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on Contract Theory and Applications |
| By: | Costa, Carlos da; Maestri, Lucas |
| Abstract: | We study optimal labor income taxation in non-competitive labor markets. Firms offer screening contracts to workers who have private information about their productivity. A planner endowed with a Paretian social welfare function tries to induce allocations that maximize its objective. We provide necessary and sufficient conditions for implementation of constrained efficient allocations using tax schedules. All allocations that are implementable by a tax schedule display negative marginal tax rates for almost all workers. Not all allocations that are implementable in a competitive setting are implementable in this noncompetitive environment. |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:epgewp:775&r=cta |
| By: | Armstrong, Mark; Vickers, John |
| Abstract: | We study pricing by multiproduct firms in the context of unregulated monopoly, regulated monopoly and Cournot oligopoly. Using the concept of consumer surplus as a function of quantities (rather than prices), we present simple formulas for optimal prices and show that Cournot equilibrium exists and corresponds to a Ramsey optimum. We then present a tractable class of demand systems that involve a generalized form of homothetic preferences. As well as standard homothetic preferences, this class includes linear and logit demand. Within the class, profit-maximizing quantities are proportional to efficient quantities. We discuss cost-passthrough, including cases where optimal prices do not depend on other products' costs. Finally, we discuss optimal monopoly regulation when the firm has private information about its vector of marginal costs, and show that if the probability distribution over costs satisfies an independence property, then optimal regulation leaves relative price decisions to the firm. |
| Keywords: | Multiproduct pricing, homothetic preferences, Cournot oligopoly, monopoly regulation, Ramsey pricing, cost passthrough, multidimensional screening |
| JEL: | D42 D43 D82 L12 L13 L51 |
| Date: | 2016–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68717&r=cta |
| By: | Andrea Bellucci (Institute for Applied Economic Research (IAW), Germany and MoFiR, Italy); Alexander Borisov (University of Cincinnati, USA and MoFiR, Italy); Alberto Zazzaro (University of Naples Federico II, Polytechnic University of Marche, Finance Research Group (MoFiR) and CSEF) |
| Abstract: | Academic research recognizes that the organizational structure of banks could have implications for the financing of small businesses and entrepreneurial firms. In this chapter, we start by reviewing the underlying theoretical motivation and then summarize existing evidence. Overall, it is confirmed that the organization of lending institutions is important for the use and transmission of information, as well as credit availability for small businesses. Moreover, using a unique dataset of bank loans, we empirically document that loan contract characteristics such as interest rates and collateral requirements are sensitive to the hierarchical allocation of decision-making authority within the bank’s organization. JEL Classification: |
| Keywords: | Bank organization structure, Authority allocation, Small business financing |
| Date: | 2016–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:424&r=cta |
| By: | Matt V. Leduc; Sebastian Poledna; Stefan Thurner |
| Abstract: | We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a CDS market can be designed to rewire the network of interbank exposures in a way that makes it more resilient to insolvency cascades. A regulator can use information about the topology of the interbank network to devise a systemic insurance surcharge that is added to the CDS spread. CDS contracts are thus effectively penalized according to how much they contribute to increasing systemic risk. CDS contracts that decrease systemic risk remain untaxed. We simulate this regulated CDS market using an agent-based model (CRISIS macro-financial model) and we demonstrate that it leads to an interbank system that is more resilient to insolvency cascades. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1601.02156&r=cta |