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on Contract Theory and Applications |
| By: | Jan U. Auerbach (Department of Economics, University of Exeter); Miguel A. Fonseca (Department of Economics, University of Exeter) |
| Abstract: | We propose a procedural rule that we refer to as preordered service to replace sequential service of civil cases for breach of contract. The judiciary preannounces a list that ranks all entities that may enter contracts by some uniquely identifying information, such as taxpayer numbers. Courts use this list to enforce the contracts of the highest ranked entities that file a contract case. In theory, unlike sequential service, preordered service ensures efficiency in a population of investment games. Results from a laboratory experiment suggest that it may substantially reduce the caseload at courts and mitigate payoff inequality. |
| Keywords: | Judicial system, courts, judiciary performance, legal procedure, civil cases, caseload, contract enforcement, population of investment games, experiments. |
| JEL: | K00 K12 K40 O17 C92 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1704&r=cta |
| By: | Kerkkamp, R.B.O.; van den Heuvel, W.; Wagelmans, A.P.M. |
| Abstract: | We consider principal-agent contracting models between a seller and a buyer with single- dimensional private information. The buyer's type follows a continuous distribution on a bounded interval. We present a new modelling approach where the seller oers a menu of nitely many contracts to the buyer. The approach distinguishes itself from existing methods by pooling the buyer types using a partition. That is, the seller rst chooses the number of contracts oered and then partitions the set of buyer types into subintervals. All types in a subinterval are pooled and oered the same contract by the design of our menu. We call this approach robust pooling and apply it to utility maximisation and cost min- imisation problems. In particular, we analyse two concrete problems from the literature. For both problems we are able to express structural results as a function of a single new parameter, which remarkably does not depend on all instance parameters. We determine the optimal par- tition and the corresponding optimal menu of contracts. This results in new insights into the (sub)optimality of the equidistant partition. For example, the equidistant partition is optimal for a family of instances for one of the problems. Finally, we derive performance guarantees for the equidistant and optimal partitions for a given number of contracts. For the considered problems the robust pooling approach has good performances with only a few contracts. |
| Keywords: | mechanism design, asymmetric information, robust pooling, optimal partitioning, performance guarantees |
| Date: | 2017–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:100165&r=cta |
| By: | Thibaut Mastrolia (CMAP); Zhenjie Ren (CEREMADE) |
| Abstract: | In this paper, we consider a problem of contract theory in which several Principals hire a common Agent and we study the model in the continuous time setting. We show that optimal contracts should satisfy some equilibrium conditions and we reduce the optimisation problem of the Principals to a system of coupled Hamilton-Jacobi-Bellman (HJB) equations. Further, in a more specific linear-quadratic model where two interacting Principals hire one common Agent, we are able to calculate the optimal effort by the Agent for both Principals. In this continuous time model, we extend the result of Bernheim and Whinston (1986) in which the authors compare the optimal effort of the Agent in a non-cooperative Principals model and that in the aggregate model, and give the condition under which these two optimisations coincide. |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1706.02936&r=cta |