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on Contract Theory and Applications |
| By: | Ying-Ju Chen; Zhengqing Gui; Ernst-Ludwig von Thadden; Xiaojian Zhao |
| Abstract: | A central problem in vertical relationships is to minimize the mismatch between supply and demand. This paper studies a problem of contracting between a manufacturer and a retailer who privately observes the retail demand materialized after the contracting stage. Cash payments are bounded above by the retailer’s revenue, while the return of unsold inventories is bounded above by the order quantity net of the actual quantity sold. While the majority of the papers in the literature takes the contractual forms as given and investigates the consequences that these contracts may lead to in various contexts, without assuming any functional form of contracts, we show that the optimal contract can be implemented by a buy-back contract: the manufacturer requests an upfront payment from the retailer and buys back the unsold inventories at the retailer’s salvage value. The optimality of buy-back contracts is robust to several scenarios including competition between retailers. |
| Keywords: | Retail contracts, return policies, buy-back contracts, incentive problems, limited liability |
| JEL: | D82 D86 L42 L60 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_292&r= |
| By: | Plassard, Romain |
| Abstract: | Under which conditions did Robert Lucas’s microfoundational program come to dominate the field? My article sheds new light on this question. The focus is on why models incorporating rational expectations and market-clearing seduced macroeconomists. My case study is Robert Barro and Herschel Grossman. Drawing on Grossman’s archives, I define a framework for explaining their modeling choices. I show that methodological principles, tractability constraints, and research strategies explained why, at the end of the 1970s, Barro and Grossman preferred equilibrium over disequilibrium macroeconomics. |
| Keywords: | fluctuations, non-neutrality of money, fixed-price equilibrium models, contract theory, disequilibrium macroeconomics, equilibrium macroeconomics |
| JEL: | B21 B22 B23 E10 E32 |
| Date: | 2021–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107201&r= |