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on Contract Theory and Applications |
| By: | Martimort, David; Pouyet, Jérôme; Ricci, Francesco |
| Abstract: | We characterize the optimal extraction path when a concessionaire has private information on the initial stock of resource. Under asymmetric information, a "virtual Hotelling rule" describes how the resource price evolves over time and how extraction costs are compounded with information costs along an optimal extraction path. In sharp contrast with the case of complete information, fields which are heterogeneous in terms of their initial stocks follow different extraction paths. Some resource might be left unexploited in the long-run as a way to foster incentives. The optimal contract may sometimes be implemented through royalties and license fees. With a market of concessionaires, asymmetric information leads to a "virtual Herfindahl principle" and to a new form of heterogeneity across active concessionaires. Under asymmetric information, the market price converges faster to its long-run limit, exhibiting more stability. |
| Keywords: | asymmetric information; Delegated Management; Non-Renewable resource; Optimal Contract |
| JEL: | D86 Q38 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11769&r=cta |
| By: | Becker, Johannes Gerd; Gersbach, Hans |
| Abstract: | We consider an infinitely repeated reappointment game in a principal-agent relationship and examine the consequences of threshold contracts, which forbid reappointment if the principal's utility is too low. Typical examples are voter-politician or government-public servant relationships. The agent chooses costly effort and enjoys being in office until he is deselected. The principal observes a noisy signal of the agent's effort and decides whether to reappoint the agent or not. We analyse the stationary Markovian equilibria of this game with and without threshold contracts. We identify the circumstances under which such threshold contracts are welfare-improving or beneficial for the principal, which, in turn, may justify attempts to introduce such contracts in politics. |
| Keywords: | asymmetric information; commitment.; principal-agent model; reappointment; repeated game; stationary Markovian strategies; threshold contracts; threshold strategies |
| JEL: | C83 D82 D86 H11 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11766&r=cta |
| By: | Besley, Timothy J.; Raynal-Querol, Marta |
| Abstract: | Hereditary leadership has been an important feature of the political landscape throughout history. This paper argues that hereditary leadership is like a relational contract which improves policy incentives. We assemble a unique dataset on leaders between 1874 and 2004 in which we classify them as hereditary leaders based on their family history. The core empirical finding is that economic growth is higher in polities with hereditary leaders but only if executive constraints are weak. Moreover, this holds across of a range of specifications. The finding is also mirrored in policy outcomes which affect growth. In addition, we find that hereditary leadership is more likely to come to an end when the growth performance under the incumbent leader is poor. |
| Keywords: | growth; Hereditary Institutions; political agency |
| JEL: | H11 N40 O11 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11777&r=cta |
| By: | Benito Arruñada |
| Abstract: | The contractual, single-exchange framework in Coase (1960) contains the implicit assumption that exchange in property rights does not affect future transaction (i.e., trading) costs. This is pertinent for analyzing use externalities but limits our understanding of property institutions: a central problem of property markets lies in the interaction among multiple transactions, which causes exchange-related and non-contractible externalities. By retaining a single-exchange simplification, the economic analysis of property has encouraged views that: (1) overemphasize the initial allocation of property rights, while some form of recurrent allocation is often needed; (2) pay scant attention to legal rights, although these determine enforceability and, therefore, economic value; and (3) overestimate the power of unregulated private ordering, despite its inability to protect third parties. These three biases have been misleading policy in many areas, including land titling and business firm formalization |
| Keywords: | Property rights, Externalities, enforcement, transaction costs, public ordering, private ordering, impersonal exchange, organized markets, blockchain |
| JEL: | D23 K11 K12 L85 G38 H41 O17 P48 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:948&r=cta |
| By: | Mamatzakis, Emmanuel; Xu, Bingrun |
| Abstract: | This study investigates the effectiveness of the contractual governance of Chinese fund management companies by using comprehensive governance data over the period from 2005 to 2015. The study finds that board size a negative impact on its performance and market share. The findings are consistent with the ‘agency cost’ hypothesis. This paper also finds a positive association between the percentage of independent directors and market share and a negative correlation between the percentage of independent directors and the expense ratio. Moreover, a fund management company with a higher level of managerial ownership and a higher proportion of institutional investors results in more effective fund governance; however, a larger institutional investor holding may lead to a higher expense ratio. |
| Keywords: | Contractual governance, governance effectiveness, board size, board structure, managerial ownership, institutional investors’ holding |
| JEL: | G20 G23 G30 G34 |
| Date: | 2017–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76138&r=cta |