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on Contract Theory and Applications |
| By: | Ines Macho-Stadler (UAB - Universitat Autònoma de Barcelona [Barcelona]); David Pérez-Castrillo (UAB - Universitat Autònoma de Barcelona [Barcelona]); Nicolas Quérou (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We consider a market where \standard" risk-neutral agents coexist with "goalorented" agents who, in addition to the expected income, seek a high-enough monetary payo (the \trigger") to ful ll a goal. We analyze a two-sided one-to-one matching model where the matching between principals and agents and incentive contracts are endogenous. In any equilibrium contract, goal-oriented agents are matched with the principals with best projects and receive the trigger with positive probability. Moreover, goal and monetary incentives are complementary: goaloriented agents receive stronger monetary incentives. Finally, we discuss policy interventions in relevant environments.. |
| Keywords: | Goal-oriented agents,incentives,matching market |
| Date: | 2020–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-02901398&r=all |
| By: | Haufler, Andreas (University of Munich and CESifo); Perroni, Carlo (University of Warwick and CESifo) |
| Abstract: | We offer a new explanation for why taxes have become less progressive in many countries in parallel with an increase in income inequality. When performancebased compensation differentials are needed to incentivize effort, redistribution through progressive income taxes becomes less precisely targeted. Taxation reduces after-tax income inequality but undermines incentive contracts, lowering effort and raising pre-tax income differentials. Market integration can widen the spread of project returns and make contract choices more responsive to changes in the level of taxation, resulting in a lower optimum income tax rate even when individuals are not inter-jurisdictionally mobile. |
| Keywords: | Redistributive Taxation ; Performance-based Contracts ; Market Integration JEL codes: H21 ; F15 ; D63 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1282&r=all |
| By: | Guerrazzi, Marco |
| Abstract: | In this paper, I develop a dynamic version of the efficient bargaining model grounded on optimal control in which a firm and a union bargain over the wage in a continuous-time environment under the supervision of an infinitely lived mediator. Overturning the findings achieved by means of a companion right-to-manage framework, I demonstrate that when employment is assumed to adjust itself in the direction of the contract curve implied by the preferences of the two bargainers, increases in the bargaining power of the firm (union) accelerate (delay) the speed of convergence towards the stationary solution. In addition, confirming the reversal of the results obtained when employment moves over time towards the firm's labour demand, I show that the dynamic negotiation of wages tends to penalize unionized workers and favour the firm with respect to the bargaining outcomes retrieved with a similar static wage-setting model. |
| Keywords: | Wage-employment bargaining; Optimal control; Local dynamics. |
| JEL: | E24 J52 |
| Date: | 2020–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102012&r=all |
| By: | Julie Ing (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper studies the contractual relationship between a government and a firm in charge of the extraction of an exhaustible resource. Governments design taxation scheme to capture resource rent and they usually propose contracts with limited duration and possess less information on resources than the extractive firms do. This article investigates how information asymmetry on costs and an inability to commit to long-term contracts affect tax revenue and the extraction path. This study gives several unconventional results. First, when information asymmetry exists, the inability to commit does not necessarily lower tax revenues. Second, under asymmetric information without commitment, an efficient firm may produce during the first period more or less than under symmetric information. Hence, the inability to commit has an ambiguous effect on the exhaustion date. Third, the modified Hotelling's rule is such that an increase in the discount factor does not necessarily reduce the first-period extraction. |
| Keywords: | resource taxation,asymmetric information,commitment |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02885885&r=all |
| By: | Elliott, M.; Talamàs, E. |
| Abstract: | In many markets, heterogenous agents make non-contractible investments before bargaining over both who matches with whom and the terms of trade. In static markets, the holdup problem—that is, inefficient investments caused by agents receiving only a fraction of their returns—is ubiquitous. Markets are often dynamic, however, with agents entering over time. Taking a general non-cooperative investment and bargaining approach, we show that the holdup problem vanishes in markets with dynamic entry as agents become patient: While there is substantial wiggle room for bargaining to determine outcomes, every bargaining outcome gives everyone her marginal product. |
| Date: | 2020–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2070&r=all |
| By: | Eleftheria Triviza |
| Abstract: | This article analyses how consumers’ habit formation affects firms’ pricing policies. I consider both sophisticated consumers, who realize that their current consumption will affect future consumption, and naive consumers, who do not. The optimal contract for sophisticated consumers is a two-part tariff. The main result is that under naive habit formation, the optimal pricing pattern is a three-part tariff; namely a fixed fee, with some units priced below cost — and after their end — pricing above marginal cost. This holds both under symmetric and asymmetric information. |
| Keywords: | three-part tariff, nonlinear pricing, naivete, habit formation |
| JEL: | L11 D11 D42 D82 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_098v2&r=all |