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on Contract Theory and Applications |
| By: | Tamas Fleiner (Centre for Economic and Regional Studies, Institute of Economics); Ravi Jagadeesan (Harvard Business School, and Department of Economics, Harvard University); Zsuzsanna Janko (Department of Mathematics, University of Hamburg); Alexander Teytelboym (Department of Economics, Institutefor New Economics Thinking, and St.-Catherine's College, University of Oxford) |
| Abstract: | We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes, bargaining costs, and incomplete markets. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative stability property called trail stabity. In the presence of frictions, competitive equilibria might be neither stable nor (constrained) Pareto-efficient. In the absence of frictions, on the other hand, competitive equilibria are stable and in the core, even if utility is imperfectly transferable. |
| Keywords: | Trading networks; frictions; competitive equilibrium; matching withcontracts; trail stabity; transaction taxes; commission |
| JEL: | C62 C78 D47 D51 D52 L14 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:2008&r=all |
| By: | Ochieng, Dennis O. |
| Abstract: | While contract farming provides opportunities to link smallholder farmers to markets, its sustainability depends on how the interests of both farmers and buyers are addressed. Previous studies analyze farmers’ preferences for contracts, but buyers’ preferences for contracts and design attributes are hardly examined. The author contributes to the knowledge gap by analyzing farmers’ and buyers’ preferences for contracts and design attributes, and the similarities and differences in preferences using a discrete choice experiment with 505 cotton farmers and 512 tea farmers in southern Malawi. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:masspn:37&r=all |
| By: | Klein, Tobias J. (Tilburg University); Salm, Martin (Tilburg University); Upadhyay, Suraj (Tilburg University) |
| Abstract: | We develop a new approach to quantify how patients respond to dynamic incentives in health insurance contracts with a deductible. Our approach exploits two sources of variation in a differences-in-regression-discontinuities design: deductible contracts reset at the beginning of the year, and cost-sharing limits change over the years. Using rich claims-level data from a large Dutch health insurer we find that individuals are forward-looking. Changing dynamic incentives by increasing the deductible by €100 leads to a reduction in healthcare spending of around 3% on the first days of the year and 6% at the annual level. The response to dynamic incentives is an important part of the overall effect of cost-sharing schemes on healthcare expenditures—much more so than what the previous literature has suggested. |
| Keywords: | health insurance, patient cost-sharing, dynamic incentives |
| JEL: | I13 H51 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13108&r=all |
| By: | Marie-Laure ALLAIN (CREST, CNRS, Ecole Polytechnique, Institut Polytechnique de Paris, Palaiseau, France); Claire CHAMBOLLE (Université Paris-Saclay, INRAE, UR ALISS, 94205, Ivry-sur-Seine, France; CREST, Institut Polytechnique de Paris); Patrick REY (Toulouse School of Economics, University Toulouse Capitole, Toulouse, France); Sabrina TEYSSIER (Univ. Grenoble Alpes, INRA, CNRS, Grenoble INP, GAEL, 38000 Grenoble, France) |
| Abstract: | In a vertical chain in which two rivals invest before contracting with one of two competing suppliers, partial vertical integration may create hold-up problems for the rival. We develop an experiment to test this theoretical prediction in two setups, in which suppliers can either pre-commit ex ante to appropriating part of the joint profit, or degrade ex post the support they provide to their customer. Our experimental results confirm that vertical integration creates hold-up problems in both setups. However, we observe more departures from theory in the second one. Bounded rationality and social preferences provide a rationale for these departures. |
| Keywords: | Vertical Integration, Hold-up, Experimental Economics, Bounded Rationality, Social Preferences. |
| JEL: | C91 D90 L13 L41 L42 |
| Date: | 2020–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2020-09&r=all |