If entry is inefficiently low, a social planner canincentivize firms through ex ante subsidies, which defray the costs associatedwith making operations safer, or ex post subsidies, which mitigate the finan-cial damages caused by the accident. We demonstrate that when the socialplanner values reliability over market competition, it is optimal to offer exante subsidies alone. The exogenous channels measure theextent to which productivity is influenced by the partners’ characteristics(e.g.
Firms in these industries may be discouraged from entering the marketas a result of these costs.
The third essay explores the interplay between public policy and risk management, when governments must strike a balance between safety and industry welfare.
We focus on industries where operational accidents can be destructive and, as a result, where the cost of third-party liability is significant.
The second essay unveils a previously unexplored role of business insurance in managing supply chain risk.
We show that firms may strategically buy insurance purely as a commitment mechanism to prevent excessive free-riding by other firms.