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on Contract Theory and Applications |
| By: | Mats Kröger |
| Abstract: | Public support systems and private investments in renewable energy are increasingly existing side-by-side and are both emphasized in policy proposals on the European and national levels. This paper assesses the interaction between the two approaches with respect to cream-skimming, i.e., the potential for low-cost projects to sign private contracts that increase the costs of publicly supported renewable energy. This paper uses a stylized microeconomic model and a numerical simulation to assess this question. It finds that the incentive to cream-skimming exists when governments employ any form of resource differentiation in their renewable energy contracts. The numerical analysis shows that, at current price levels, cream-skimming could increase power prices by 2-6% depending on the PPA’s mark-up. The effect is larger for a wider cost-distribution of renewable energy projects, which might occur as the energy transition proceeds. |
| Keywords: | Climate policy, renewable energy, distributional consequences, creamskimming, contracts for differences |
| JEL: | D44 Q42 Q48 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2092 |
| By: | Patrick Rey; Joseph E. Stiglitz |
| Abstract: | Principal-agent models take outside options, determining participation and incentive constraints, as given. We construct a general equilibrium model where workers’ reservation wages and the maximum punishment acceptable before workers quit are instead determined endogenously. We simultaneously extend the standard effort efficiency-wage model by incorporating noisy signals, labor market frictions, and the possibility of performance-based pay, analyzing the equilibrium response to an adverse signal, and establishing conditions under which equilibrium entails lowering wages (performance contracting) rather than firing. We provide a complete analysis of the general equilibrium comparative statics, showing, for instance, that frictions (sand-in-the-wheels) may decrease unemployment and that the equilibrium is determined by two simple aggregates which depend on the parameters of the economy, interpretable as the intercept and slope of a pseudo-labor supply curve, embedding all the binding constraints (e.g., the no-shirking and labor market participation constraints). We also show that there may exist only a firing equilibrium, a no-firing equilibrium, multiple (firing and no-firing) equilibria, and no pure-strategy equilibrium. The economy is, in general, not efficient either in the selection of the form of equilibrium or the wages paid within any type of equilibrium. We discuss welfare enhancing government interventions, including publicly provided sand-in-the-wheels. |
| JEL: | D82 D86 E24 J31 J41 J63 J64 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32700 |
| By: | Anton Kolotilin (School of Economics, UNSW Business School); Hongyi Li (School of Economics, UNSW Business School); Andriy Zapechelnyuk (School of Economics, University of Edinburgh) |
| Abstract: | We study monotone persuasion in the linear case, where a posterior distribution over states is summarized by its mean. We identify two settings where the optimal unrestricted signal can be nonmonotone. In the first setting, the optimal unrestricted signal requires randomization. In the second setting, the optimal unrestricted signal entails nonmonotone pooling of states. We solve for the optimal monotone signal in each setting, and illustrate our results with an application to media censorship. |
| Keywords: | Bayesian persuasion, monotone persuasion |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:swe:wpaper:2024-05 |
| By: | Bachev, Hrabrin |
| Abstract: | The achievements of the interdisciplinary New Institutional Economics are adapted and a holistic approach to the definition, classification, evaluation, and improvement of contracts and contractual relations is justified. Specificity of the economic study of agrarian contracts is summarized and a "new" approach for economic analysis, evaluation and improvement of agrarian contracts is presented. The later includes: (1) economic definition of agrarian contracts and characterization of their place in the system of agrarian governance as bilateral or multilateral agreements related to agricultural production and services; (2) economic characteristics of the agents participating in the contractual relations (interests, awareness, risk-taking, capability, tendency to opportunism, etc.); (3) economic characteristics of different types of agrarian contracts (for purchase and sale, hire of labor and resources, services, loan, insurance, marketing, coalition, etc.); (4) economic characterization of the agrarian contracting process (technological, transactional, institutional, etc. factors for managerial choice); (5) economic characterization of the outcome of the contractual process and the dominant governance order in the agrarian sphere (rule of law, rule of force, contractual structure, etc.); (6) characterization of the stages for the improvement of agrarian contracts and governance (identification of problems and failures of the market, private contracting, and public modes; needs and forms of new public intervention, etc.); (7) identification of needs and sources of new information for analysis and evaluation of agrarian contracts. |
| Keywords: | agrarian contracts, agents, process, order, transaction costs |
| JEL: | K0 Q1 Q12 Q13 Q14 Q15 Q18 |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121504 |