nep-cta 2021-09-27 papers

on Contract Theory and Applications

Issue of 2021‒09‒27
two papers chosen by
Guillem Roig
University of Melbourne

Equilibria in Matching Markets with Soft and Hard Liquidity Constraints By Herings, P. Jean-Jacques; Zhou, Yu
Vertical integration as a source of hold-up: An experiment By Marie-Laure Allain; Claire Chambolle; Patrick Rey; Sabrina Teyssier

Equilibria in Matching Markets with Soft and Hard Liquidity Constraints

By:	Herings, P. Jean-Jacques (RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics); Zhou, Yu
Abstract:	We consider a matching with contracts model in the presence of liquidity constraints on the buyers side. Liquidity constraints can be either soft or hard. A convergent sequence of economies with increasingly stringent soft liquidity constraints is an economy with hard liquidity constraints at the limit. The limit of a corresponding convergent sequence of competitive equilibria may fail to be a competitive equilibrium in the limit economy. We establish limit results of two alternative notions of competitive equilibrium, quantity-constrained competitive equilibrium and expectational equilibrium, which do not suffer from such discontinuity problems. The implications of these limit results are discussed.
JEL:	C72 C78 D45 D52
Date:	2021–09–20
URL:	http://d.repec.org/n?u=RePEc:unm:umagsb:2021013&r=

Vertical integration as a source of hold-up: An experiment

By:	Marie-Laure Allain (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Claire Chambolle (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Patrick Rey (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Sabrina Teyssier (GAEL - Laboratoire d'Economie Appliquée de Grenoble - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
Abstract:	In a vertical chain in which two rivals invest before contracting with one of two competing suppliers, vertical integration can create hold-up problems for the rival. We develop an experiment to test this theoretical prediction in a setup in which suppliers can either pre commit ex ante to being greedy or degrade ex post the input they provide to their customer. Our experimental results confirm that vertical integration creates hold-up problems. However, vertical integration also generates more departures from theory, which can be explained by bounded rationality and social preferences.
Keywords:	Vertical integration,Hold-up,Experimental economics,Bounded rationality,Social preferences
Date:	2021
URL:	http://d.repec.org/n?u=RePEc:hal:journl:hal-03341440&r=

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