NBER's Program on Industrial Organization, directed by Nancy Rose of MIT, met on February 2 and 3 at the NBER's California office. Catherine Wolfram and Florian Zettelmeyer, both of the University of California, Berkeley and NBER, organized the meeting. These papers were discussed:
William Adams, Citigroup, and Liran Einav and Jonathan Levin, Stanford University and NBER, "Liquidity Constraints and Their Causes: Evidence from Subprime Lending"
Discussant: Raj Chetty, University of California, Berkeley and NBER
Alessandro Gavazza, Yale University, "Asset Liquidity, Boundaries of the Firm and Financial Contracts: Evidence from Aircraft Leases"
Discussant: Mara Lederman, University of Toronto
Massimo Massa, INSEAD; Jonathan Reuter, University of Oregon; and Eric Zitzewitz, Stanford University, "The Rise of Anonymous Teams in Fund Management"
Discussant: Chad Syverson, University of Chicago and NBER
Stephen Ryan, MIT and NBER, and Catherine Tucker, MIT, "Heterogeneity and the Dynamics of Technology Adoption" Discussant: Marc Rysman, Boston University
Joseph Farrell and Carl Shapiro, University of California, Berkeley, "How Strong Are Weak Patents?"
Discussant: Robert Gertner, University of Chicago
Matt Gentzkow and Jesse M. Shapiro, University of Chicago and NBER, "What Drives Media Slant? Evidence from U.S. Daily Newspapers" (NBER Working Paper No. 12707)
Discussant: Joel Waldfogel, University of Pennsylvania and NBER
Meghan R. Busse, University of California, Berkeley; Duncan Simester, MIT; and Florian Zettelmeyer, "The Best Price You'll Ever Get: The 2005 Employee Discount Pricing Promotions in the U.S. Automobile Industry"
Discussant: Steve Berry, Yale University and NBER
Adams, Einav, and Levin present new evidence on consumer liquidity constraints and the credit market conditions that might give rise to them. Their analysis is based on unique data from a large auto sales and financing company that serves the subprime market. They first document the role of short-term liquidity in driving purchasing behavior, including sharp increases in demand during tax rebate season and a high sensitivity to minimum down payment requirements. They then explore the informational problems facing subprime lenders. They find that default rates rise significantly with loan size, providing a rationale for lenders to impose loan caps because of moral hazard. They also find that borrowers at the highest risk of default demand the largest loans, but the degree of adverse selection is mitigated substantially by effective risk-based pricing.
Gavazza uses data on aircraft leasing contracts to examine how contracting costs simultaneously shape firms' boundaries and firms' financial structure. In particular, he studies how the liquidity of the market for different types of aircraft affects the lease/ own decision, the optimal maturity of lease contracts, and the mark-ups of lease rates over prices. A lease contract integrates in a single agreement the primary issues of a vertical and a financing contract, but the literatures on vertical and financial contracting make different predictions on how the liquidity of the assets should affect lease contracts. For example, more liquid aircraft are more redeployable and should then have longer financing contracts (as in Shleifer and Vishny, 1992), but are also less specific and should then have shorter vertical contracts (as in Williamson, 1979). Gavazza finds that asset liquidity affects the existing types of lease contracts differently: operating leases adhere to the predictions of the vertical contracting literature, while capital leases follow the financial contracting predictions. This suggests that the growth of operating leases over time is an additional aspect of the vertical disintegration of production.
The fraction of actively managed mutual funds that report being anonymously "team managed" increased by a factor of 4-5 between 1993 and 2004. …