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on Contract Theory and Applications |
| By: | Arina Nikandrova (Department of Economics, Mathematics & Statistics, Birkbeck); Romans Pancs (University of Rochester) |
| Abstract: | We consider a single-item, independent private value auction environment with two bidders: the leader, who knows his valuation, and the follower, who exerts an effort that affects the probability distribution of his valuation, which he then learns. We provide sufficient conditions under which an ex-post efficient revenue-maximizing auction solicits bids sequentially and partially discloses the leader’s bid to the follower, thereby influencing the follower’s effort. This disclosure rule, which is novel, is non-monotone and prescribes sometimes revealing only a pair to which the leader’s bid belongs and sometimes revealing the bid itself. The induced effort distortion relative to the first-best is discussed. |
| Keywords: | Information Disclosure, Conjugate Disclosure, Optimal Auction, Moral Hazard. |
| JEL: | D82 D83 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:1504&r=cta |
| By: | Bastani, Spencer (Uppsala University); Blumkin, Tomer (Ben Gurion University); Micheletto, Luca (University of Milan) |
| Abstract: | In this paper we allude to a novel role played by the non-linear income tax system in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. We show that an appropriate choice of the tax schedule enables the government to affect the wage distribution by controlling the transmission of information in the labor market. This represents an additional channel through which the government can foster the pursuit of its redistributive goals. |
| Keywords: | adverse selection, labor market, optimal taxation, pooling, redistribution |
| JEL: | D82 H21 J31 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9154&r=cta |
| By: | Kantarevic, Jasmin (Ontario Medical Assocation); Kralj, Boris (Ontario Medical Assocation) |
| Abstract: | We develop a stylized principal-agent model with moral hazard and adverse selection to provide a unified framework for understanding some of the most salient features of the recent physician payment reform in Ontario and its impact on physician behavior. These features include: (1) physicians can choose a payment contract from a menu that includes an enhanced fee-for-service contract and a blended capitation contract; (2) the capitation rate is higher and the cost-reimbursement rate is lower in the blended capitation contract; (3) physicians sort selectively into the contracts based on their preferences; and (4) physicians in the blended capitation model provide fewer services than physicians in the enhanced fee-for-service model. |
| Keywords: | physician remuneration, moral hazard, adverse selection, Ontario |
| JEL: | I10 I12 I18 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9142&r=cta |
| By: | Mitra, Manipushpak; De, Parikshit |
| Abstract: | We address the mechanism design issue for the sequencing problem. We identify the just sequencing rule that serves the agents in the non-increasing order of their waiting costs and prove that it is a Rawlsian rule. We identify all rVCG mechanisms that implement the just sequencing rule. The other properties of the just sequencing rule that we identify are the following. It is an affine cost minimizer. It can be implemented with budget balanced rVCG mechanisms. Finally, when waiting cost and processing time are private information, we identify all generalized rVCG mechanisms that ex-post implement the just sequencing rule. |
| Keywords: | sequencing, implementation, outcome efficient sequencing rule, just sequencing rule, budget balance, ex-post implementation. |
| JEL: | C72 D63 D82 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65447&r=cta |
| By: | Bernard De Meyer (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Gaëtan Fournier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS) |
| Abstract: | A market with asymmetric information can be viewed as a repeated exchange game between an informed sector and an uniformed sector. The case where all agents in the market are risk neutral was analyzed in De Meyer [2010]. The main result of that paper was that the price process in this risk neutral environment should be a particular kind o Brownian martingale called CMMV. This type of dynamics is due to the strategic use of their private information by the informed agents. In this paper, we generalize this analysis to the case of a risk averse market. Our main result is that the price process is still a CMMV under a martingale equivalent measure. |
| Abstract: | Un marché avec asymétrie d'information peut être vu comme un jeu répété entre un secteur informé et un secteur non informé. Le cas d'un marché où les agents sont risque-neutres a été analysé dans De Meyer (2010). Le principal résultat de ce papier est que le processus des prix est, dans ce cadre risque neutre, une martingale Brownienne particulière appelée CMMV. Ce type de dynamique vient de l'utilisation stratégique de l'information par les agents informés. Dans ce papier, nous généralisons cette analyse au cas d'un marché averse au risque. Notre résultat principal est que le processus des prix est encore une CMMV sous une mesure martingale équivalente. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01169563&r=cta |
| By: | Orman, Cuneyt |
| Abstract: | This paper develops a theory of the firm scope where not only research but also ordinary production employees can generate inventions. Separating research from production (“specialization”) solves the two-tier agency problem of inducing simultaneously research effort and managerial truthful-reporting but is costly when capital markets are imperfect. Improvements in capital markets, therefore, promote specialization, allowing a greater number of specialized firms to be established and also enabling them to undertake innovative projects with larger potential outcomes. Moreover, this capital market improvement effect is stronger for innovative activities that are less capital-intensive and that have weaker synergies with existing production activities. The model can help us understand the explosion of small company innovation in the U.S. since late 1970s and the contribution of venture capital to this change. |
| Keywords: | Innovation, Organizational form, Agency problems, Technological synergies, Financial imperfections. |
| JEL: | D86 D2 D82 O32 G24 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65441&r=cta |
| By: | Marta Silva; Luis Filipe Martins; Helena Lopes |
| Abstract: | The best known equilibrium strategies of multiplayer bargaining define that the agreement is established at the first moment. In this paper two new subgame perfect Nash equilibria strategies are proposed, one in which the agreement moment is delayed for T > 1 periods and one other in which the bargaining proposals proceed endlessly. Empirical evidence suggests that fixed-term contracts tend to bear the adjustment cost of asymmetric reforms that increase the employment protection gap between fixed-term and open-ended contracts. However, previous studies did not take into account that fixed-term contracts can play different roles in the labour market and therefore the effect of this type of reform is heterogeneous. We estimate an endogenous regime switching model using rich administrative linked employer-employee data to study the impact of a change in Portuguese employment protection legislation that eased regulations on fixed-term contracts. Our results suggest that the implementation of this reform has a negative impact on match quality, proxied by the probability of conversion of fixed-term contracts. However, the conversion of the contract is associated with a significant increase in wage growth and not all fixed-term contracts are evenly affected by this type of reform. Everything else remaining constant, the wage growth of good matches, i.e. converted fixed-term contracts, was less penalised (-0.16 pp.) than that of non-converted fixed-term contracts (-0.55 pp.) in the years in which the changed legislation was in force. The change in legislation contributed to increase the wage growth differential between both groups in approximately 15%. |
| Keywords: | Employment Protection Legislation, Fixed-term Contract, Match Quality, Learning, Endogenous Regime Switching Model |
| JEL: | J31 J41 C24 |
| Date: | 2015–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:isc:iscwp2:bruwp1504&r=cta |
| By: | Markevich, Andrei; Zhuravskaya, Ekaterina |
| Abstract: | We document a very large increase in agricultural productivity, peasants' living standards, and industrial development in the 19th century Imperial Russia as a result of the abolition of serfdom. We construct a novel province-level panel dataset of development outcomes and conduct a difference-in-differences analysis relying on cross-sectional variation in the shares of serfs and over-time variation in emancipation controlling for region-specific trends. We disentangle the effects of the emancipation and the subsequent land reform and show that land reform contributed negatively to agricultural productivity in contrast to a large positive effect of the emancipation. The evidence is consistent with the increase in the power of the peasant commune as the channel of the negative effect of the land reform. The different organizational forms of serfdom were associated with different levels of nutrition of serfs and productivity. The emancipation of serfs from estates where serfs were obliged to work on the landlord's farm (corvee, barshchina) caused an increase in height of their children by 1.6 centimeters. Estates where serfs were required to make in kind payment to the landlord (quitrent, obrok) were equally productive, but, in contrast, their emancipation did not lead to rise in their height. Commitment to an implicit longer-term contract on the amount of serf obligations to landlords, practiced in some estates, made serfdom more productive. |
| Keywords: | development; forced labor; Russian empire; serfdom |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1502&r=cta |