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on Contract Theory and Applications |
| By: | Bontems, Philippe; Calmette, Marie-Françoise; Martimort, David |
| Abstract: | Motivated by the forthcoming terminations of most highways concessions in France, we propose a versatile model of dynamic regulation and contract renewals that describes a long-term relationship between the public authority and an incumbent operator with private information about its costs that may face potential entrants. We discuss various issues including the nature of discriminatory biases towards entrants, their consequences on investments, the public or private nature of the management of concessions, the role of the operator's financial constraints, the consequences of allotments. So doing, we isolate a few principles that should guide policy-makers when deciding upon concession renewals. |
| Keywords: | Procurement; concession contracts; contract renewal; highways; transportation;; auctions; asymmetric information |
| JEL: | D82 D86 L51 L91 L98 |
| Date: | 2025–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130653 |
| By: | Faro, Clovis de; Lachtermacher, Gerson |
| Abstract: | As far as it is known, at least in Brazil, the idea of substituting a single contract by multiple individual contracts, was first presented in Sandrini (2007), later followed in Vieira Sobrinho (2012); both addressing the concept of anatocism (the charge of interest upon interest). Nevertheless, the pioneering work of De-Losso et al. (2013) should be credited as the first to show that, considering its cost of capital, a financial institution may be better off if a single contract is substituted by multiple contracts. With their analysis focusing attention only in the case of constant installments. |
| Date: | 2025–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:fgv:epgewp:847 |
| By: | Carli, Francesco; Cecchi, Francesco; Fritz, Manuela; Lensink, Robert; Uras, Burak |
| Abstract: | Joint liability loans are used in various settings, including business partnerships, agricultural cooperatives, and real estate investment. Most notably, they have been central to the microfinance model since the 1970s. Despite early promises, recent evidence suggests that joint liability has not consistently reduced loan defaults or operational costs. As a result, microfinance institutions (MFIs) worldwide are increasingly shifting toward individual liability contracts. A key limitation of traditional joint liability loans lies in their symmetric contract structure, which often leads to coordination failures and free-riding: while peers can enforce repayment, they may jointly default or shirk monitoring responsibilities. We propose that introducing asymmetry in joint liability contracts, by designating one group member as a lead borrower with preferential interest rates, can enhance peer monitoring and reduce moral hazard. We extend an existing theoretical model of ex-ante moral hazard (investment behavior) to the scenario of hazard (strategic default) and evaluate both frameworks through a lab-in-the-field experiment with microfinance clients in urban Bolivia. Our experimental results show that asymmetric contracts significantly increase peer monitoring by 17-20% in both moral hazard scenarios. These findings suggest that asymmetric group lending contracts offer a promising path to reviving joint liability in microfinance. |
| Keywords: | Microfinance;Asymmetric joint liability;Group leader;Peer monitoring;Investment diligency;Strategic default;Lab-in-the-field |
| JEL: | D86 G21 O12 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14162 |
| By: | Jihwan Do (Yonsei University); Nicolas Riquelme (Universidad de los Andes) |
| Abstract: | We revisit Cournot competition with asymmetric demand information by introducing a common input supplier. We characterize a unique equilibrium where information spills over through screening and signaling in vertical contracting. The equilibrium outcomes either coincide with those under complete information or involve quantity distortions. Compared to the independent-supplier case, the presence of the common supplier enhances both consumer and producer surplus under mild downstream competition. Under intense competition, producer surplus can decline, although consumer surplus may still increase. Our findings reveal informational efficiency gains of upstream mergers and the possibility of a welfare improvement even when direct efficiency gains are absent. |
| Keywords: | Cournot competition; Asymmetric information; Common agency; Information transmission; Vertical contracting; Screening; Signaling. |
| JEL: | D82 D86 L13 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-251 |