Working Papers

Bailout Policies when Banks Compete with Switching Costs [SSRN, Online Appendix], with  Marianne Verdier

We analyze the effects of bailout policies on borrower surplus in a two-period Hotelling model of competition with switching costs and poaching. Before the second period of competition, banks may sometimes fail or face capacity constraints because of random shocks and uncertain bailouts. If borrowers are myopic, banks reduce the first-period interest rates according to their bailout expectations. We show that banks may reduce the first-period interest rates even more when borrowers anticipate a bank failure in the second period, whereas they may sometimes add a mark-up to the first-period interest rates if borrowers expect the market to remain stable. Higher bailout expectations have a different impact on the interest rates in markets with high and low switching costs. We derive the bailout policy that maximizes borrower surplus and show that it may sometimes be time-inconsistent.

Branch Closures and Access to Credit: Do Severed Relationships Harm Borrowers? [upon request]

This paper studies whether borrowers are harmed by a closure of their bank’s branch, using a combination of matching and difference-indifference to control for endogenous variation in credit allocation. We document two main results. First, borrowers from closed branches experience an increase of around 6% in their amount of credit, two years after the closure. Second, this increase is not driven by bank supply, as borrowers are able to regain access to credit both from their previous bank and from other banks. Borrowers experience an increase in their amount of credit only when local branch density is high enough, suggesting that branch closures enable them to take advantage of local competition among branches.

Cyber Security and Cloud Outsourcing of Payments [SSRN], with Marianne Verdier

We study the incentives of competing banks to outsource their payment services to a cloud service provider (CSP). The CSP stores depositor data in the cloud, but is exposed to cyber risk. Without cyber risk, banks excessively outsource to the CSP compared to the first-best because network effects soften price competition for deposits. We show that security competition may sometimes reduce banks’ incentives to outsource their payment systems. We examine how the recent liability shift from a full bank responsibility model to a shared responsibility model with CSPs could impact outsourcing decisions and investment incentives. We show that the security of payments only increases if the CSP processes an intermediate share of the total volume of consumer payments data.

Work in progress

Security screening in network markets 

We study investment incentives in a duopoly where firms compete on price for consumers on a Hotelling line that includes misusers, who impose a negative network externality on others. Misuse entering as a network externality that depends on both firms' realized consumer composition. To prevent servicing them, firms engage in costly screening. Depending on the intensity of competition and on the effect of misuse on their own and on the rival's customers, firms may over-invest, under-invest or not invest at all. We discuss the implications of our results in the pharmaceutical, weapons and AI industries. 

Published articles

Le financement des projets entrepreneuriaux disruptifs [Journal version, in French], with Valérie Fernandez, Thomas Houy & Nicole Venegas 

Comment les investisseurs en capital-risque traitent-ils les projets entrepreneuriaux dits « disruptifs » ? L’article instruit la question à partir d’une série d’entretiens réalisés auprès d’acteurs de plusieurs fonds d’investissement. Cette recherche est l’occasion d’avancer trois résultats. Premièrement, les investisseurs ne semblent pas s’accorder sur la signification de « disruption ». Deuxièmement, ils évaluent les projets disruptifs au moyen de méthodes quasiment équivalentes à celles mises en œuvre pour juger de la pertinence de projets plus classiques. Troisièmement, les projets disruptifs financés donnent souvent lieu à des modalités d’investissement atypiques. 

Books

L’industrie du futur : une compétition mondiale [Book, in French], dir. Thibaut Bidet-Mayer (contribution)