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on Contract Theory and Applications |
| By: | Watson, Joel |
| Abstract: | This article describes the emerging game-theoretic framework for modeling long-term contractual relationships with moral hazard. The framework combines self-enforcement and external enforcement, accommodating alternative assumptions regarding how actively the parties initially set and renegotiate the terms of their contract. A progression of theoretical components is reviewed, building from the recursive formulation of equilibrium continuation values in repeated games. A principal-agent setting serves as a running example. Expected final online publication date for the Annual Review of Economics, Volume 13 is August 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates. |
| Date: | 2021–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:qt19f9w2xf&r= |
| By: | Eppinger, Peter S.; Kukharskyy, Bohdan |
| Abstract: | Firm integration is fundamentally shaped by contractual frictions. But do better contracting institutions, reducing these frictions, induce firms to be more or less deeply integrated? To address this question, this paper exploits unique micro data on ownership shares across more than 200,000 firm pairs worldwide, including domestic and cross-border ownership links. We uncover a new stylized fact: Firms choose higher ownership shares in subsidiaries located in countries with better contracting institutions. We develop a Property-Rights Theory of the multinational firm featuring partial ownership that rationalizes this pattern and guides our econometric analysis. The estimations demonstrate that better contracting institutions favor deeper integration, in particular in relationship-specific industries. |
| Keywords: | firm integration,contracting institutions,multinational firms,Property-Rights Theory,ownership shares |
| JEL: | F21 F23 D02 D23 L14 L23 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:148&r= |
| By: | Marek Pycia; M. Bumin Yenmez |
| Abstract: | We incorporate externalities into the stable matching theory of two-sided markets. Extending the classical substitutes condition to markets with externalities, we establish that stable matchings exist when agent choices satisfy substitutability. We show that substitutability is a necessary condition for the existence of a stable matching in a maximal-domain sense and provide a characterization of substitutable choice functions. In addition, we extend the standard insights of matching theory, like the existence of side-optimal stable matchings and the deferred acceptance algorithm, to settings with externalities even though the standard fixed-point techniques do not apply. |
| Keywords: | Matching, externalities, two-sided matching, matching with contracts, stable matching, labor markets, deferred acceptance, substitutes |
| JEL: | C78 D47 D50 D62 D86 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:392&r= |
| By: | Belleflamme, Paul (Université catholique de Louvain, LIDAM/CORE, Belgium); Li, Muxin (Université catholique de Louvain, LIDAM/CORE, Belgium); Périlleux, Anaïs (Université catholique de Louvain, LIDAM/IRES, Belgium); Strowel, Alain (Université catholique de Louvain) |
| Abstract: | We contribute to the discussion on the resilience of sharing economy platforms (SEPs) in pandemic times. We distinguish SEPs according to how the pandemic affects their respective supply and demand sides (both sides contract, sides get unbalanced, or both sides expand). Within each category, we discuss how SEPs (both for-profit and prosocial) bear up against the threats and/or exploit the opportunities raised by the pandemic; we also compare SEPs to “pipelines” (integrated firms). Analyzing specific examples through the lens of management science, economics and legal studies, we formulate three conjectures: (1) although SEPs may benefit from lower operating costs in the short run, network effects might accelerate their decline in the long run; (2) yet, network effects also make SEPs better-equipped than pipelines to seize new opportunities emerging in pandemic times; (3) prosocial SEPs are more flexible than profit-oriented SEPs in responding to social needs during difficult times. |
| Keywords: | Digital platforms, resilience, sharing economy, Covid-19 |
| JEL: | L21 L31 L86 M13 M14 K24 |
| Date: | 2021–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2021008&r= |
| By: | Attar, Andrea; Campioni, Eloisa; Mariotti, Thomas; Pavan, Alessandro |
| Abstract: | We study games in which several principals contract with several privately-informed agents. We show that enabling the principals to engage in contractible private disclosures – by sending private signals to the agents about how the mechanisms will respond to the agents’ messages – can significantly affect the predictions of such games. Our first result shows that private disclosures may generate equilibrium outcomes that cannot be supported in any game without private disclosures, no matter the richness of the message spaces and the availability of public randomizing devices. The result thus challenges the canonicity of the universal mechanisms of Epstein and Peters (1999). Our second result shows that equilibrium outcomes of games without private disclosures need not be sustainable when private disclosures are allowed. The result thus challenges the robustness of the “folk theorems” of Yamashita (2010) and Peters and Troncoso-Valverde (2013). These findings call for a novel approach to the analysis of competing-mechanism games. |
| Keywords: | Incomplete Information; Competing Mechanisms; Private Disclosures;; Signals; Universal Mechanisms; Folk Theorems |
| JEL: | D82 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125751&r= |