The Rise of Populism and Italy's Electoral 'Tsunami'

Rawi  Abdelal; Dante  Roscini; Elena  Corsi

Case | HBS Case Collection | November 2018 (Revised June 2019)

The Rise of Populism and Italy's Electoral 'Tsunami'

by Rawi Abdelal, Dante Roscini and Elena Corsi

Abstract

Italy’s March 2018 elections led to a populist government that included the right-wing League and the anti-establishment 5 Star Movement. To respect their electoral promises, the two parties came up with a budget plan that provided for a public deficit at 2.4%, a figure higher than what the previous administration had promised the EU Commission. On October 23, 2018, the EU Commission rejected the plan asking Italy to revise downwards the public deficit. The same day, Italian bond yields spoke to 4-year highs, up to 3.7% as investors questioned Italy’s capacity to repay its public long-term debt, the second highest in the EU. Would the Italian government be able to implement its plan?

Keywords: globalized economies; unemployment; extremism; Political Elections; Immigration; Poverty; Social Issues; Government and Politics; Financial Condition; Financial Markets; Italy;

Language: English

Format: Print

50 pages

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Citation:

Abdelal, Rawi, Dante Roscini, and Elena Corsi. "The Rise of Populism and Italy's Electoral 'Tsunami'." Harvard Business School Case 719-042, November 2018. (Revised June 2019.)

Karl Jan Erick Hummel had founded Paradigm Capital Value Fund in 2007 together with Columbia Business School Professor Bruce Greenwald, an expert in value investing and now chairman of the fund. The fund followed the principles of value investing to their target universe: publicly traded companies with market capitalization between €100 million and €4.5 billion based in Germany, the Nordic countries, the UK, and Ireland. Hummel and Greenwald believed they had developed an investing edge in that universe, ignored by large U.S.- and UK-based funds, through deep research and by locating their headquarters close to companies and their management. Hummel and his team of six analysts were based in a small suburb of Munich, Germany. Paradigm Capital Value Fund was highly concentrated, with 60% of its assets invested in four stocks, and held its positions for long periods of time. Hummel had to decide if it was time to divest from one of their main investments, a German manufacturer of rollover car washing systems, and instead invest in a German truck equipment supplier. At the same time, Hummel was concerned by how to grow the fund.

Article | Marketing Science | Forthcoming

Price Bargaining and Competition in Online Platforms: An Empirical Analysis of the Daily Deal Market

Lingling Zhang and Doug J. Chung

The prevalence of online platforms opens new doors to traditional businesses for customer reach and revenue growth. This research investigates platform choice in a setting where prices are determined by negotiations between platforms and businesses. We compile a unique and comprehensive dataset from the U.S. daily deal market, where merchants offer deals to generate revenues and attract new customers. We specify and estimate a two-stage supply-side model in which platforms and merchants bargain on the wholesale price of deals. Based on Nash bargaining solutions, our model generates insights into how bargaining and competition jointly determine the price and firm profits. Our results show that there is systematic variation in bargaining power between platforms and merchants with different characteristics. By working with a bigger platform, merchants enjoy a larger customer base, but they are subject to lower margins due to less bargaining power during negotiations. Our counterfactual results quantify the value of platforms for merchants and show that merchants with lower bargaining power benefit more by working with a smaller platform. Regarding the impact of price negotiations on platform competition, we estimate that roughly 11% of the deals on a smaller platform are attributable to the platform’s lower level of revenue sharing.

Keywords: business-to-business marketing; platform competition; Two-Sided Markets; price bargaining; daily deals; structural model; Two-Sided Platforms; Competition; Price; Negotiation;