Nicolas Pasquier

In an uncertain demand environment, the per-unit price of a two-part tariff can have insurance properties, insofar as it transfers risk from risk-averse downstream firms to less risk averse upstream firms, and compensation properties insofar as it compensates downstream firms for lessened attractiveness of trade. Both properties have opposite effects such as the first one can increase double marginalization and the second one can mitigate it. This paper provides experimental evidence of both properties.

We investigate to what extent crop insurance can address the multiple risks faced by agricultural producers. Climatic, disease, technological and financial risks make insurance especially valuable to farmers. But their interactions and regulatory constraints also make insurance especially difficult to design. We stress that some risks (such as heavy rainfalls) can affect the feasibility of prevention and curative actions for other risks (such as crop diseases), so that risks, beyond correlation, compound in a complex way. In addition, existing regulations impose strong constraints that affect farmers' behavior. We contrast insurance in the US and in the EU, where different types of risks are covered. We illustrate some of the interactions between multiple risks, regulatory constraints on insurance and farmers' actions with the case of wine-growing in the South-West of France. We present data on correlation between rainfalls and mildew, and results from a real experiment designed to reduce treatments thanks to a conditional insurance.

When a firm appoints a new manager, it reopens the possibility of new contractual friction with its partners. We explore strategic ambiguity as a potential for friction with a supplier. The firm's new manager probably has fuzzy expectations about the supplier's strategy. An optimistic manager weights favorable strategies more heavily than detrimental ones, whereas a pessimistic manager does the opposite. We show that the manager's degree of optimism is critical: above a threshold, it can cause the supplier to change the timing of its contracting and increase its profits. We also find that this threshold degree of optimism depends on the degree of product substitution: it is more stringent with imperfect substitutes than with perfect substitutes or unrelated goods.

The theoretical literature on vertical relationships usually assumes that beliefs about secret contracts take specific forms. In a recent paper, Eguia et al. (2018) propose a new selection criterion that does not impose any restriction on beliefs. In this article, we extend their criterion by generalizing it to risk-averse retailers, and we show that risk aversion modifies the size of the belief subsets that support each equilibrium. We conduct an experiment which revisits that of Eguia et al. (2018). We design a new treatment effect on equilibrium selection depending on the retailers' risk sensitivity. Experimental results confirm the treatment effect: the more sensitivity there is towards risk, the more the equilibrium played is consistent with passive beliefs. In addition, extending Eguia et al.'s (2018) criterion to risk-averse retailers improves its predictive power on the equilibria played, especially for a population of retailers with moderate to extreme risk aversion.