|
on Contract Theory and Applications |
| By: | David Martimort (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Jérôme Pouyet (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Francesco Ricci (ART-Dev - Acteurs, Ressources et Territoires dans le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - Université Paul Valéry - Montpellier III - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We characterize the optimal extraction path when a concessionaire has private information on the initial stock of resource. Under asymmetric information, a `virtual Hotelling rule' describes how the resource price evolves over time and how extraction costs are compounded with information costs along an optimal extraction path. In sharp contrast with the case of complete information, elds which are heterogeneous in terms of their initial stocks follow di erent extraction paths. Some resource might be left unexploited in the long-run as a way to foster incentives. The optimal contract may sometimes be implemented through royalties and license fees. With a market of concessionaires, asymmetric information leads to a `virtual Her ndahl principle' and to a new form of heterogeneity across active concessionaires. Under asymmetric information, the market price converges faster to its long-run limit, exhibiting more stability. |
| Keywords: | Non-Renewable resource, Delegated Management, Optimal,Contract, Asymmetric Information |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01431170&r=cta |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sanandaji, Tino (Institute for Economic and Business History Research (EHFF), Stockholm School of Economics) |
| Abstract: | Venture capital has become a dominant form of innovation finance, used by many high-tech startups. Europe lags the U.S. in both VC activity and the creation of successful startups, and has recently been surpassed by China. Few European countries have rates of VC activity commensurable to their deep financial markets, strong legal institutions and high R&D spending. This paper points to the tax treatment of employee stock options as an important and neglected explanation. Innovative entrepreneurship is a complex activity that normally requires support structures and collaboration by actors providing financial and human capital to startups. As a response to high uncertainty and transaction costs, VC financiers developed a model where founders and key recruitments are compensated with stock options under complex contracts. While most countries tax stock options as labor earnings, the U.S. allow them to be taxed at a low capital gains tax rate. This has led to near universal use of stock options in U.S. VC deals, while this remains less common in Europe. There is a strong correlation between favorable tax treatment of employee stock options and VC activity. We discuss the interaction between tax policy and contract theory to show why employee stock options are a suitable solution to agency and incentive problems in this sector. A major advantage of this tax policy is that it narrowly targets entrepreneurial startups without requiring broad tax cuts. |
| Keywords: | Business taxation; Corporate governance; Entrepreneurship; Innovation; Institutions; Tax policy; Stock options; Venture capital |
| JEL: | H25 H30 K34 L26 |
| Date: | 2017–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1168&r=cta |
| By: | James Andreoni |
| Abstract: | Theorists and policy analysts have convincingly argued that greater trust makes a more efficient society by eliminating costly contracts or expensive reputations. Concurrently, experiments suggest that reciprocity is a potent substitute for law when compliance with contracts is imperfectly enforced. This paper examines these issues within the context of a common trust-building contract device: satisfaction guaranteed. We find that satisfaction guaranteed indeed builds trust and improves efficiency. Interestingly, sellers offering a guarantee are more trustworthy than those who don't, even when honoring it is fully voluntary, but the guarantee only elicits the trust of buyers when it has legal backing. |
| JEL: | C92 D02 D4 K2 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23352&r=cta |
| By: | Bernard, Tanguy; Hidrobo, Melissa; Le Port, Agnès; Rawat, Rahul |
| Abstract: | Health-related incentives to reward effort or commitment are commonplace in many professional contracts throughout the world. Typically absent from small-scale agriculture in poor countries, such incentives may help overcome both health issues for remote rural families and supply issues for firms. Using a randomized control design, we investigate the impact of adding a micronutrient-fortified product in contracts between a Senegalese dairy processing factory and its seminomadic milk suppliers. Findings show significant increases in frequency of delivery but only limited impacts on total milk delivered. These impacts are time sensitive and limited mostly to households where women are more in control of milk contracts. |
| Keywords: | nutrition; incentives; contract farming; supply chain; production economics; dairy industry; dairies; dairying; health; households; women; gender; dairy farms; milk production; rural areas; rural communities, dairy value chain, D13 Household Production and Intrahousehold Allocation; Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets; O12 Microeconomic Analyses of Economic Development, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1629&r=cta |