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on Contract Theory and Applications |
| By: | Chongwoo Choe; In-Uck Park |
| Abstract: | In a typical corporate hierarchy, the manager is delegated the authority to make strategic decisions, and to contract with other employees. We study when such delegation can be optimal. In centralization, the owner retains the authority, which fails to motivate the manager to acquire valuable information, leading to suboptimal decisions and inefficient incentive provision to the worker. Beneficial delegation should necessarily motivate the manager to acquire information, which is possible only when the authority is delegated to the manager. We also document comparative statics results regarding the benefits of delegation and discuss when delegation is more likely to dominate centralization. |
| Keywords: | Corporate hierarchies, information gathering, delegation, centralization. |
| JEL: | C72 D21 D82 L22 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2008-19&r=cta |
| By: | Bernardita Vial; (Instituto de Economía. Pontificia Universidad Católica de Chile.); Felipe Zurita. |
| Abstract: | This paper shows that more intense competition may improve, rather than hamper, the chances that a market for an experience good or service overcomes the problems caused by informational asymmetries. This, in spite of the fact that intensified competition diminishes the reputational rents that -allegedly- provide the incentives for the production of high quality. Our results show that instead, these incentives are created by price differentials not levels. |
| Keywords: | Reputation, rents, competition, adverse selection, experience good, public monitoring. |
| JEL: | L15 D82 D41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:354&r=cta |
| By: | Josh Cherry; Lones Smith |
| Date: | 2009–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:814577000000000284&r=cta |
| By: | Chongwoo Choe; Chander Shekhar |
| Abstract: | We study a voluntary pre-merger notification game under asymmetric information and characterize perfect Bayesian equilibria. It is shown that the equilibrium outcomes are similar to those when notification is compulsory. However, thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia where pre-merger notification is voluntary. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the parties as well as to the regulator. |
| Keywords: | Merger regulation, pre-merger notification, abnormal returns. |
| JEL: | D21 G34 K21 L40 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2008-20&r=cta |