|
on Contract Theory and Applications |
| By: | Balke, Neele (University of Chicago); Lamadon, Thibaut (University of Chicago) |
| Abstract: | This paper examines how employer- and worker-specific productivity shocks transmit to earnings and employment in an economy with search frictions and firm commitment. We develop an equilibrium search model with worker and firm shocks and characterize the optimal contract offered by competing firms to attract and retain workers. In equilibrium, riskneutral firms provide only partial insurance against shocks to risk-averse workers and offer contingent contracts, where payments are backloaded in good times and frontloaded in bad times. We prove that there exists a unique spot target wage, which serves as an attraction point for smooth wage adjustments. The structural model is estimated on matched employer-employee data from Sweden. The estimates indicate that firms absorb persistent worker and firm shocks, with respective passthrough values of 27 and 11%, but price permanent worker differences, a large contributor (32%) to variations in wages. A large share of the earnings growth variance can be attributed to job mobility, which interacts with productivity shocks. We evaluate the effects of redistributive policies and find that almost 40% of government-provided insurance is undone by crowding out firm-provided insurance. |
| Keywords: | wages; salary; |
| JEL: | J31 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2021_019&r= |
| By: | Hunold, Matthias; Schad, Jannika |
| Abstract: | We review the Chicago school's single monopoly profit theory whereby an upstream monopolist cannot increase its profits through vertical integration as it has sufficient market power anyways. In our model the dominant supplier has full bargaining power and uses observable two-part tariffs. We show that, by vertically integrating with a downstream incumbent, the supplier can profitably commit to pricing more aggressively if a downstream entrant refuses its supply contract. This can deter welfare-enhancing entry. The anti-competitive effects arise from the seemingly pro-competitive elimination of double marginalization. We relate our model to hybrid platforms and, in particular, Apple's App store. |
| Keywords: | double marginalization,entry deterrence,exclusive dealing,foreclosure,verticalmerger |
| JEL: | L22 L40 L42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:373&r= |
| By: | Massimo Finocchiaro Castro (Mediterranean University of Reggio Calabria, Italy); Calogero Guccio (University of Catania, Italy) |
| Abstract: | In this work, adopting a semi-parametric approach and a quasi-experiment setting, we empirically assess the effects of a reform of public procurement regulation in Italy, approved in 2011, that increased the discretion of bureaucrats in selecting the procurer. To this end, employing a large dataset of public works managed by Italian municipalities in the period 2009-2013, we first estimate contract execution performance; then, we test the impact of the reform on the efficiency of public works execution in an institutional context characterized by large differences in social capital and trust in institutions. The results provide evidence that the reform exerted a positive, albeit small, effect on public works execution performance. However, the beneficial role exerted by increased discretion is positive and significant only in those areas where social capital and trust in institutions have reached higher levels. These results seem to suggest that more discretion leads to greater efficiency but also to greater corruption risks suggesting that increased discretion must be balanced by strengthened ex-post controls, particularly in high-risk areas. |
| JEL: | D24 D73 H57 P16 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:108&r= |
| By: | Kohei Daido (School of Economics, Kwansei Gakuin University); Tomoya Tajika (Hokusei Gakuen University) |
| Abstract: | This study examines the effect of the principal's control over the agent's behavior in a dynamic principal-agent model with hidden information. We show the condition that the agent who has a similar preference for actions as the principal dares to choose the unpreferred action when the principal imposes a sanction on such an action. This also makes the principal worse off even when imposing sanctions is materially costless. When the principal incurs a cost on sanctions, they cease implementing them after observing the unpreferred action taken by the agent. Our results of the hidden cost of control correspond to the insight from the psychological reactance theory: when an agent's freedom is threatened, they resist it to restore the freedom. |
| Keywords: | Dynamic principal-agent model, Hidden cost of controls, Psychological reactance, Ratchet effects, Sanction |
| JEL: | D82 D86 D91 M52 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:233&r= |
| By: | Giuseppe Attanasi (Université Côte d'Azur, France; GREDEG CNRS); Marta Ballatore (GREDEG CNRS; Université Côte d'Azur, France); Michela Chessa (Université Côte d'Azur, France; GREDEG CNRS); Agnès Festré (GREDEG CNRS; Université Côte d'Azur, France; The Arctic University of Norway, Tromsø, Norway); Chris Ouangraoua (GREDEG CNRS; Université Côte d'Azur, France) |
| Abstract: | This study proposes an analysis of behavioral factors (attitudes toward risk, ambiguity and reduction of compound lotteries) as choice determinants of a blockchain-based car insurance smart contract (henceforth, BCT-based SC) vs. an ambiguous expert-based one. In a laboratory experiment, we develop a toy model representing such a choice and complement it with a questionnaire in order to collect data concerning participants’ demographics, personality traits, and car use experience. Our results can inform policies aimed at improving the understanding of BCT-based SC in the case of car insurance services. In particular, they advocate for designing ad hoc policies depending on user’s experience with cars. |
| Keywords: | Laboratory experiments, Blockchain, Smart contracts, Technology adoption, Risk, Ambiguity, Compound lottery |
| JEL: | C81 C83 C91 D81 D91 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2021-41&r= |