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Oliver Hart and Bengt Holmström were awarded the 2016 Swedish National Bank's Prize in Economic Sciences in Memory of Alfred Nobel for their contributions to the Theory of Contracts. Their works build a theory of firms and organizations that is based on two pillars: (1) Parties exert efforts or incur investments that increase the value of their relationships, but these actions are sometimes hidden, not directly observed, and thus cannot be contractually enforced by courts, and (2) contracts and ownership structures are (imperfect) responses to such informational frictions. Together, the contributions of these authors have paved the way for a complete renewal of the Theory of the Firm and Organizations Theory.

Richard H. Thaler on The Limits of Rationality On October 9, 2017, Richard H. Thaler was awarded the Nobel Memorial Prize in Economic Sciences for his work in behavioral economics. The article presents his main contributions, namely the establishment of a list of anomalies of human behaviors from the perspective of rational models, the laying of foundations for a quasi-rational model inspired by psychology, and the approach to public policy commonly known as Nudge. As a conclusion, we more subjectively comment on the influence Thaler has had on the economic science, and speculate on a possible path forward for behavioral economics.

Richard Thaler or How Financial Economics Became Behavioural Richard Thaler is a leading economist, a bold and original researcher. Professor at the University of Chicago, the centre of economic orthodoxy, where Milton Friedman and Eugene Fama spent most of their career, he is one of the most relevant critics of the efficient market hypothesis. His works in finance, often of great simplicity, changed the dominant paradigm. While there are few arbitrage opportunities in financial markets, they do exist and may be persistent. Rational investors do not always have the last word and prices often tend to over- or under-react to information. It is always particularly difficult to “beat the market”, even for knowledgeable practitioners, but asset prices do not fully capture the fundamentals and speculative bubbles are common. In short, the markets are not crowded with homo oeconomicus, but homo sapiens.

This article proposes an original review of the literature on tax competition, and provides new evidence concerning different types of footloose capital: the intensity of strategic interactions is three time stronger for financial assets than for less mobile capital (e.g. industrial buildings). We also present tax optimization techniques used by Multi-National Firms (MNFs) and document some case studies regarding the foregone tax revenue due to evasion. Amounts saved by firms are comparable to the annual contributions to the EU budget by countries like the UK, Ireland, the Netherlands or Luxembourg. We estimate that the total revenue losses for the EU governments due to corporate tax avoidance amount to almost 100 billion €. After this description of the failure of the current system of taxation, this article analyzes alternative schemes such as the Common Consolidated Corporate Tax Base (CCCTB) and concludes with the outlook of a European corporate income as a genuine own resource for the EU budget.

The Impact of Regret and Rejoicing on The Allocation of Risky Assets In this article, we propose to analyze the impact of regret and rejoicing on the allocation of risky assets. Regret and rejoicing are two emotions that are defined by comparing the result of an action retained by an agent with respect to the result that he could have obtained from an alternative action. We show that the choice of the alternative action impacts the allocation of risky assets. When it is defined in relation to the ex post maximum expected result, the agent only receives regret. This may lead, for low values of the marginal cost of risk, to retain more risky assets than an agent who maximized a standard expected utility function. On the contrary, the agent could express a preference for certainty and defines his emotions in relation to what a total investment in risk-free assets would bring to him. In this case, we show that investment in risky assets is weaker than the one realized by an agent who maximized a standard expected utility function.

Championship Uncertainty and Soccer Attendance in French Ligue 1: A New Approach This study proposes a new method for estimating supporters' attendance in considering uncertainty about the games results and the final ranking of teams. Outcome uncertainty is expressed by some probabilities, which is determined according to the gap between team qualities. In this turn, the qualities of teams are randomly estimated by average wages of their players. However, unlike previous studies, these probabilities are further adjusted according to the past results of these specific teams during the championship. Moreover, instead of relying on an aggregate indicator to estimate the uncertainty about the final ranking, we estimate the probability of each possible final ranking. This procedure allows us to make use of a more complete information statistics in estimation than usually done in this kind of studies. We provide three main results. First, the effect that uncertainty about the match outcome has on supporters' attendance is positive, significant and non-linear. Second, concerning the final ranking, we identify two opposite effects on supporter's behaviour. While their attendance is inversely related to the gap between the position of their preferred team and its followers in the ongoing ranking, their attendance is also higher if the gap between each teams in the final ranking is sufficiently low. Third, supporters' attendance is not linearly decreasing with the position of the supported team in the championship, but this link presents a sinusoidal curve. The reason is that supporters' attendance also depends on the likelihood of their team to accede to Europea League during the next season, and also on the likelihood of their team being drawn out of “Ligue 1” at the end of the season. We also show that supporters' attendance is directly proportional to the uncertainty level about the championship final victory. In particular, the attractiveness of the championship is negatively affected by the recent financial power of PSG.

Technical Efficiency of Microfinance Institutions in West African Economic and Monetary Union Area The aim of this article is to analyze the efficiency of microfinance institutions (MFIs) in the WAEMU area. The analysis is based on a two-stage DEA approach. In the first step, the efficiency of MFIs is estimated, by performing a VRS model (variable returns of scale) with input orientation. A total of six efficiency models are estimated, three of which relate to financial efficiency and three to social efficiency. The efficiency scores obtained in this first step are regressed in the second step on a set of environmental variables by following Simar and Wilson's bootstrap truncated procedure [2007], which is more robust than the conventional approaches based on a tobit regression. The results of the first stage show that the MFIs in the WAEMU area are not very efficient. Inefficiency is both technical and of scale, but it is more likely to be explained by a poor technical combination of resources. It is more palpable socially than financially. The results of the post-dea estimate show that economic profitability is an essential determinant of financial and social efficiency. The MFIs that are most profitable economically are the most socially and financially efficient. The largest and oldest MFIs are also the least efficient at the social level. Similarly, MFIs with a non-commercial profile are the most efficient from the social point of view. However, the results show that environmental variables often have an impact that varies according to the type of model specified.