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Full-Text Articles in Business
The New Basel Capital Accord: Making It Effective With Stronger Market Discipline, Harald Benink, Clas Wihlborg
The New Basel Capital Accord: Making It Effective With Stronger Market Discipline, Harald Benink, Clas Wihlborg
Business Faculty Articles and Research
In January 2001 the Basel Committee on Banking Supervision proposed a new capital adequacy framework to respond to deficiencies in the 1988 Capital Accord on credit risk. The main elements or ‘pillars’ of the proposal are capital requirements based on the internal risk-ratings of individual banks, expanded and active supervision, and information disclosure requirements to enhance market discipline. We discuss the incentive effects of the proposed regulation. In particular, we argue that it provides incentives for banks to develop new ways to evade the intended consequences of the proposed regulation. Supervision alone cannot prevent banks from ‘gaming and manipulation’ of …
A Comparison Of Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson
A Comparison Of Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson
Economics Faculty Articles and Research
We compare first-price auctions to an exchange process that we term 'multilateral negotiations.' In multilateral negotiations, a buyer solicits price offers for a homogeneous product from sellers with privately known costs, and then plays the sellers off one another to obtain additional price concessions. Using the experimental method, we find that with four sellers, transaction prices are statistically indistinguishable in the two institutions, but with two sellers, prices are higher in multilateral negotiations than in first-price auctions. The institutions are equally efficient with two sellers, but multilateral negotiations are slightly more efficient with four sellers.