|
on Contract Theory and Applications |
| By: | Calzolari, Giacomo; Felli, Leonardo; Koenen, Johannes; Spagnolo, Giancarlo; Stahl, Konrad O |
| Abstract: | Based on data from a comprehensive benchmarking study on buyer-supplier relationships in the German automotive industry, we show that more trust in a relationship is associated with higher idiosyncratic investment by suppliers and better part quality|but also with more competition among suppliers. Both associations hold only for parts involving comparatively unsophisticated technology, and disappear for parts involving sophisticated technology. We rationalize all these observations by means of a relational contracting model of repeated procurement with non-contractible, buyer-specific investments. In relationships involving higher trust, buyers are able to induce higher investment and more intense competition among suppliers|but only when the buyer has the bargaining power. This ability disappears when the bargaining power resides with the supplier(s). |
| Keywords: | bargaining power; Buyer-Supplier Contracts; hold-up; Relational Contracts |
| JEL: | D86 L14 L62 O34 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13750&r=all |
| By: | Johannes Wachs; J\'anos Kert\'esz |
| Abstract: | Competing firms can increase profits by setting prices collectively, imposing significant costs on consumers. Such groups of firms are known as cartels and because this behavior is illegal, their operations are secretive and difficult to detect. Cartels feel a significant internal obstacle: members feel short-run incentives to cheat. Here we present a network-based framework to detect potential cartels in bidding markets based on the idea that the chance a group of firms can overcome this obstacle and sustain cooperation depends on the patterns of its interactions. We create a network of firms based on their co-bidding behavior, detect interacting groups, and measure their cohesion and exclusivity, two group-level features of their collective behavior. Applied to a market for school milk, our method detects a known cartel and calculates that it has high cohesion and exclusivity. In a comprehensive set of nearly 150,000 public contracts awarded by the Republic of Georgia from 2011 to 2016, detected groups with high cohesion and exclusivity are significantly more likely to display traditional markers of cartel behavior. We replicate this relationship between group topology and the emergence of cooperation in a simulation model. Our method presents a scalable, unsupervised method to find groups of firms in bidding markets ideally positioned to form lasting cartels. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1906.08667&r=all |
| By: | Broberg, Thomas (CERE - the Center for Environmental and Resource Economics); Melkamu Daniel , Aemiro (CERE - the Center for Environmental and Resource Economics); Persson, Lars (CERE - the Center for Environmental and Resource Economics) |
| Abstract: | In this paper we investigate if a pro-environmental framing influences households' stated willingness to accept restrictions on their electricity use. We use a split-sample choice experiment (CE) and ask respondents to choose between their current electricity contract and hypothetical contracts featuring various load controls and a monetary compensation. Our results indicate that the pro-environmental framing have little impact on the respondents' choices. We observe a significant framing effect on choices and marginal willingness-to-accept (MWTA) for only a few contract attributes. The results further suggest that there is no significant framing effect among households that engage in different pro-environmental activities. |
| Keywords: | Choice experiment; Demand response; Electricity contract; Load management; Pro-environmental framing; Willingness to accept |
| JEL: | C25 D83 Q51 Q54 |
| Date: | 2019–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2019_008&r=all |
| By: | Elert, Niklas (Research Institute of Industrial Economics (IFN)); Stam, Erik (Utrecht School of Economics); Stenkula, Mikael (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Trust and entrepreneurship are seen as key ingredients of long-term prosperity. However, it is not clear how these two are related. Part of the confusion can be traced back to the measurement of entrepreneurship, biased towards independent entrepreneurship (self-employed and new firms), and excluding entrepreneurship within established organizations. We shed new light on the relationship between trust and entrepreneurship, by proposing two mechanisms relating trust to entrepreneurship by employees, so-called intrapreneurship. We hypothesize that generalized trust influences the prevalence of intrapreneurship in an economy, and the allocation of entrepreneurial talents between independent entrepreneurship and intrapreneurship, through two mechanisms. First, generalized trust may substitute for complete contracts as a means of organizing labor in society, enabling a level of job autonomy in organizations necessary for intrapreneurship to flourish. Second, by way of its influence on the size and scope of the welfare state, generalized trust may increase the benefits of employment relative to self-employment, causing entrepreneurial individuals to elect to be intrapreneurs rather than independent entrepreneurs. Using a novel dataset, we find support for these hypotheses in a cross-country regression model covering the time period 2011–2017. |
| Keywords: | Trust; Intrapreneurship; Entrepreneurship; Entrepreneurial behavior; Institutions; Job autonomy; Welfare state |
| JEL: | H30 J20 J83 L26 M13 O12 O31 O43 O57 |
| Date: | 2019–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1280&r=all |
| By: | Le Coent, Philippe; Preget, Raphaële; Thoyer, Sophie |
| Abstract: | The economic literature on Agri-environmental Schemes (AES) largely considers that farmers participate in contracts if the payment offered is superior to their opportunity costs. Psychological and social forces may however be at play in this decision. This article analyses the role played by social norms in farmers’ decisions to enrol into AES. It develops a simple theoretical model highlighting the interplay of descriptive and injunctive norms in farmers’ utility functions. Results of this model lead us to propose few policy recommendations to counter or, in other contexts, to take advantage of the influence of social norms to increase farmers’ participation to AES. |
| Keywords: | Agricultural and Food Policy, Environmental Economics and Policy, Institutional and Behavioral Economics |
| Date: | 2019–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaa172:289863&r=all |
| By: | Eleftheria Triviza |
| Abstract: | This article analyses how consumers' habit formation affects firms' pricing policies. We consider both sophisticated consumers, who realize that their current consumption will affect future consumption, and naive consumers, who do not. The optimal contract for sophisticated consumers is a two-part tariff. The main result is that under naive habit formation, the optimal pricing pattern is a three-part tariff; namely a fixed fee, with some units priced below cost --- and after their end --- pricing above marginal cost. This holds both under symmetric and asymmetric information. |
| Keywords: | three-part tariff, nonlinear pricing, naivete, habit formation |
| JEL: | L11 D11 D42 D82 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_098&r=all |
| By: | Emilien Prost |
| Abstract: | The aim of this paper is to study in a theoretical perspective how the choice of the ability on which an executive is evaluated to be promoted may be a crucial stake. We show that a procedure where an executive is selected on a managerial ability will allow to increase his own wage, compared to a procedure where he needs to demonstrate ability on the same task than his employee. The intuition is that it would neutralize the issue of rivalry with the employee by preserving the self confidence of the employee in spite he has failed at being promoted, making him easier to incentivize. The consequence is that selecting leaders on their ability to outperform their employee will tend to favor the emergence of a leadership culture of humility during the promotion process in a sense that opponents will strategically reduce their performance to preserve the self-confidence of their employee and then make him less costly to incentivize. On the contrary, selecting leaders on managerial ability will favor the emergence of a leadership culture of demonstration of strength. |
| Keywords: | Legitimacy, leadership, tournament, contract theory, moral hazard, personnel economics. |
| JEL: | D00 D86 J50 M50 M51 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2019-20&r=all |