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on Contract Theory and Applications |
| By: | Patrick Bolton (Columbia University Graduate School of Business & CEPR); Mitu Gulati (Duke Law School); Ugo Panizza (Graduate Institute, Geneva & CEPR) |
| Abstract: | The economic harm being caused by the novel coronavirus may soon result in multiple sovereign debtors moving into default territory. But the existing playbook for dealing with multi-sovereign emerging market debt crises is blank. The only debt crisis scenario we know is protracted country-by-country and contract-by-contract negotiated workouts. As of this writing, expert groups are working on the design of a mechanism to run multiple sovereign debt workouts simultaneously. Those designs, however, will take time to configure and get international buy-in. This paper sets forth some options to provide temporary legal protection to the debtor countries in the meantime; while they are in need of diverting resources toward Covid amelioration. This is the notion of "legal air cover". The options we propose involve ex post state intervention in debt contracts. They are extreme and may come with risks. But we show that in the case of Greece, when intervention such as we envision was necessary, there were no negative spillovers on periphery Eurozone debt markets associated with the Greek ex post modification of contract terms. |
| Keywords: | Sovereign default; Incomplete contracts; Debt restructuring |
| JEL: | F34 F51 |
| Date: | 2020–10–04 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp16-2020&r=all |
| By: | Kiho Yoon (Department of Economics, Korea University 145 Anam-ro, Seongbuk-gu, Seoul, Korea 02841) |
| Abstract: | With a multilateral vertical contracting model, we examine the contractual form and the vertical structure in media markets. We analyze the trade of content by the Nash bargaining solution and the downstream competition by the Hotelling location model. We show that the possibility of exclusive contracts rises when the value of the premium content increases, the degree of horizontal differentiation in the downstream market decreases, the importance of advertising revenue decreases, and the relative bargaining power of upstream firm decreases. We also show that vertical separation (full vertical integration, respectively) is plausible when the relative bargaining power of upstream firm is strong (weak, respectively). |
| Keywords: | content provision, exclusive contract, vertical integration, media market, video programming. |
| JEL: | D43 L42 L82 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:2009&r=all |
| By: | Aubhik Khan; Latchezar Popov; B. Ravikumar |
| Abstract: | We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in models with private information about endowments. In contrast to the latter, the value of the risk-sharing arrangement in our model always remains above the autarky value. There is no need for long-term commitment. Further, in our model, there are no net expected transfers each period across individuals. This allows us to decentralize the efficient allocation into one-period insurance contracts that do not require long-term commitment on the part of the principal or agent. Furthermore, while the efficient allocation implies an increasing dispersion of lifetime utility entitlements and consumption, this need not lead to declines in individual consumption as in the endowment model. When technology is sufficiently productive, all individuals experience consumption growth. |
| Keywords: | Efficiency; Private information; Capital accumulation; Commitment; Immiseration; One-period contract |
| JEL: | D30 D52 D82 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:88818&r=all |
| By: | Shi Chen; Wolfgang Karl H\"ardle; Brenda L\'opez Cabrera |
| Abstract: | In this paper we propose a regularization approach for network modeling of German power derivative market. To deal with the large portfolio, we combine high-dimensional variable selection techniques with dynamic network analysis. The estimated sparse interconnectedness of the full German power derivative market, clearly identify the significant channels of relevant potential risk spillovers. Our empirical findings show the importance of interdependence between different contract types, and identify the main risk contributors. We further observe strong pairwise interconnections between the neighboring contracts especially for the spot contracts trading in the peak hours, its implications for regulators and investors are also discussed. The network analysis of the full German power derivative market helps us to complement a full picture of system risk, and have a better understanding of the German power market functioning and environment. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.09739&r=all |
| By: | Jorge Padilla (Compass Lexecon); Salvatore Piccolo (Università di Bergamo, Compass Lexecon and CSEF); Helder Vasconcelos (Porto University and Compass Lexecon) |
| Abstract: | We characterize and compare the private and social incentives to collect consumer data by a vertically-integrated online intermediary who competes with third-party sellers listed on its platform and is required by regulation to share with rivals all the information it gathers. With linear intermediation fees and price competition, the intermediary over-invests in accuracy compared to the social optimum when the intra-platform competition is sufficiently weak and when demand is not too responsive to quality. By contrast, the intermediary tends to under-invest in accuracy when the intra-platform competition is strong enough, and demand is sufficiently responsive to quality. With quantity competition, the intermediary always over-invests in accuracy. Importantly, when consumers exhibit privacy concerns, the over-investment problem worsens, whereas the under-investment problem mitigates. We also investigate the impact of alternative (non-linear) contractual arrangements. |
| Keywords: | Consumer Data, Competition, Information Accuracy, Platforms, Privacy, Value of Information, Vertical Integration. |
| JEL: | D47 D85 L5 L81 M3 |
| Date: | 2020–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:583&r=all |