the incentives to make commitments in wage bargains it is commonly believed that a workforce of identical workers will be better off organised in a single union rather than separate unions that bargain independently with an employer for this will prevent the employer playing off one union against another in this paper i show that there are circumstances where this need not be the case if it is impossible for the firm and workers to sign long term binding contracts on wages and employment then the firm will wish to invest in a capital stock below the efficient level by organising in separate unions the firm will be induced to raise its level of investment to ensure it has enough capacity with each union to make a threat to switch production to another union credible the effect on workers payoffs from a higher capital stock can outweigh the loss of bargaining power as a result of the workforce being in separate unions there will also be circumstances where the firm will invest in a capital stock that exceeds the efficient level

cost value and foreign market entry mode the transaction and the firm this paper compares and contrasts the mode of foreign market entry decision from the transaction cost internalization and organizational capability perspectives each of these perspectives operates at a different level of analysis respectively the transaction and the firm and consequently differs in the primary arena of attention namely transaction characteristics and the capabilities of firms in making the comparison a key distinction is made between the cost and the value aspects in the management of know how based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined the main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose the paper shows how the value based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that even though tc internalization theory raises some valid concerns the organizational capability framework may be more in tune with today s business context some of the assumptions of the tc internalization perspective both direct opportunism exploitation of existing advantage and indirect preservation of the value of know how across locational contexts asymmetry between bounded rationality for transaction and production purposes are critically examined and questioned implications of a shift from a cost to a value based framework are discussed and the need for a shift in research focus is emphasized

endogenous incomplete contracts a bargaining approach in this paper we argue that by modelling the contracting process as a bargaining game one can endogenize the choice between complete and incomplete contracts this point is demonstrated within a stylized model in which agents can allocate an endowment stream either via a once for all bargain over the entire stream a long term contract or through a series of bargaining rounds a short term contract within this structure short term contracts arise as equilibrium outcomes under very general conditions because a short term contract implies reduced bargaining costs for one of the agents in essence reduced transaction costs produce a short term contract jel classification l14 c78

do unions reduce investment evidence from canada the authors test for a link between unionization and net investment rates in canadian manufacturing analysis of data on 18 industries for the years 1967 87 reveals a negative non linear relationship the presence of unions appears to have reduced investment when the percentage of firms in the industry that were unionized was between 0 and approximately 50 with a plateau or slight positive marginal effect above this level in an industry moving from no unions to the mean level of unionization net investment and gross investment are predicted to fall by 66 74 and 18 25 respectively

race ethnicity and credit card marketing there is a vast literature on discrepancies in consumer credit related to race and ethnicity i explore a pattern that was first identified in aggregate data by han keys and li 2011 in their study of credit access blacks were approximately 27 less likely to receive offers from credit card lenders during the sample period even after controlling for variables such as credit history household income and local economic conditions hispanics were 17 less likely to receive an offer after including controls the discrepancy is robust to lender specific regressions and the inclusion of a large number of explanatory variables my findings imply that marketing is an important area for analysis of discrimination in consumer credit due to the likely need for confidential information in further analysis investigation by an appropriate regulatory agency such as the consumer financial protection bureau would be useful

on cost sharing in the provision of a binary and excludable public good we study efficiency and fairness properties of the equal cost sharing with maximal participation ecsmp mechanism in the provision of a binary and excludable public good according to the maximal welfare loss criterion the ecsmp is optimal within the class of strategyproof individually rational and no deficit mechanisms only when there are two agents in general the ecsmp mechanism is not optimal we provide a class of mechanisms obtained by symmetric perturbations of ecsmp with strictly lower maximal welfare loss we show that if one of two possible fairness conditions is additionally imposed the ecsmp mechanism becomes optimal

the real costs of credit access evidence from the payday lending market using geographic differences in the availability of payday loans i estimate the real effects of credit access among low income households payday loans are small high interest rate loans that constitute the marginal source of credit for many high risk borrowers i find no evidence that payday loans alleviate economic hardship to the contrary loan access leads to increased difficulty paying mortgage rent and utilities bills the empirical design isolates variation in loan access that is uninfluenced by lenders location decisions and state regulatory decisions two factors that might otherwise correlate with economic hardship measures further analysis of differences in loan availability over time and across income groups rules out a number of alternative explanations for the estimated effects counter to the view that improving credit access facilitates important expenditures the results suggest that for some low income households the debt service burden imposed by borrowing inhibits their ability to pay important bills copyright 2011 oxford university press

the function of authority in transaction cost economics abstract this paper questions the transaction cost characterization of observed authority relations as efficient governance structures various inadequacies in the transaction cost account of work organization and the limits of firm size are traced to its neglect of the possibility that authority may be abused opportunistically this exemplifies a more general propensity in the transaction cost literature that of explaining economic organization in functionalist terms with little attention to the causal mechanisms through which efficient governance structures might actually arise three such mechanisms are considered but none is found to provide an adequate rationale for the imputation of efficiency to observed structures

contract duration and relationship specific investments empirical evidence from coal markets this paper examines the importance of specific relationship investments in determining the duration of coal contracts negotiated between coal suppliers and electric utilities data for 277 coal contracts are used to perform the analysis the results provide strong support for the view that buyers and sellers make longer commitments to the terms of future trade at the contract execution stage and rely less on repeated bargaining when relationship specific investments are more important

the importance of lender heterogeneity in mortgage lending abstract previous studies of the mortgage lending process which fail to adequately account for inter lender differences suffer from a potentially serious omitted variables bias using a sample of 23 094 home purchase mortgage applications from pinellas county st petersburg florida over the 1993 1995 interval i demonstrate that the inclusion of lender characteristics enhances the predictive power of accept reject decision models of mortgage origination in addition the inclusion of lender attributes is shown to substantially influence the coefficient estimates of additional model parameters of interest such as the applicant race and neighborhood racial composition variables finally this study provides unique and supportive evidence regarding the existence and persistence of information externalities in home purchase mortgage markets

rent sharing holdup and wages evidence from matched panel data rent sharing by workers can reduce the incentives for investment if some of the returns to sunk capital are captured in higher wages we propose a simple measure of this holdup effect based on the size of the wage offset for firm specific capital accumulation using social security earnings records for workers in the veneto region of italy linked to detailed financial data for their employers we find strong evidence of rent sharing with an elasticity of wages with respect to potential rents per worker of around 4 arising mainly at larger firms with higher price cost margins on the other hand we find little evidence that bargaining lowers the return on investment instead firm level bargaining appears to split the rents after deducting the full cost of capital

discrimination in the small business credit market we use data from the 1993 and 1998 national surveys of small business finances to examine the existence of racial discrimination in the small business credit market we conduct an econometric analysis of loan outcomes by race and find that black owned small businesses are about twice as likely to be denied credit even after controlling for differences in creditworthiness and other factors a series of specification checks indicates that this gap is unlikely to be explained by omitted variable bias these results indicate that the racial disparity in credit availability is likely caused by discrimination

bargaining structures and delay in innovation it is sometimes argued that fears about the employment consequences of introducing new technology may lead unions to wish to delay innovations and this may reduce incentives for firm to carry out r d we explore these issues in a model of two countries that compete over both market share and r d and we restrict attention to cases where unions would wish to delay innovation we show that allowing unions to bargain over the timing of innovation need not reduce the possibility of a firm successfully competing for r d however simulations suggest that for a particular model allowing unions to delay innovation does not help a firm compete over r d

long term relationships governed by short term contracts this paper studies the effects of contract duration on the incentive to invest in a relationship when its parties are rational and have perfect information and contracts are complete ex cept that short term contracts specify only current period actions t hen short term contracting distorts investment decisions only when t he efficient plan involves mainly sunk cost investment and the relati onship plays a consumption smoothing role there is a general but no t universal tendency to underinvest copyright 1988 by american economic association

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

the nature of the agricultural firm abstract models explaining the choice between rent wage and share contracts in agriculture abstract from the large variations within the classes of rent share and owner managed forms of organization regarding the extent to which a specific form accommodates specialization between labor and management as a result modern explanations of agricultural organizations are misleadingly dependent on risk aversion or the assumption that landowners have an absolute advantage in production decisions viewing the agricultural firm as a constitution instead of as a nexus of contracts facilitates an agency explanation of alternative organizational forms and their amenability to specialization

the role of soft information in a dynamic contract setting evidence from the home equity credit market credit underwriting is a dynamic process involving multiple interactions between borrower and lender during this process lenders have the opportunity to obtain hard and soft information from the borrower we analyze more than 108 000 home equity loans and lines of credit applications to study the role of soft and hard information during underwriting our data set allows us to distinguish lender actions that are based strictly on hard information from decisions that involve the collection of soft information our analysis confirms the importance of soft information and suggests that its use can be effective in reducing overall portfolio credit losses ex post

population monotonic allocation schemes for cooperative games with transferable utility abstract an allocation scheme for a cooperative game specifies how to allocate the worth of every coalition it is population monotonic if each player s payoff increases as the coalition to which he belongs grows larger we show that essentially a game has a population monotonic allocation scheme pmas if and only if it is a positive linear combination of monotonic simple games with veto control a dual characterization is also provided sufficient conditions for the existence of a pmas include convexity and increasing average marginal contributions if the game is convex its extended shapley value is a pmas classification number 026

on the survival of contracts assessing the stability of technology licensing agreements in the brazilian seed industry abstract the present study focuses on contract duration as defined ex post meaning that the survival of contractual relationships is observed over time our empirical study employs hazard rate models with time varying covariates using data from technology licensing contracts between seed companies and a governmental rd 2 decrease as a function of past satisfactory outcomes 3 increase with the extent of disturbances affecting the technology s demand and other things being equal 4 increase rather than decrease over time

rates for vehicle loans race and loan source a household s vehicle purchases are among its largest expenditure outlays moreover unlike housing purchases which a typical household may make once or twice over a lifetime a house hold may well buy several cars over the same interval the magnitude and relative frequency of vehicle purchases suggest that differential treatment by race in the vehicle market may have important implications for differences in wealth and financial well being by race yet whereas a robust literature in economics has studied virtu

is shapley cost sharing optimal abstract a general approach to the design of budget balanced cost sharing mechanisms is to use the shapley value applied to the given cost function to define payments from the players to the mechanism is the corresponding shapley value mechanism optimal in some sense we consider the objective of minimizing worst case inefficiency subject to a revenue constraint and prove results in three different regimes first for the public excludable good problem the shapley value mechanism minimizes the worst case efficiency loss over all truthful deterministic and budget balanced mechanisms that satisfy equal treatment second even with randomization and approximate budget balance allowed and dropping equal treatment the worst case efficiency loss of the shapley value mechanism is within a constant factor of the minimum possible third for no deficit mechanisms we prove a general positive result for every monotone cost function a suitable blend of the vcg and shapley value mechanisms is no deficit and enjoys good approximate efficiency guarantees

holdups simple contracts and information acquisition abstract in a typical procurement setup several recent papers have shown that when complete contracting is not possible simple noncontingent contracts may suffice to solve the under investment problem this paper points out that a noncontingent contract offer such as a fixed price contract may induce the seller to acquire information on the future course of costs and only to accept the offer if the cost is low it is shown that sometimes the buyer prefers to wait and buy on the spot market than to offer a long term contract when the seller rejects a contract offer or the buyer chooses not to make one the seller will not make efficient investments because he expects to be held up on the spot market

household borrowing after personal bankruptcy a large body of literature has examined factors leading to filing for personal bankruptcy but little is known about household borrowing after bankruptcy this paper augments the existing literature with a comprehensive analysis of postbankruptcy borrowing using data from the survey of consumer finances we find that filers generally have more limited access to unsecured credit but borrow more secured debt after bankruptcy than comparable households that have never filed for bankruptcy filers also pay higher interest rates on all types of debt in addition as more time passes after filing credit access and borrowing costs improve however filers remain more prone than comparable nonfilers to experience financial distress accumulate less wealth and use expensive credit sources like payday loans even more than 10 years after filing

do liquidity constraints and interest rates matter for consumer behavior evidence from credit card data this paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply the data consist of a panel of thousands of individual credit card accounts from several different card issuers with associated credit bureau data we estimate both marginal propensities to consume mpcs out of liquidity and interest rate elasticities we also evaluate the ability of different models of consumption to rationalize our results distinguishing the permanent income hypothesis pih liquidity constraints precautionary saving and behavioral models we find that increases in credit limits generate an immediate and significant rise in debt counter to the pih the average mpc out of liquidity ddebt dlimit ranges between 10 14 the mpc is much larger for people starting near their limits consistent with binding liquidity constraints however the mpc is significant even for people starting well below their limit we show this response is consistent with buffer stock models of precautionary saving nonetheless there are other results that conventional models cannot easily explain e g why so many people are borrowing on their credit cards and simultaneously holding low yielding assets unlike most other studies we also find strong effects from changes in account specific interest rates the long run elasticity of debt to the interest rate is approximately 1 3 less than half of this elasticity represents balance shifting across cards with most reflecting net changes in total borrowing the elasticity is larger for decreases in interest rates than for increases which can explain the widespread use of temporary promotional rates the elasticity is smaller for people starting near their credit limits again consistent with liquidity constraints

on public good provision mechanisms with dominant strategies and balanced budget abstract consider a mechanism for the binary public good provision problem that is dominant strategy incentive compatible dsic ex post individually rational epir and ex post budget balanced epbb it is well known that if there are only two agents then any such mechanism must have a threshold or fixed cost sharing form providing the public good if and only if both agents have values that are at least their respective thresholds when there are more than two agents there are mechanisms that are dsic epir and epbb that are not of the threshold form any dsic epir and epbb mechanism that additionally satisfies that the lowest types expect zero net utility from participating are again of the threshold form this additional condition arises endogenously when maximizing expected welfare subject to dsic epir and epbb

contracting on time the paper shows how the time considerations especially those concerning contract duration affect incomplete contract theory time is not only a dimension along which the relationship unfolds but also a continuous verifiable variable that can be included in contracts we consider a bilateral trade setting where contracting investment trade and renegotiation take place in continuous time we show that efficient investment can be induced either through a sequence of constantly renegotiated fixed term contracts or through a renegotiation proof evergreen contract a perpetual contract that allows unilateral termination with advance notice we provide a detailed analysis of properties of optimal contracts

to invest or screen efficiently a potential conflict in relationships governed by incomplete contracts abstract we consider a dynamic trade relationship where quality is not contractible and potential sellers retain quality relevant private information we show that the presence of an investment technology to improve the incumbent seller s innate quality may impair the efficiency of the screening process if the conflict is effective the buyer has to induce an inefficient screening process or reduce the productivity of the investment technology this conflict suggests that the hold up problem may be more severe than predicted by models of incomplete contracts that assume complete information

can the shadow of the future harm cooperation abstract it is generally thought that in long term relationships high valuations of the future are conducive to cooperation in an intertemporal model of conflict however we demonstrate the possibility of the opposite effect a longer shadow of the future may harm cooperation in particular we show that the degree of inefficiency is positively related to i the agents valuation of the future ii potential growth rates in resources iii the size of initial resource endowments and iv the effectiveness of conflict

long term short term and renegotiation on the value of commitment in contracting spot contracting generally involves efficiency losses relative to long term contracting it is proved here that short term contracting and renegotiation allow to achieve long run efficiency when transfers are not limited objectives are conflicting and no relevant asymmetric information appears at recontracting dates this last assumption excludes adverse selection but not moral hazard when technologies and preferences are time separable copyright 1990 by the econometric society

the effects of unions on research and development an empirical analysis using multi year data a link between unionization and research and development rates research and development expenditures divided by output is tested for in thirteen aggregate canadian industries a balanced panel of thirteen industries covering 1968 to 1986 reveals a negative relationship between industry unionization rates and research and development the results hold when a number of techniques are used to control for unobserved industry heterogeneity and non linear responses to unionization in an industry that moves from the 25th to the 75th percentile of unionization research and development is predicted to fall by about 40 per cent jel classification j51 les effets des syndicats sur l intensite de la recherche et developpement une analyse empirique sur plusieurs annees ce memoire examine le lien entre le degre de syndicalisation et les taux de depenses en recherche et developpement en proportion de la production dans treize industries canadiennes pour ces treize secteurs industriels entre 1968 et 1986 il semble qu il y ait une relation negative entre les taux de syndicalisation et les taux de depenses en recherche et developpement ces resultats sont robustesmeme quand on utilise des techniques pour tenir compte de l heterogeneite des secteurs et des reponses non lineaires a la syndicalisation pour une industrie qui voit son taux de syndicalisation passer du 25e au 75e percentile on prevoit une chute de 40 dans la recherche et developpement

credit card redlining abstract this paper evaluates the presence of racial disparities in the issuance of consumer credit using a database of credit histories i link location based information on race with individual credit files after controlling for place specific factors such as housing vacancy rates and general population demographics i find qualitatively large differences in the amount of credit offered to similarly qualified applicants living in black versus white areas high data quality allows distinguishing between issuer provision supply and utilization of credit demand additional estimates using information on payday lending provide support for idea that issuers condition lending on location

short term contracting and strategic oil reserves the effect of short term contracting on resource extraction is studied in a two country model of international trade in oil countries planners are assumed to be fully rational with perfect information and perfect foresight contracts are assumed perfectly enforceable and complete except that short term contracts do not allow commitments to actions taken beyond the contract period we show that short term contracting limits countries opportunities for intertemporal consumption smoothing reducing their collective tolerance for temporal variation in consumption this tends to make them extract more slowly than in the efficient plan that results from long term contracting contractual relationships often outlive the contracts that govern them it is therefore common for a long term relationship to be governed by a sequence of short term contracts when these contracts allow complete control of the organization of the relationship within each contract period any outcome that can be achieved in a long term contract covering the entire life of the relationship is also feasible with a sequence of short term contracts short term contracting can nevertheless have significant effects on resource allocation because each contract must be voluntarily negotiated in the environment created by its predecessors an allocation that is acceptable to both parties as a long term contract might not be voluntarily negotiable as a sequence of short term contracts because short term contracting is so prevalent it is worth asking what sorts of relationship can be organized efficiently only by long term contract and what kinds of distortion are caused by short term contracting two kinds of answers to these questions have been given in the literature one important line of investigation considers the use of memory in contracts designed to control parties incentives under asymmetric information baron and besanko 1985 rubinstein and yaari 1983 sanchez and zapater 1985 stiglitz and weiss 1983 tirole 1986 and townsend 1982 among others have shown how parties can use

the failure of competition in the credit card market the bank credit card market containing 4 000 firms and lacking regulatory barriers casually appears to be a hospitable environment for the model of perfect competition nevertheless this article reports that credit card interest rates have been exceptionally sticky relative to the cost of funds moreover major credit card issuers have persistently earned from three to five times the ordinary rate of return in banking during the periods 1983 88 the failure of the competitive model appears to be partly attributable to consumers making credit card choices without taking account of the very high probability that they will pay interest on their outstanding balances copyright 1991 by american economic association

the importance of adverse selection in the credit card market evidence from randomized trials of credit card solicitations analyzing unique data from multiple large scale randomized marketing trials of preapproved credit card solicitations by a large financial institution we find that consumers responding to the lender s inferior solicitation offers have poorer credit quality attributes this finding supports the argument that riskier type borrowers are liquidity or credit constrained and thus have higher reservation loan interest rates we also find a more severe deterioration ex post in the credit quality of the booked accounts of inferior offer types relative to superior offers after controlling for a cardholder s observable risk attributes demographic characteristics and adverse economic shocks we find that cardholders who responded to the inferior credit card offers are significantly more likely to default ex post our results provide evidence on the importance of adverse selection effects in the credit card market

unionization incomplete contracting and capital investment this article examines empirically the hypothesis that incomplete contracts and resulting opportunistic behavior over the return to sunk assets reduces investment union firm contracts are incomplete because they 1 do not prevent all actions aimed at changing the existing contract 2 cover a relatively short time period and 3 do not extend to union members yet to be hired the primary response of firms is to reduce investment in specific durable assets and also to reduce employment growth and increase debt the authors find fairly strong evidence of these effects in a sample of large publicly traded firms using firm specific measures of unionization copyright 1993 by university of chicago press

licensing duration in foreign markets a real options perspective licensing can be considered an initial trial of a foreign market before a firm fully commits to it through other investment modes the length of trial has great importance because licensing duration represents part of the licensing agreement when it is too short the firm may not acquire the necessary experience and knowledge of the foreign market but if it is too long the firm misses optimal expansion timing arguing that licensing can be considered as a european style real option with a fixed holding period we develop and test a model of the determinants of licensing duration in foreign markets empirical results based on a sample of firms in various countries show that uncertainty and threat of competitive pre emption in the foreign market are related to shorter duration of the technology licensing agreements we also find that irreversibility of the impending investment moderates the relationships between uncertainty and duration specifically market and technology uncertainties in the foreign market induce shorter contracts under low levels of irreversibility

characterizations of strategy proof mechanisms for excludable versus nonexcludable public projects first we characterize the unanimous mechanisms as the set of strategy proof individually rational and citizen sovereign mechanisms for the provision of a nonexcludable public project second we characterize the largest unanimous mechanisms as the set of strategy proof individually rational demand monotonic and access independent mechanisms for the provision of an excludable public project comparing these two classes of mechanisms we conclude that admitting partial exclusion always improves efficiency under the incentive compatibility constraint journal of economic literature classification numbers d71 d82 h41

food price policy the rationale for government intervention abstract policy makers in the most successful developing countries have not accepted either of the two major schools of thought on food price policy the neo classical school favours free trade to maximize efficiency of resource allocation the structuralist school favours interventions to satisfy goals for income distribution especially in the rapidly growing rice based economies of asia policy makers have been more concerned about stability of domestic prices than their level relative to world prices this concern traditionally dismissed by economists as purely political is justified on economic grounds because of improved macroeconomic and dynamic efficiency from stable food prices the paper identifies both the benefits from food price stability and the costs of achieving it

balanced ranking mechanisms abstract in the private values single object auction model we construct a satisfactory mechanism a symmetric dominant strategy incentive compatible and budget balanced mechanism the mechanism converges to efficiency at an exponential rate it allocates the object to the highest valued agent with more than 99 probability provided there are at least 14 agents it is also ex post individually rational we show that our mechanism is optimal in a restricted class of satisfactory ranking mechanisms since achieving efficiency through a dominant strategy incentive compatible and budget balanced mechanism is impossible in this model our results illustrate the limits of this impossibility

opportunism and the dynamics of incomplete contracts this paper studies a buyer seller relationship where quality is not contractible but is affected by effort and the seller s privately known innate value the seller s cost of effort is also private knowledge assuming constant outside opportunities we show that more than two contracts is redundant the sequence of contracts exhibits increasing prices and durations and commitments for prices beyond the actual contract invite opportunism not effort the seller uses effort during the screening process which improves noncontractible quality as a result type related information may have negative value when contracts are incomplete copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association