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on Contract Theory and Applications |
| By: | Daniel Danau (Normandie Univ, UNICAEN, CNRS, CREM, F-14000 Caen, France) |
| Abstract: | In this study we parallel Contract theory and Contract law and over a few considerations about the link between the two literatures. First, we highlight that studies in Contract theory can be classi ed in analyses of principal agent relation-ships and analyses of speci c investment problems, and that Contract law mainly focuses on the latter, in general. This leaves aside the analysis of the potential role of the law, for instance, in containing the contractual costs of asymmetric information. Second, we try and clarify under what legal rules the parties fully commit with the contract, or they do not, taking into account that the notions of full and limited commitment are very common in Contract theory whereas they are not in Contract law. This further allows us to provide a uni ed presentation of the literature, based on the features of the contractual environment: complete versus incomplete contracting, full versus limited commitment. Third, we point out that, unlike studies in Contract law, studies in Contract theory devote little attention to the litigation process. For this reason, there is no uni ed analysis of optimal contracts accounting for the transaction costs that appear in the various stages of a contractual relationship. |
| Keywords: | Contract law, Contract theory, Law and economics, Incomplete contracts |
| JEL: | D82 K12 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:2019-04&r=all |
| By: | Herings, P. Jean-Jacques (General Economics 1 (Micro)); Zhou, Yu (osaka university) |
| Abstract: | We consider the one-to-one two-sided matching with contracts model in which buyers face financial constraints. In this model there is a stable outcome, but not necessarily a competitive equilibrium as defined in the standard way. We propose a new equilibrium notion, quantity-constrained competitive equilibrium (QCCE) that allows buyers to form rational expectations on the lack of supply when their financial constraints are binding. We show the existence of QCCEs and establish the equivalence among QCCE outcomes, stable outcomes, and core outcomes. We also analyze the existence of QCCEs with uniform prices, the lattice property of QCCEs, and the rural hospital theorem of QCCEs. We finally examine the relation between models with financial constraints and models with price controls. |
| Keywords: | financial constraints, matching with contracts, stable outcome, quantity-constrained competitive equilibrium, equivalence result, lattice property, core outcome, rural hospital theorem |
| JEL: | C71 C78 D45 D52 |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2019007&r=all |
| By: | Bellia, Mario; Pelizzon, Loriana; Subrahmanyam, Marti G.; Uno, Jun; Yuferova, Darya |
| Abstract: | Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? Using data from NYSE Euronext Paris, we show that an exogenous increase in competition among DMMs leads to a significant decrease in quoted and effective spreads, mainly through a reduction in adverse selection costs. In contrast, changes in incentives, through small changes in rebates and requirements for DMMs, do not have any tangible effect on market liquidity. Our results are of relevance for designing optimal contracts between exchanges and DMMs and for regulatory market oversight. |
| Keywords: | High-Frequency Trading (HFT),Designated Market Makers (DMMs) Market Making,Adverse Selection,Liquidity Provision |
| JEL: | G12 G14 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:247&r=all |