF). These two institutions are strategically equivalent. In our experimental markets, price efficiency is almost perfect in both market structures. On the other hand, transaction costs are lower in the TW than in the MF where investors are unable to discover equilibrium strategies.

This thesis proposes a theoretical study of the optimal financial structure of firms, in the framework of principal-agent models with moral hazard. In this sense, it is part of the recent theoretical developments in agency theory. The first chapter presents a review of the literature explaining the choice of a financial structure by moral hazard problems (green (1984), innes (1990), gale and hellwig (1985), bolton and sharfstein (1990). . ). These theoretical results are contrasted with empirical observations (Bradley, Jarell, and Kim (1984), Long and Malitz (1985), and Barclay, Smith, and Watts (1995)). . ). This highlights the relevance of the models cited, as well as their shortcomings, especially when it comes to explaining the emergence of a mixed financial structure. The second and third chapters offer personal contributions to these issues. The second chapter is a re-reading of the theory of jensen and meckling (1976) in a framework of optimal contracts. The moral hazard problems considered arise from the fact that a manager can choose both a certain level of effort and a certain level of risk when he decides to commit to a project. We show that when the risk choice problem is dominant, the joint issuance of debt and equity is an optimal capital structure. On the other hand, when the effort choice problem is dominant, it is necessary to add to this structure stock options, allocated to the manager, in order to preserve his incentives to effort. The third chapter deals with the financing of start-ups, and the dual role played by financial partners such as business angels. The latter bring to the companies their experience of business management, as well as their financial means. Their intervention is modeled in a context of double moral hazard, where managers and financiers must both make an effort to improve the profitability of the project. We show how the issuance of preferred shares or convertible bonds is an optimal response to the incentive problems posed. These results are supported by empirical evidence.

This thesis is composed of three independent chapters stemming from a common problem: to build econometric specifications of the dynamics of financial markets, integrating a structural modeling of informational aspects. The first chapter is devoted to the frequency of transactions on financial markets in the presence of asymmetric information. We consider a Kyle (1985) model, but where liquidity shocks do not always occur. We characterize the set of perfect Bayesian equilibria. In particular, we show that the insider does not systematically intervene in the market, which affects the trading frequencies. We then extend this analysis to the case where volumes are heterogeneous. The second chapter focuses on the temporal aggregation of volatility. We propose a class of models of conditional variance that includes most of the models existing in the literature where the variance is linear (Garch, linear factors). We show that this class is robust to temporal and individual aggregation and marginalization. We also show the superiority and relevance of this class compared to the so-called "weak arch" class in terms of financial and statistical interpretations. We establish the direct link between our class and the class of continuous time processes called "stochastic volatility". Finally, the last chapter is devoted to the estimation of models defined by their conditional mean and variance, in particular those of the arch type. We consider a large class of m-estimators and we show the optimal estimator, which depends crucially on the conditional skewness and kurtosis coefficients. We show that it is more efficient than the pmv estimator and that it is equivalent to the optimal gmm estimator. A Monte Carlo study confirms these results.

The objective of this thesis is to determine the optimal degree of leniency in corporate default law. The French, American and British laws have different orientations. The French law is lenient towards the troubled manager, while the British law is severe. The American law falls between these two extremes. A lenient law increases the bargaining power of the distressed company's manager. On the other hand, a harsh law increases the bargaining power of creditors. But too much leniency or too much severity encourages the manager to invest in a suboptimal way. We analyze the game that pits the manager-owner, the bank and the judge. There is a problem of moral alea between the bank and the manager. In some states of the world, their interests may conflict. The manager can be incited, in case of difficulties of the company, not to provide all the efforts necessary to the success of his project. Anticipating these problems, the bank can be led to refuse to finance the project of the manager, which leads to a situation of credit rationing. We analyze the link between these problems and the degree of leniency of the law on business failures. On the one hand, a lenient law allows to avoid ex-post an inefficient liquidation of the firm. On the other hand, ex-ante, the law should not be too lenient in order to encourage the manager to make efforts. Finally, the degree of leniency of the law influences the possibility of reaching an amicable settlement of the difficulties which leads to efficiency gains. In fact, the optimal law acts in such a way as to restore the incentives of the bank and the manager to implement the project ex-ante, by rebalancing their chances of seeing their interests respected, in the event of bankruptcy, by the judge's decision to reorganize or liquidate ex-post.

This research is part of the microstructure theory. The first chapter is a review of the literature on the revelation of information during the pre-opening of order-driven markets and on information selling models. The second chapter proposes a theoretical analysis of the pre-opening mechanism of order-driven markets. The model of vives (1995) where investors observe only one signal, before the beginning of the game, is extended to the more general case where they receive a series of signals during the game. The speed of information revelation is then significantly higher. In the third chapter, a model is proposed for a financial intermediary who, on the one hand, carries out transactions for his own account and, on the other hand, manages the funds of a client. This management of funds can be interpreted as an indirect sale of information. Information selling contracts allow the informant to credibly commit to adding noise to the market and thus increase the total profits of both the client and the informant. In the last chapter, the previous study is generalized to the case of an oligopoly of information sellers. In this context, the paradox of Grossman and Stiglitz (1980) is reversed: when the acquisition of information is free, prices are no longer informative at all because the number of sellers is infinite in equilibrium. On the other hand, the greater the cost of acquiring information, the greater the information content of prices. Finally, the expected profits of information sellers remain positive even when their number tends towards infinity.

In French IPOs, issuing companies can choose an IPO procedure from a variety of sales mechanisms. The formation of the price, the allocation of shares to investors and the role of intermediaries differ according to the procedures. The multiplicity and diversity of IPO procedures and institutional contexts make it possible to propose an original empirical study of IPOs on the second market in France. Various hypotheses formulated to explain the underpricing of securities are tested and, given the specificity of the French institutional context, particular tests are proposed. The database consists of all listings on the second market from 1983 to 1994. The empirical tests concern : - the presence of an agency problem between the intermediaries and the firm - the existence of the "winner's curse" phenomenon highlighted by Rock (1986), in the context of public offerings. - the partial adjustment of prices to market demand during sales. - the strategic behavior of the intermediaries (the introducing bank and the specialist brokerage firm) when choosing the selling mechanism. - the building of a reputation for the offering.

The objective of our research is to contribute to the theory of the microstructure of financial markets. The first essay is devoted to the revelation of information through prices. We propose a model that allows us to analyze the role of the assumptions traditionally used in models studying price formation in the presence of information asymmetries. We highlight the decisive role of the assumptions concerning the origin of the noise that prevents the equilibrium from being perfectly revealing. In the second essay, we study the impact of transaction costs on the revelation of information by prices. We show that an increase in transaction costs is always at the expense of informational efficiency. For this reason, transaction costs increase the value of information and can increase the proportion of informed agents. The third essay proposes a model of the auction mechanism involved in an order-driven market. We analyze in a dynamic framework how agents determine their order placement strategies (best-order choice limit orders). In addition, we characterize the bid and ask prices of limit order givers.