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SEPTEMBER 2007 |
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Dr. Douglas Davis, professor of Economics, VCU School of Business, presented this paper as part of the Dean’s Seminar for September, 2007.
Pure Numbers Effects, Market Power and Tacit Collusion in Posted Offer Markets |
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Douglas Davis
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Abstract: This paper reports an experiment conducted to examine the effects of seller concentration, static market power and tacit collusion on prices in posted offer markets. Results iindicate that static market power, and to a lesser extent, concentration can affect prices. However, supra competitive prices also arise frequently in relatively unconcentrated markets where static market power is not present. Further, the coordinated behavior consistent with standard models of tacit collusion does not drive the observed supra-competitive prices. Rather, unilateral seller calculations of the costs of maintaining or raising prices relative to the gains of price cutting appear to organize market outcomes. |
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Dr. Oghenovo Obrimah, professor of Finance, Department of Finance, Insurance and Real Estate, presented this paper on September 12 as part of the Dean’s Seminar.
Performance Reversals, Flow-Performance Relations, and
Signals of Ability in the Venture Capital Market
Co-authoring the paper is Puneet Prakash, professor of Finance, Department of Finance, Insurance and Real Estate, August 29, 2007. |
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Oghenovo Obrimah |
Abstract: This paper finds evidence of performance reversals in the venture capital (VC) market.
These reversals, in contrast to the evidence in the mutual fund industry, are not associated
with larger fund flows to superior past performers, but with investor updates of priors about
ability. We find that a model in which investors update priors about VCs’ ability using past
performance and the skewness of VCs’ investment distributions, that is, risk-return tradeoffs,
best explains performance reversals in the venture capital market. We also find that longrun
future fund flows to VCs are a concave function of skewness in investment decisions,
hence, the concavity of the flow-performance relation (Kaplan and Schoar (2005)) in the
venture capital market is associated with ability, consistent with the rational expectations
model of Berk and Green (2004). Our findings indicate that performance reversals in the
venture capital market are not associated with contrarian investment strategies but with
fundamentals, that is, ability. |
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