nep-cta New Economics Papers
on Contract Theory and Applications
Issue of 2008‒02‒16
twelve papers chosen by
Simona Fabrizi
Massey University Department of Commerce

  1. Memory in Contracts: The Experience of the EBRD (1991-2003) By Lionel Artige; Rosella Nicolini
  2. Contributing or Free-Riding?  A Theory of Endogenous Lobby Formation By Taiji Furusawa; Hideo Konishi
  3. Communication and Learning By Luca Anderlini; Dino Gerardi; Roger Lagunoff
  4. Gatekeeping versus Direct-Access when Patient Information Matters By Paula González
  5. Point-record incentives, asymmetric information and dynamic data By Jean Pinquet; Georges Dionne; Charles Vanasse; Mathieu Maurice
  6. Environment factor, private information and the controllability principle By François Larmande; Jean-Pierre Ponssard
  7. The lack of controllability of EVA explains its decline a field study By François Larmande; Jean-Pierre Ponssard
  8. Responsibility Accounting with a Privately Informed Agent By François Larmande; Jean-Pierre Ponssard
  9. WHY BUSINESS SCHOOLS DO SO MUCH RESEARCH:<br /> A SIGNALING EXPLANATION By Damien Besancenot; Joao Faria; Radu Vranceanu
  10. Matching Markets under (In)complete Information By EHLERS, Lars; MASSÓ, Jordi
  11. Schedule Selection by Agents: from Price Plans to Tax Tables By Erzo F.P. Luttmer; Richard J. Zeckhauser
  12. Direct Mechanisms, Menus and Latent Contracts By Piaser, Gwenaël

  1. By: Lionel Artige; Rosella Nicolini
    Abstract: The objective of this paper is to identify the role of memory in repeated contracts with moral hazard in financial intermediation. We use the database we have built containing the contracts signed by the European Bank for Reconstruction and Development EBRD between 1991 and 2003. Our framework is a standard setting of repeated moral hazard. After having controlled for the adverse selection component, we are able to prove that client reputation is the discrimination device according to which the bank fixes the amount of credit for the established clients. Our results unambiguously isolate the effect of memory in the bank's lending decisions.
    Keywords: Financial Contracts, Incentives, Investment, Memory, Moral Hazard.
    JEL: D21 D82 G21 L14 P21
    Date: 2008–02–01
  2. By: Taiji Furusawa (Hitotsubashi University); Hideo Konishi (Boston College)
    Abstract: We consider a two-stage public goods provision game: In the first stage, players simultaneously decide if they will join a contribution group or not. In the second stage, players in the contribution group simultaneously offer contribution schemes in order to influence the government's choice on the level of provision of public goods. Using perfectly coalition-proof Nash equilibrium (Bernheim, Peleg and Whinston, 1987 JET), we show that the set of equilibrium outcomes is equivalent to an "intuitive" hybrid solution concept, the free-riding-proof core, which is always nonempty but does not necessarily achieve global efficiency. It is not necessarily true that an equilibrium lobby group is formed by the players with highest willingness-to-pay, nor is it a consecutive group with respect to their willingnesses-to-pay. We also show that the equilibrium level of public goods provision shrinks to zero as the economy is replicated.
    Keywords: common agency, public good, free rider, core, lobby, coalition formation, coalition-proof Nash equilibrium
    JEL: C71 C72 F13 H41
    Date: 2008–02–11
  3. By: Luca Anderlini; Dino Gerardi; Roger Lagunoff
    Date: 2008–02–08
  4. By: Paula González
    Abstract: We develop a principal-agent model in which the health authority acts as a principal for both a patient and a general practitioner (GP). The goal of the paper is to weigh the merits of gatekeeping versus non-gatekeeping approaches to health care when patient selfhealth information and patient pressure on GPs to provide referrals for specialized care are considered. We find that, when GPs incentives matter, a non-gatekeeping system is preferable only when (i) patient pressure to refer is sufficiently high and (ii) the quality of the patient’s self-health information is neither highly inaccurate (in which case the patient's self-referral will very inefficient) nor highly accurate (in which case the GP’s agency problem will be very costly).
    Date: 2008–01
  5. By: Jean Pinquet (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X); Georges Dionne (HEC Montréal -); Charles Vanasse (TD Asset Management -); Mathieu Maurice (HEC Montréal -)
    Abstract: Les politiques de sécurité routière utilisent souvent des mécanismes incitatifs basés sur les infractions pour améliorer le comportement des conducteurs. Ces mécanismes sont soit monétaires (amendes, primes d'assurance), soit non monétaires (permis à points). Nous utilisons des données québécoises couvrant une période allant de 1983 à 1996 pour analyser l'efficacité incitative de ces mécanismes. Nous analysons leurs propriétés théoriques par rapport au nombre de points associés aux infractions et par rapport au temps contrat. Ces propriétés sont ensuite testées empiriquement. Nous comparons l'efficacité globale des différents mécanismes incitatifs et nous relions les résultats obtenus avec les propriétés de la relation entre l'effort de conduite prudente et le risque d'infractions. Nous concluons à la présence d'aléa moral dans les données. Par ailleurs, la prime indicée sur les points introduite en 1992 a réduit de 15% la fréquence d'infractions.
    Date: 2007
  6. By: François Larmande (EM-Lyon Business School -); Jean-Pierre Ponssard (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: NA
    Date: 2007
  7. By: François Larmande (EM-Lyon Business School -); Jean-Pierre Ponssard (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: NA
    Date: 2007
  8. By: François Larmande (EM-Lyon Business School -); Jean-Pierre Ponssard (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: NA
    Date: 2007
  9. By: Damien Besancenot (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Joao Faria (Department of Economics - Nottingham Business School); Radu Vranceanu (Department of Economics - ESSEC)
    Abstract: Criticism is mounting on business schools for their excessive focus on research and for neglecting teaching. We show that if students have imperfect information about a school's overall capabilities and if business schools differ in their research productivity, the least productive schools may do as much research as the top-tier ones only to manipulate students' expectations. In turn, the most productive schools might resort to excess research in order to signal their type in the eyes of future students. This signaling equilibrium is characterized by a relative neglect of teaching by the top-tier schools. Such a situation is socially inefficient as compared to the perfect information case.
    Keywords: Business Schools; Research management; Research policy; Research vs. teaching; Signalling; Imperfect information
    Date: 2008–01–17
  10. By: EHLERS, Lars; MASSÓ, Jordi
    Abstract: We are the first to introduce incomplete information to centralized many-to-one matching markets such as those to entry-level labor markets or college admissions. This is important because in real life markets (i) any agent is uncertain about the other agents' true preferences and (ii) most entry-level matching is many-to-one (and not one-to-one). We show that for stable (matching) mechanisms there is a strong and surprising link between Nash equilibria under complete information and Bayesian Nash equilibria under incomplete information. That is,given a common belief, a strategy profile is a Bayesian Nash equilibrium under incomplete information in a stable mechanism if and only if, for any true profile in the support of the common belief, the submitted profile is a Nash equilibrium under complete information at the true profile in the direct preference revelation game induced by the stable mechanism. This result may help to explain the success of stable mechanisms in these markets.
    Keywords: Many-To-One Matching Market ; Incomete Information ; Stability
    Date: 2007
  11. By: Erzo F.P. Luttmer; Richard J. Zeckhauser
    Abstract: Requiring agents with private information to select from a menu of incentive schedules can yield efficiency gains. It will do so if, and only if, agents will receive further private information after selecting the incentive schedule but before taking the action that determines where on the incentive schedule they end up. We argue that this information structure is relevant in many applications. We develop the theory underlying optimal menus of non-linear schedules and prove that there exists a menu of schedules that offers a strict first-order interim Pareto improvement over the optimal single non-linear schedule. We quantify the gains from schedule selection in two settings. The first is a stylized example of a monopolistic utility company increasing profits by offering a menu of price plans. The second is a simulation based on U.S. earnings data, which shows that moving to a tax system that allows individuals to choose their tax schedule increases social welfare by the same amount as would occur from a 4.0 percent windfall gain in the government budget (or about $600 per filer per year). The resulting reduction in distortions accounts for about two thirds of the increase in social welfare while the remainder comes from an increase in redistribution.
    JEL: D42 D82 H21
    Date: 2008–02
  12. By: Piaser, Gwenaël
    Abstract: In common agency games, one cannot characterize all equilibria by considering only direct mechanisms. In an attempt to overcome this difficulty, Peters [Econometrica, 2001]and Martimort and Stole [Econometrica, 2002] identified a class of indirect mechanisms (namely, menus) which are able to characterize every equilibrium. Unfortunately, menus are difficult to handle, and several methodologies have been proposed in the literature. Here, it is shown that, even if authors consider menus rather than simpler mechanisms, many equilibria described in the literature could have been characterized by direct incentive compatible mechanisms. Use of more sophisticated mechanisms was not necessary in these cases.
    Keywords: Common Agency; Revelation Principle; Delegation Principle; Direct Mechanisms; Menus; Latent Contracts
    JEL: D82
    Date: 2007–07–30

This nep-cta issue is ©2008 by Simona Fabrizi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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