|
on Contract Theory and Applications |
| By: | Jan Christoph Schlegel |
| Abstract: | We study conditions for the existence of stable and group-strategy-proof mechanisms in a many-to-one matching model with contracts if students' preferences are monotone in contract terms. We show that "equivalence", properly defined, to a choice profile under which contracts are substitutes and the law of aggregate holds is a necessary and sufficient condition for the existence of a stable and group-strategy-proof mechanism. Our result can be interpreted as a (weak) embedding result choice functions under which contracts are observable substitutes and the observable law of aggregate demand holds. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.10326&r=all |
| By: | Bernard GAUTHIER (FERDI); Frédéric LESNÉ (Transparency International - Initiative Madagascar) |
| Abstract: | This paper examines the accuracy of estimates of corruption reported in business surveys by comparing reported experience of corruption in public procurement from Malagasy firms having won public contracts with a more objective measure of corruption in the sector using a red flag indicator of corruption risk. This red flag indicator of corruption identifies contracts that failed to comply (or circumvented) public procurement regulations. We find that about 68 percent of public contracts in Madagascar in 2013 and 2014 were awarded with a method not complying with the Public Procurement Code and classified according to our methodology at risk of corruption, with 85% of contracting firms having won at least one corruption-prone contract. Matching public procurement data in Madagascar with a firm-level survey in 2015 among firms awarded public contracts in 2013-2014, we find that experience of corruption has no influence on firms’ survey participation or propensity to answer questions about corruption. |
| Keywords: | index, corruption, surveys, firms |
| JEL: | D21 C42 D73 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:fdi:wpaper:4648&r=all |
| By: | Zhengqing Gui; Ernst-Ludwig von Thadden; Xiaojian Zhao |
| Abstract: | We characterize an optimal financial contract when the firm’s realized cash flow is unobservable to the investor and the firm’s collateral can only be liquidated partially by resorting to the services of a costly third party. An optimal contract may exhibit a piecewise structure and vary with the liquidation cost and the firm’s actual liquidity shortage. Partial liquidation and wholesale transfers of collateral can coexist in an optimal contract. In contrast to part of the literature, the incentive-compatibility constraint incorporates the firm’s limited liability, and may be slack at the optimum. Allowing the firm to overcome an ex-post liquidity shortage by borrowing surreptitiously from a third party may reduce the firm’s ex-ante expected utility. |
| Keywords: | Financial contracting, incentive-compatibility, limited liability, indivisible collateral, costly liquidation |
| JEL: | D86 G33 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_064_2018&r=all |
| By: | Mariassunta Giannetti; Nicolas Serrano-Velarde; Emanuele Tarantino |
| Abstract: | Using a unique dataset with information on 20 million inter-firm transactions, we provide evidence that suppliers offer cheap trade credit to ease competition in downstream markets. We show theoretically that trade credit allows suppliers to transfer surplus to high-bargaining-power customers while preserving sales to other buyers. Suppliers optimally choose a trade credit limit up to which customers can purchase on account. This contractual feature allows suppliers to target infra-marginal units and to leave unaffected customers' marginal costs. Empirically, we find that suppliers grant trade credit to high-bargaining-power customers only when they fear the cannibalization of sales to other low-bargaining-power customers. Exploiting a law that lowered the cost of offering trade credit, we show that higher provision of trade credit to high-bargaining-power customers leads to an expansion of the suppliers' customer base and higher growth of sales to low-bargaining-power customers. |
| Keywords: | Trade credit, competition, input prices, supply chains |
| JEL: | G3 D2 L1 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_062_2018&r=all |