This paper develops a model that captures which contracts are signed and on what terms in a market with a network of firms.
本文开发了一个模型，该模型捕捉了在具有企业网络的市场中签订哪些合同以及以何种条件签订合同。
{"title":"Network Formation and Bargaining in Vertical Markets: The Case of Narrow Networks in Health Insurance","authors":"Soheil Ghili","doi":"10.2139/ssrn.3904373","DOIUrl":"https://doi.org/10.2139/ssrn.3904373","url":null,"abstract":"This paper develops a model that captures which contracts are signed and on what terms in a market with a network of firms.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128791098","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Chinese companies sometimes appoint a government official (bureaucrat) as CEO on the expectation of benefiting from the political connections of the new hire. Based on a sample of 2,454 CEO transitions our empirical findings are consistent with the implications of a simple contract model in oligopolistic markets. Firms that appoint a bureaucrat as CEO obtain more credit and subsidies. They have positive abnormal announcement returns, negative abnormal long-run returns and larger variance of long-run returns. Furthermore, they experience a deterioration in operating performances, increased rent-seeking behavior of the management and weakening of corporate governance. The results from the split share structure reform in 2005 corroborate the supportive findings for the preferential treatment hypothesis.
{"title":"Bureaucrats as Successor CEOs","authors":"Tri Vi Dang, Qing He","doi":"10.2139/ssrn.2848828","DOIUrl":"https://doi.org/10.2139/ssrn.2848828","url":null,"abstract":"Chinese companies sometimes appoint a government official (bureaucrat) as CEO on the expectation of benefiting from the political connections of the new hire. Based on a sample of 2,454 CEO transitions our empirical findings are consistent with the implications of a simple contract model in oligopolistic markets. Firms that appoint a bureaucrat as CEO obtain more credit and subsidies. They have positive abnormal announcement returns, negative abnormal long-run returns and larger variance of long-run returns. Furthermore, they experience a deterioration in operating performances, increased rent-seeking behavior of the management and weakening of corporate governance. The results from the split share structure reform in 2005 corroborate the supportive findings for the preferential treatment hypothesis.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125982367","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper shows how expected utility shortcut can result in some adversary conclusion: excessive cost. It then demonstrates graphically how Grossman and Hart (GH) have twisted the agent’s model to form the principal model. A complete principal-agent model is then introduced, and is proved to be a bargaining model. Although there is generally no clear-up solution to the bargaining problem, GH’s method is arbitrary and their result detrimental.
{"title":"The Wasteful Grossman-Hart Contract Theory: An Adverse Consequence of Expected Utility","authors":"Hak Choi","doi":"10.2139/ssrn.2834890","DOIUrl":"https://doi.org/10.2139/ssrn.2834890","url":null,"abstract":"This paper shows how expected utility shortcut can result in some adversary conclusion: excessive cost. It then demonstrates graphically how Grossman and Hart (GH) have twisted the agent’s model to form the principal model. A complete principal-agent model is then introduced, and is proved to be a bargaining model. Although there is generally no clear-up solution to the bargaining problem, GH’s method is arbitrary and their result detrimental.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116057823","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
International arbitration law and practice has changed dramatically over last couple of decades and so are the attitudes of disputing parties. This paper will be comparing arbitration with other DRMs and explore its benefits in some detail that makes it the most suitable for the petroleum industry. We will be also looking in the mechanics of international arbitration practice and how does national and international laws relate to it. Even though international arbitration is classified between investment and commercial arbitration, besides ICSID, majority of international arbitral institutions are open to both arbitrations. This paper will also be examining some features of a few widely recognised international arbitral institutions. International Arbitration Law exists among other areas of international laws, its relation, interaction and conflicts are also discussed. However, the main focus of the study is to make the readers from petroleum industry aware of processes involved in international arbitration, the due diligence they need to conduct when entering into arbitration agreements and the most effective terms on which they can agree to make the best use of this wonderful dispute resolution forum.
{"title":"Effectiveness of Current International Arbitration Law and Practice for Commercial Contracting Parties, in Transnational Oil and Gas Industry","authors":"Z. Muhammad","doi":"10.2139/SSRN.2866420","DOIUrl":"https://doi.org/10.2139/SSRN.2866420","url":null,"abstract":"International arbitration law and practice has changed dramatically over last couple of decades and so are the attitudes of disputing parties. This paper will be comparing arbitration with other DRMs and explore its benefits in some detail that makes it the most suitable for the petroleum industry. We will be also looking in the mechanics of international arbitration practice and how does national and international laws relate to it. Even though international arbitration is classified between investment and commercial arbitration, besides ICSID, majority of international arbitral institutions are open to both arbitrations. This paper will also be examining some features of a few widely recognised international arbitral institutions. International Arbitration Law exists among other areas of international laws, its relation, interaction and conflicts are also discussed. However, the main focus of the study is to make the readers from petroleum industry aware of processes involved in international arbitration, the due diligence they need to conduct when entering into arbitration agreements and the most effective terms on which they can agree to make the best use of this wonderful dispute resolution forum.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126306319","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We propose a model for word-of-mouth (WoM) management where a firm has two tools at hand: offering referral rewards and offering a free contract. Current customers’ incentives to engage in WoM can affect the contracting problem of a firm in the presence of positive externalities of users. Formally, we consider a classic Maskin–Riley contracting problem for the receiver of WoM where the firm can pay the senders referral rewards and a sender experiences positive externalities if the receiver adopts. A free contract can incentivize WoM because the higher adoption probability increases the expected externalities that the sender receives. We characterize the optimal incentive scheme and show when the two tools serve as substitutes and complements to each other depending on whether the market is niche and whether the product is social. We show that offering a free contract is optimal only if the fraction of premium users in the population is small, which is consistent with the observation that companies that successfully offer “freemium” contracts oftentimes have a high percentage of free users. This paper was accepted by Juanjuan Zhang, marketing.
{"title":"Contracting with Word-of-Mouth Management","authors":"Yuichiro Kamada, Aniko Oery","doi":"10.2139/ssrn.3242378","DOIUrl":"https://doi.org/10.2139/ssrn.3242378","url":null,"abstract":"We propose a model for word-of-mouth (WoM) management where a firm has two tools at hand: offering referral rewards and offering a free contract. Current customers’ incentives to engage in WoM can affect the contracting problem of a firm in the presence of positive externalities of users. Formally, we consider a classic Maskin–Riley contracting problem for the receiver of WoM where the firm can pay the senders referral rewards and a sender experiences positive externalities if the receiver adopts. A free contract can incentivize WoM because the higher adoption probability increases the expected externalities that the sender receives. We characterize the optimal incentive scheme and show when the two tools serve as substitutes and complements to each other depending on whether the market is niche and whether the product is social. We show that offering a free contract is optimal only if the fraction of premium users in the population is small, which is consistent with the observation that companies that successfully offer “freemium” contracts oftentimes have a high percentage of free users. This paper was accepted by Juanjuan Zhang, marketing.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127574831","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We introduce two new sufficient conditions for the existence of stable outcomes in many-to-one matching with contracts. The conditions subsume the observable substitutability of Hatfield et al. (2015) and the substitutable completability of Hatfield and Kominers (2016) as special cases. We also prove that unilaterally substitutability and irrelevance of rejected contracts imply substitutable completability.
引入了多对一契约匹配稳定结果存在的两个新的充分条件。这些条件包括Hatfield et al.(2015)的可观察可替代性和Hatfield and Kominers(2016)的可替代可完全性作为特例。我们还证明了被拒绝契约的单方可替代性和不相关性意味着可替代性。
{"title":"On Sufficient Conditions for the Existence of Stable Matchings with Contracts","authors":"Jun Zhang","doi":"10.2139/ssrn.2722322","DOIUrl":"https://doi.org/10.2139/ssrn.2722322","url":null,"abstract":"We introduce two new sufficient conditions for the existence of stable outcomes in many-to-one matching with contracts. The conditions subsume the observable substitutability of Hatfield et al. (2015) and the substitutable completability of Hatfield and Kominers (2016) as special cases. We also prove that unilaterally substitutability and irrelevance of rejected contracts imply substitutable completability.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129048287","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In Major League Baseball, players sign contracts that are guaranteed. What this means is that the player's salary must be paid even if the player's performance does not meet expectations and even if the player is removed from the roster. This is important because guaranteed contracts can potentially have an influence on player effort. In this paper I provide a framework for determining the value of the guarantee to players. The estimates suggest that, on average, top players value the guarantee at $8.5 million annually. The median estimate is $5.71 million. This implies that the average player in the sample would have made 58% more in 2015 on a non-guaranteed contract. Finally, the value of the guarantee is increasing at an increasing rate with respect to a player's remaining salary. This implies that high-paid, superstar players actually see a much bigger percentage decline in their salaries due to guaranteed contracts than other players.
{"title":"How Much are Guaranteed Contracts Worth? Evidence from Major League Baseball","authors":"Joshua R. Hendrickson","doi":"10.2139/ssrn.2792318","DOIUrl":"https://doi.org/10.2139/ssrn.2792318","url":null,"abstract":"In Major League Baseball, players sign contracts that are guaranteed. What this means is that the player's salary must be paid even if the player's performance does not meet expectations and even if the player is removed from the roster. This is important because guaranteed contracts can potentially have an influence on player effort. In this paper I provide a framework for determining the value of the guarantee to players. The estimates suggest that, on average, top players value the guarantee at $8.5 million annually. The median estimate is $5.71 million. This implies that the average player in the sample would have made 58% more in 2015 on a non-guaranteed contract. Finally, the value of the guarantee is increasing at an increasing rate with respect to a player's remaining salary. This implies that high-paid, superstar players actually see a much bigger percentage decline in their salaries due to guaranteed contracts than other players.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"62 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129890119","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the optimal incentive scheme for a multistage project in which the agent privately observes intermediate progress. The optimal contract involves a soft deadline wherein the principal guarantees funding up to a certain date--if the agent reports progress at that date, then the principal gives him a relatively short hard deadline to complete the project--if progress is not reported at that date, then a probationary phase begins in which the project is randomly terminated at a constant rate until progress is reported. We explore several variants of the model with implications for optimal project design. In particular, we show that the principal benefits by imposing a small cost on the agent for submitting a progress report or by making the first stage of the project somewhat "harder" than the second.
{"title":"Breakthroughs, Deadlines, and Self-Reported Progress: Contracting for Multistage Projects","authors":"Brett Green, Curtis R. Taylor","doi":"10.2139/ssrn.2579730","DOIUrl":"https://doi.org/10.2139/ssrn.2579730","url":null,"abstract":"We study the optimal incentive scheme for a multistage project in which the agent privately observes intermediate progress. The optimal contract involves a soft deadline wherein the principal guarantees funding up to a certain date--if the agent reports progress at that date, then the principal gives him a relatively short hard deadline to complete the project--if progress is not reported at that date, then a probationary phase begins in which the project is randomly terminated at a constant rate until progress is reported. We explore several variants of the model with implications for optimal project design. In particular, we show that the principal benefits by imposing a small cost on the agent for submitting a progress report or by making the first stage of the project somewhat \"harder\" than the second.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123979994","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Implicit contracts can mitigate moral hazard in labor, credit and product markets. The enforcement mechanism underlying an implicit contract is the threat of exclusion: the agent fears that he will lose future income if the principal breaks off the relationship. This threat may be very weak in environments where an agent can appropriate income-generating resources provided by the principal. For example, in credit markets with weak creditor protection borrowers may be able to appropriate borrowed funds and generate investment income without requiring further loans. We examine implicit contracting in a lending experiment where the threat of exclusion is exogenously varied. We find that weak exclusion undermines implicit contracting: it leads to a more frequent breakdown of credit relationships as well as to smaller loans.
{"title":"The Threat of Exclusion and Implicit Contracting","authors":"Martin Brown, Marta Serra-Garcia","doi":"10.1287/mnsc.2016.2572","DOIUrl":"https://doi.org/10.1287/mnsc.2016.2572","url":null,"abstract":"Implicit contracts can mitigate moral hazard in labor, credit and product markets. The enforcement mechanism underlying an implicit contract is the threat of exclusion: the agent fears that he will lose future income if the principal breaks off the relationship. This threat may be very weak in environments where an agent can appropriate income-generating resources provided by the principal. For example, in credit markets with weak creditor protection borrowers may be able to appropriate borrowed funds and generate investment income without requiring further loans. We examine implicit contracting in a lending experiment where the threat of exclusion is exogenously varied. We find that weak exclusion undermines implicit contracting: it leads to a more frequent breakdown of credit relationships as well as to smaller loans.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124856490","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a tractable human capital model with limited enforceability of contracts. The model economy is populated by a large number of long-lived, risk-averse households with homothetic preferences who can invest in risk-free physical capital and risky human capital. Households have access to a complete set of credit and insurance contracts, but their ability to use the available financial instruments is limited by the possibility of default (limited contract enforcement). We provide a convenient equilibrium characterization that facilitates the computation of recursive equilibria substantially. We use a calibrated version of the model with stochastically aging households divided into 9 age groups. Younger households have higher expected human capital returns than older households. According to the baseline calibration, for young households less than half of human capital risk is insured and the welfare losses due to the lack of insurance range from 3 percent of lifetime consumption (age 40) to 7 percent of lifetime consumption (age 23). Realistic variations in the model parameters have non-negligible effects on equilibrium insurance and welfare, but the result that young households are severely underinsured is robust to such variations.
{"title":"Insurance in Human Capital Models with Limited Enforcement","authors":"T. Krebs, M. Kuhn, Mark L. J. Wright","doi":"10.2139/ssrn.2816640","DOIUrl":"https://doi.org/10.2139/ssrn.2816640","url":null,"abstract":"This paper develops a tractable human capital model with limited enforceability of contracts. The model economy is populated by a large number of long-lived, risk-averse households with homothetic preferences who can invest in risk-free physical capital and risky human capital. Households have access to a complete set of credit and insurance contracts, but their ability to use the available financial instruments is limited by the possibility of default (limited contract enforcement). We provide a convenient equilibrium characterization that facilitates the computation of recursive equilibria substantially. We use a calibrated version of the model with stochastically aging households divided into 9 age groups. Younger households have higher expected human capital returns than older households. According to the baseline calibration, for young households less than half of human capital risk is insured and the welfare losses due to the lack of insurance range from 3 percent of lifetime consumption (age 40) to 7 percent of lifetime consumption (age 23). Realistic variations in the model parameters have non-negligible effects on equilibrium insurance and welfare, but the result that young households are severely underinsured is robust to such variations.","PeriodicalId":285784,"journal":{"name":"ERN: Economics of Contract: Theory (Topic)","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133696773","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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