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on Contract Theory and Applications |
| By: | Antelo, Manel; Bru, Lluís |
| Abstract: | The standard dominant firm (DF)-competitive fringe model, in which all firms sell the good through linear pricing, is extended to the use of nonlinear contracts in the form of two-part tariffs (2PT). We show that under general conditions, the DF practices intrapersonal price discrimination, and supplies to fewer consumers than under linear pricing. As a consequence, nonlinear pricing leads to an inefficient result and consumers are worse off than when the DF uses linear prices; on the contrary, fringe firms are better off as they end up charging a higher price for the good. |
| Keywords: | Dominant firm, fringe firms, linear and nonlinear contracts, intrapersonal price discrimination |
| JEL: | L13 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108412&r= |
| By: | Berardino Cesi (University of Rome Tor Vergata, Rome, Italy); Alessio D'Amato (University of Rome †Tor Vergata†, Italy) |
| Abstract: | Environmental regulation and pollution control may clash against the presence of unverifiable tasks, like source specific emissions. To tackle this issue we reshape a voluntary agreement instrument, already available in the received literature, in a dynamic perspective by means of a relational contracting approach. Setting up a Relational Voluntary Environmental Agreement (REA) helps the regulator to solve the unverifiability issue, and may provide polluting firms with the incentives to stick to environmental requirements. In an N firms symmetric context we show that even if emissions are not contractible across firms, so that enforcement cannot be delegated to a third party, if firms themselves are sufficiently patient, a self-enforcing equilibrium, under which the environmental objective is voluntarily met, exists. Finally, the policy analysis reveals that our REA may be welfare-improving with respect to a Voluntary Environmental Agreement on contractible emissions. This occurs when the enforcement cost savings under a relational agreement are larger than the additional social costs related to free riding. |
| Keywords: | Relational Contracts, Environmental Policy, UnveriÂ…ability, Voluntary Environmental Agreement |
| JEL: | D62 H23 Q58 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:srt:wpaper:0821&r= |
| By: | Shehroze Khan; James R. Wright |
| Abstract: | The spread of disinformation on social media platforms such as Facebook is harmful to society. This harm can take the form of a gradual degradation of public discourse; but it can also take the form of sudden dramatic events such as the recent insurrection on Capitol Hill. The platforms themselves are in the best position to prevent the spread of disinformation, as they have the best access to relevant data and the expertise to use it. However, filtering disinformation is costly, not only for implementing filtering algorithms or employing manual filtering effort, but also because removing such highly viral content impacts user growth and thus potential advertising revenue. Since the costs of harmful content are borne by other entities, the platform will therefore have no incentive to filter at a socially-optimal level. This problem is similar to the problem of environmental regulation, in which the costs of adverse events are not directly borne by a firm, the mitigation effort of a firm is not observable, and the causal link between a harmful consequence and a specific failure is difficult to prove. In the environmental regulation domain, one solution to this issue is to perform costly monitoring to ensure that the firm takes adequate precautions according a specified rule. However, classifying disinformation is performative, and thus a fixed rule becomes less effective over time. Encoding our domain as a Markov decision process, we demonstrate that no penalty based on a static rule, no matter how large, can incentivize adequate filtering by the platform. Penalties based on an adaptive rule can incentivize optimal effort, but counterintuitively, only if the regulator sufficiently overreacts to harmful events by requiring a greater-than-optimal level of filtering. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.09847&r= |
| By: | Cynthia L. Doniger |
| Abstract: | I document that less educated workers experience higher and more cyclically sensitive job separation rates. Meanwhile, workers with a bachelor's degree or more exhibit pro-cyclical wages while workers without a high school degree exhibit no statistically discernible cyclical pattern. Differences in the sensitivity are most stark when measurement of labor costs accounts for the value of the persistent effects of current macroeconomic conditions on future remitted wages. These findings suggest optimally differential implementation of self-enforcing implicit wage contracts in which educated workers and their employers leverage relative employment stability to smooth the effects of cyclical fluctuations over longer horizons. This margin of adjustment is less available to the less well educated, who have shorter expected employment durations. Furthermore, failure to account for the heterogeneities documented here leads to substantial underestimation of the welfare costs of business cycles. |
| Keywords: | User Cost of Labor; Implicit Contracts; Education and Wage Differentials; Tenure and Turnover; Turnover; Wage Differentials (Education and Tenure Based); Wage Rigidity |
| JEL: | E24 J31 J63 J41 M52 E52 |
| Date: | 2021–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-19&r= |