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on Contract Theory and Applications |
| By: | Emmanuel Dechenaux; Jerry Thursby; Marie C. Thursby |
| Abstract: | We examine commonly observed forms of payment, such as milestones, royalties, or consulting contracts as ways of engaging inventors in the development of licensed inventions. Our theoretical model shows that when milestones are feasible, royalties are not optimal unless the licensing firm is risk averse. The model also predicts the use of consulting contracts which improve the firm's ability to monitor inventor effort. Because these contracts increase the firm's expected profits, the upfront fee that the university can charge is higher than otherwise. These results therefore support the commonly observed university policy of allowing faculty to consult with licensing firms outside of their university contracts. They also support firm policies of including milestones. An empirical analysis based on a survey of 112 businesses that license-in university inventions supports the complementarity of milestones and consulting suggested by the theory. |
| JEL: | D82 L14 O3 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14226&r=cta |
| By: | Celik, Gorkem; Peters, Michael |
| Abstract: | We study a design setup, where players can take part in a mechanism to coordinate their actions in a default game. By refusing to participate in the mechanism, a player can revert to playing the default game non-cooperatively. We illustrate with an example that there are allocation rules that can only be supported by equilibria in which some types of some players are not participating in the mechanism. |
| Keywords: | Mechanism design; Default game; Cartel agreements |
| Date: | 2008–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:ubc:pmicro:gorkem_celik-2008-10&r=cta |
| By: | René M. Stulz |
| Abstract: | As barriers to international investment fall and technology improves, the cost advantages for a firm's securities to trade publicly in the country in which that firm is located and for that country to have a market for publicly traded securities distinct from the capital markets of other countries will progressively disappear. However, securities laws remain an important determinant of whether and where securities are issued, how they are valued, who owns them, and where they trade. The value of public firms depends on these laws, so that identical firms subject to different laws are likely to have different values. We show that mandatory disclosure through securities laws can decrease agency costs between corporate insiders and minority shareholders, but only provided the investors can act on the information disclosed and the laws cannot be weakened ex post too much through lobbying by corporate insiders. With financial globalization, national disclosure laws can have wide-ranging effects on a country's welfare, on firms and on investor portfolios, including the extent to which share holdings reveal a home bias. In equilibrium, if firms can choose the securities laws they are subject to when they go public, some firms will choose stronger securities laws than those of the country in which they are located and some firms will do the opposite. These effects of securities laws can be expected to become smaller if differences in national laws and their enforcement decrease and if the costs of private solutions to manage corporate agency conflicts that are substitutes for securities laws fall. |
| JEL: | F30 F36 G10 G15 G32 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14218&r=cta |
| By: | Pablo T. Spiller |
| Abstract: | The fundamental feature of private contracting is its relational nature. When faced with unforeseen or unexpected circumstances, private parties, as long as the relation remains worthwhile, adjust their required performance without the need for costly renegotiation or formal recontracting. Public contracting, on the other hand, seems to be characterized by formalized, standardized, bureaucratic, rigid procedures. Common wisdom sees public contracts as generally more inflexible, requiring more frequent formal renegotiation, having a higher tendency to litigate, and providing weaker incentives. In sum, public contracts are perceived to be less "efficient." In this paper I develop a theory of public contracting that accommodates these stark differences between private and public contracting. The thrust of the paper is that these differences arise directly because of the different hazards present in public and purely private contracts, which directly impact the nature of the resulting contractual forms. A fundamental corollary of this result is that the perceived inefficiency of public or governmental contracting is simply the result of contractual adaptation to different inherent hazards, and as such is not directly remediable. Finally, I apply the main insights from the general framework developed here to understand the characteristics of concession contracts. |
| JEL: | H11 L14 L32 L33 L51 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14152&r=cta |
| By: | Richard Freeman; Douglas Kruse; Joseph Blasi |
| Abstract: | Group incentive systems have to overcome the free rider or 1/N problem, which gives workers an incentive to shirk, if they are to succeed. This paper uses new questions on responses to shirking from the General Social Survey and a special NBER survey of workers at over 300 worksites in 14 companies that have some form of group incentive pay to examine how well workers can monitor their peers and what they do when the peers are not working up to speed. The paper finds that: 1) most workers say that they can detect fellow employees who shirk; 2) many report that they would speak to the shirker or report the behavior or a supervisor, and many report that they did so in the past; 3) the proportion that takes action against shirkers is greatest among workers paid under group incentive systems, in smaller companies, and in companies with good employee-management relations; 4) group incentives interact with high-performance human resource policies such as employee involvement teams, training, task variety, low levels of supervision, and good fixed wages to induce more workers to act against shirking; 5) workers in workplaces where there is more anti-shirking behavior report that co-workers work harder, encourage other workers more, and report that their workplace facility is more effective in ways that should raise productivity and profits. |
| JEL: | J33 J54 L23 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14227&r=cta |
| By: | Roberto Serrano; Rene Saran (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | We apply stochastic stability to study the evolution of bidding behaviour in private-value second-price, first-price and k-double auctions. The learning process has a strong component of inertia but with a small probability, the bids are modified in the direction of ex-post regrets. We identify essentially a unique bid that will be used by each type in the long run. In the second-price auction, this is the truthful bid. In the first-price auction, bidding half of one’s valuation is stable. The stable bid in the k-double auction is a toughening of the Chatterjee-Samuelson linear equilibrium strategy. If we add a friction in changing one’s dib, then truth-telling behaviour is also obtained in the firstprice and k-double auctions. Intuitively, the stochastically stable bid minimizes the maximal regret. |
| Keywords: | Stochastic stability, ex-post regret, second-price auction, first-price auction, k-double auction. |
| JEL: | C73 C78 D44 D83 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2007_0712&r=cta |