nep-cta New Economics Papers
on Contract Theory and Applications
Issue of 2020‒02‒24
three papers chosen by
Guillem Roig
University of Melbourne

  1. Rebundling Institutions By Katja Kalkschmied
  2. Cost Efficiency and Endogenous Regulatory Choices: Evidence from the Transport Industry in France By Joanna Piechucka
  3. Bargaining over Contingent Contracts Under Incomplete Information By Geoffroy de Clippel; Jack Fanning; Kareen Rozen

  1. By: Katja Kalkschmied (University of Graz, Austria)
    Abstract: This study investigates the joint effects of legal property rights and contracting institutions on economic development. In a two-step panel estimation procedure that uses data of 130 countries over the period 2005-2015, I find that the long-term income effects of legal property rights institutions depend on the quality of legal contracting institutions. This supports the hypothesis that the two different types of institutions provide interrelated incentives and constraints on economic decisions and productive activities. According to the estimates, the marginal effects of increasing executive constraints are significantly higher in countries with a legal system that efficiently enforces private contracts. Further decomposing the interaction effect for groups of countries with different quality combinations reveals that the first of the two types of legal institutions matters for the size and direction of the interaction effect. In poor countries with absent or bad legal institutions, reforms considering only one single type can backfire.
    Keywords: legal institutions; property rights; contracting; interrelated incentives; joint effects; economic development
    JEL: C23 H13 O11 P51
    Date: 2020–02
  2. By: Joanna Piechucka
    Abstract: We study the impact of different regulatory designs on the cost efficiency of operators providing a public service, exploiting data from the French transport industry. The distinctive feature of the study is that it considers regulatory regimes as endogenously determined choices, explained by economic, political, and institutional variables. Our approach leans on a positive analysis to study the determinants of regulatory contract choices, which, in turn, affect the costs of operating urban public transport. Our results show that given similar network characteristics, networks operated under fixed-price contracts exert lower costs than those regulated under cost-plus contracts. This finding is in line with the theoretical prediction of new regulatory economics that fixed-price contracts provide more incentives for efficiency. Importantly, ignoring the endogeneity of contractual choices would lead to significantly underestimating the impact of contract type on cost efficiency. Our findings provide useful policy implications suggesting that the move toward more high-powered incentive schemes is indeed associated with significant cost efficiencies. Moreover, they highlights the importance of accounting for the endogeneity of regulatory contract choices.
    Keywords: Cost-efficiency; Endogenous contract choices; Transport industry
    JEL: L51 L92
    Date: 2020
  3. By: Geoffroy de Clippel; Jack Fanning; Kareen Rozen
    Abstract: We study bargaining over contingent contracts in problems where private information becomes public or verifiable when the time comes to implement the agreement. We suggest a simple, two-stage game that incorporates important aspects of bargaining. We characterize equilibria in which parties always reach agreement, and study their limits as bargaining frictions vanish. We show that under mild regularity conditions, all interim-efficient limits belong to Myerson (1984)’s axiomatic solution. Furthermore, all limits must be interim-efficient if equilibria are required to be sequential. Results extend to other bargaining protocols.
    Date: 2020

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