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on Contract Theory and Applications |
| By: | Annamaria Menichini (CSEF, Università di Salerno); Maria Grazia Romano (University of Salerno and CSEF) |
| Abstract: | The paper presents a theory of leasing in which asset use and maintenance shape the firm's decision between purchasing or leasing productive assets. When the maintenance of the asset cannot be carefully specified as part of the loan agreement, its level may be suboptimal, and jeopardise the return to the financiers in case of default, thus eroding the benefit of collateral pledging, particularly relevant for financially constrained firms. Operating leasing allows to overcome such shortcoming, as the maintenance is delegated to the lessor. However, this delegation generates a novel moral hazard problem on the lessee, who, by not paying for maintenance, does not internalise the use incentive and may practice inefficiently low levels of care and cause asset depletion. The paper characterises circumstances in which it may be optimal to lease rather than buy and rationalises some observed features of leasing contracts. |
| Keywords: | Collateral, Financial constraints, Leasing, Maintenance. |
| JEL: | D82 G32 |
| Date: | 2018–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:520&r=all |
| By: | Mark Baker; Lindy Gielens |
| Abstract: | The Dutch labour market has recovered and the unemployment rate has been converging towards pre-crisis levels. Non-standard forms of work have expanded with a strong trend towards self-employment and an increased reliance on temporary contracts. These developments may reflect a preference of some individuals for a more flexible working relationship, but they could also lower job security and job quality for others. Policies need to protect vulnerable groups in the more dynamic working environment without creating barriers to labour mobility and flexibility of the overall labour market. To improve the fairness of the tax system, policies should ensure a more level playing field between workers on different types of contracts. Regulatory policies should aim at raising labour market mobility to improve the matching of skills to jobs by easing the protection on permanent employment contracts and through a more targeted approach to activation policies for disadvantaged groups. Finally, measures should improve the skills of individuals in vulnerable groups to enhance their opportunities to find better jobs.This Working Paper relates to the 2018 OECD Economic Survey of the Netherlands 2018(www.oecd.org/eco/surveys/economic-survey-the netherlands.htm). |
| Keywords: | labour market policy, non-standard work, skills, tax and benefits, work incentives |
| JEL: | J08 J21 J24 J32 J68 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1527-en&r=all |
| By: | Didier Laussel (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Joana Resende (Economics Department, University of Porto) |
| Abstract: | We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of up-stream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Pareto-undominated Nash equilibrium from the suppliers' point of view. In this equilibrium there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances. |
| Keywords: | complementary inputs, asymmetric information, private common agency games |
| JEL: | D82 L22 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1842&r=all |
| By: | Juan Ignacio Pe\~na |
| Abstract: | We present a limits-to-arbitrage model to study the impact of securitization, leverage and credit risk protection on the cyclicity of bank credit. In a stable bank credit situation, no cycles of credit expansion or contraction appear. Unlevered securitization together with mis-pricing of securitized assets increases lending cyclicality, favoring credit booms and busts. Leverage changes the state of affairs with respect to the simple securitization. First, the volume of real activity and banking profits increases. Second, banks sell securities when markets decline. This selling puts further pressure on falling prices. The mis-pricing of credit risk protection or securitized assets influences the real economy. Trading in these contracts reduces the amount of funding available to entrepreneurs, particularly to high-credit-risk borrowers. This trading decreases the liquidity of the securitized assets, and especially those based on investments with high credit risk. |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1901.00177&r=all |