nep-cta New Economics Papers
on Contract Theory and Applications
Issue of 2021‒04‒05
three papers chosen by
Guillem Roig
University of Melbourne
  1. Long-term contracting with time-inconsistent agents By Gottlieb, Daniel; Zhang, Xingtan
  2. Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms By Andrea Bassanini; Eve Caroli; François Fontaine; Antoine Reberioux
  3. Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers By Andrew Sweeting; Xuezhen Tao; Xinlu Yao
  1. By: Gottlieb, Daniel; Zhang, Xingtan
    Abstract: We study contracts between naive present-biased consumers and risk-neutral firms. We show that the welfare loss from present bias vanishes as the contracting horizon grows. This is true both when bargaining power is on the consumers’ and on the firms’ side, when consumers cannot commit to long-term contracts, and when firms do not know the consumers’ naiveté. However, the welfare loss from present bias does not vanish when firms do not know the consumers’ present bias or when they cannot offer exclusive contracts.
    Keywords: present bias; dynamic inconsistency; regulation; behavioral industrial organization; Wiley
    JEL: J1
    Date: 2021–03–01
    URL: http://d.repec.org/n?u=RePEc:ehl:lserod:106622&r=all
  2. By: Andrea Bassanini (IZA - Institute for the study of labor - Institute for the Study of Labor - IZA, OECD - Organisation for Economic Cooperation and Development); Eve Caroli (IZA - Institute for the Study of Labor - IZA, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); François Fontaine (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IZA - Institute for the Study of Labor - IZA); Antoine Reberioux (LADYSS - Laboratoire Dynamiques Sociales et Recomposition des Espaces - UP1 - Université Paris 1 Panthéon-Sorbonne - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique - UP - Université de Paris, UP - Université de Paris)
    Abstract: We develop a simple theoretical model showing that, by adding to the adjustment costs associated with permanent contracts, local social pressure against dismissals creates an incentive for CEOs to rely on fixed-term contracts, in an attempt to escape social pressure. Using linked employer-employee data, we show that establishments located closer to headquarters have higher shares of fixed-term contracts in hiring than those located further away whenever firms' headquarters are located in self-centered communities and the CEO not only works but also lives there. We show that these findings can only be explained by local social pressure.
    Keywords: CEO reputation,Adjustment costs,Employment contracts,Social pressure
    Date: 2021–03–23
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03177848&r=all
  3. By: Andrew Sweeting; Xuezhen Tao; Xinlu Yao
    Abstract: We model differentiated product pricing by firms that possess private information about serially-correlated state variables, such as their marginal costs, and can use prices to signal information to rivals. In a dynamic game, signaling can raise prices significantly above static complete information Nash levels even when the privately observed state variables are restricted to lie in narrow ranges. We calibrate our model using data from the beer industry, and we show that our model can explain changes in price levels and price dynamics after the 2008 MillerCoors joint venture.
    JEL: D43 D82 L13 L41 L90
    Date: 2021–03
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:28589&r=all
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