performance contracting in after sales service supply chains performance based contracting is reshaping service support supply chains in capital intensive industries such as aerospace and defense known as power by the hour in the private sector and as performance based logistics pbl in defense contracting it aims to replace traditionally used fixed price and cost plus contracts to improve product availability and reduce the cost of ownership by tying a supplier s compensation to the output value of the product generated by the customer buyer to analyze implications of performance based relationships we introduce a multitask principal agent model to support resource allocation and use it to analyze commonly observed contracts in our model the customer principal faces a product availability requirement for the uptime of the end product the customer then offers contracts contingent on availability to n suppliers agents of the key subsystems used in the product who in turn exert cost reduction efforts and set spare parts inventory investment levels we show that the first best solution can be achieved if channel members are risk neutral when channel members are risk averse we find that the second best contract combines a fixed payment a cost sharing incentive and a performance incentive furthermore we study how these contracts evolve over the product deployment life cycle as uncertainty in support cost changes finally we illustrate the application of our model to a problem based on aircraft maintenance data and show how the allocation of performance requirements and contractual terms change under various environmental assumptions

ultimate recovery mixtures abstract we propose a relatively simple accurate and flexible approach to forecasting the distribution of defaulted debt recovery outcomes our approach is based on mixtures of gaussian distributions explicitly conditioned on borrower characteristics debt instrument characteristics and credit conditions at the time of default using moody s ultimate recovery database we show that our mixture specification yields more accurate forecasts of ultimate recoveries on portfolios of defaulted loans and bonds on an out of sample basis than popular regression based estimates further the economically interpretable outputs of our model provide a richer characterization of how conditioning variables affect recovery outcomes than competing approaches the latter benefit is of particular importance in understanding shifts in the relative likelihood of extreme recovery outcomes that tend to be realized more frequently than observations near the distributional mean

signaling quality with a money back guarantee the role of transaction costs direct marketing is witnessing explosive growth as consumers increasingly purchase products from their homes their ability to judge the quality of products they buy is significantly reduced in this paper we study how money back guarantees can signal product quality in such environments we interpret product quality broadly to mean both the level of attributes promised as well as the firm s consistency in delivering on those promises key aspects of our formulation are the explicit consideration of transaction costs and alternative signals of product quality transaction costs are the costs the seller or buyer faces when redeeming a money back guarantee we show that money back guarantees signal quality by exploiting the higher probability of returns for a lower quality product and the attendant higher transaction costs however if the seller s transaction costs are very large then there are less costly ways to signal namely charging a high price we compare the signaling performance of 1 price 2 price with uninformative advertising and 3 price with a money back guarantee whereas uninformative advertising does not work at all in our model under certain conditions a money back guarantee is necessary to signal and under other conditions a money back guarantee is a useful supplement to price

designing supply contracts contract type and information asymmetry this paper studies the value to a supplier of obtaining better information about a buyer s cost structure and of being able to offer more general contracts we use the bilateral monopoly setting to analyze six scenarios three increasingly general contracts wholesale pricing schemes two part linear schemes and twopart nonlinear schemes each under full and incomplete information about the buyer s cost structure we allow both sides to refuse to trade by explicitly including reservation profit levels for both for the supplier this is implemented through a cutoff policy we derive the supplier s optimal contracts and profits for all six scenarios and examine the value of information and of more general contracts our key findings are as follows first the value of information is higher under two part contracts second the value of offering two part contracts is higher under full information and third the proportion of buyers the supplier will choose to exclude can be substantial

the effects of regulation on research and development theory and evidence while other aspects of the effects of regulation on resource allocation have received considerable attention the impact of regulation on the innovative p ropensities of regulated firms has generated only limited and somewha t tenuous evidence accordingly this article investigates the effect s of regulation and firm structure on research and development r d expenditures a simple model of the behavior of a firm under a rate o f return regulation suggests that both the stringency of the allowed rate of return constraint and the inclusion or exclusion of r d in a firm s rate base will be key determinants of firm level r d expenditu res the empirical results strongly support the theoretical model copyright 1988 by the university of chicago

sector choice multiple job holding and wage differentials evidence from poland this article uses data from poland to investigate the role played by wage differentials between the public and private sectors in influencing sector choice and the decision to moonlight standardising for worker characteristics and allowing for sector selection effects we find i a substantial private sector wage premium ii wage differentials are a significant determinant of sector choice and iii the desire to moonlight is particularly strong among those who face the greatest wage gap that is university educated employees

the effect of taxation on labour supply the case of moonlighting the authors provide a simple test of supply side economics by estimating the responsiveness of moonlighting labour supply to changes in the marginal tax rate and the wage rate while standard theory teachers that changes in taxes and wage should have opposite and equal effects on labour supply taxes affect the entire asset position of the household in the short run an adjustment of hours in the second job may be the only option available to an individual in responding to a tax change thus analyses based on after tax wages may understate supply side effects to estimate these effects a tobit procedure is employed the empirical results suggest a backward bending supply curve over thet range of moonlighting hours data consist of a subsample of male blue collar workers from the 1978 cross section of the panel study of income dynamics

income tax policy and lifetime labor supply abstract a progressive income tax structure provides incentives for individuals to alter their rate of work and their age of retirement compared to a zero tax or proportional tax equilibrium progressive taxation induces individuals to take less leisure in the form of retirement in exchange for more leisure during the worklife especially at high wage levels the imposition of a special pension tax provision on top of a progressive tax structure offsets the distortion on leisure alternatives imposed by progressivity indeed the pension tax deferral provision can neutralize the impact of tax progressivity on the work profile over life the magnitude of these tax inducements in the u s tax structure are non trivial and therefore are expected to alter labor supply decisions over the lifetime the model finds empirical support using data from the social security newly entitled beneficiaries survey

strategic information management under leakage in a supply chain the importance of material flow management for a profit maximizing firm has been well articulated in the supply chain literature we demonstrate in our analytical model that a firm must also actively manage information flows within the supply chain which translates to controlling what it knows as well as what its competitors and suppliers know in our model of horizontal competition between an informed and an uninformed firm with a common upstream supplier material and information flows intersect through leakage of demand order information to unintended recipients as a result the informed firm s drive to control information flows within the supply chain can trigger operational losses through material flow distortion these losses can be so severe that the firm may prefer not to acquire information even when it is costless to do so our results underscore the importance of strategic information management actively managing the supply chain s information flows and making trade offs with material flows where appropriate to maximize profits

sovereign and private default risks over the business cycle abstract sovereign debt crises are often accompanied by deep recessions with sharp declines in external credit to the private sector in a sample of emerging economies we find that both sovereign and private interest rate spreads are countercyclical this paper presents a model of a small open economy that accounts for these empirical regularities it includes private firms which finance a fraction of imports by external debt and are subject to idiosyncratic productivity risk and a government which borrows internationally and taxes firms to finance public expenditures the model gives rise to endogenous private and sovereign interest rate spreads and a dynamic feedback mechanism between sovereign and private default risks through the endogenous response of fiscal policy to adverse productivity shocks

the economics of moonlighting a double self selection model the model proposed here for obtaining the labor supply functions of moonlighters uses a double self selection system to explore the husband s decision to moonlight together with his wife s decision to work subsequently the labor functions are classified under two regimes depending on whether the wife works the model is estimated based on a cross section of 4 448 married couples from the survey of income and program participation wave 2 i find that the household production time of husbands and wives are substitutes and that specific human capital deters moonlighting copyright 1990 by mit press

call center outsourcing contract analysis and choice this paper considers a call center outsourcing contract analysis and choice problem faced by a contractor and a service provider the service provider receives an uncertain call volume over multiple periods and is considering outsourcing all or part of these calls to a contractor each call brings in a fixed revenue to the service provider answering calls requires having service capacity thus implicit in the outsourcing decision is a capacity decision insufficient capacity implies that calls cannot be answered which in turn means there will be a revenue loss faced with a choice between a volume based and a capacity based contract offered by a contractor that has pricing power the service provider determines optimal capacity levels the optimal price and capacity of the contractor together with the optimal capacity of the service provider determine optimal profits of each party under the two contracts being considered this paper characterizes optimal capacity levels and partially characterizes optimal pricing decisions under each contract the impact of demand variability and the economic parameters on contract choice are explored through numerical examples it is shown that no contract type is universally preferred and that operating environments as well as cost revenue structures have an important effect

the effect of income taxation on the labor supply of married men in sweden abstract this paper presents labor supply functions estimated on a sample of prime age swedish males the model used takes account of the nonlinear character of individuals budget sets caused by the progressive income tax it also allows preferences to vary between individuals calculations with the estimated functions using a partial equilibrium framework indicate a sizeable effect of the income tax on hours of work the average expected deadweight loss of the income tax is found to be approximately 20 percent of tax revenue

strategic commitments for an optimal capacity decision under asymmetric forecast information we study the important problem of how to assure credible forecast information sharing between a supplier and a manufacturer the supplier is responsible for acquiring the necessary capacity before receiving an order from the manufacturer who possesses private forecast information for her end product we address how different contracts affect the supplier s capacity decision and hence the profitability of the supplier and the manufacturer we fully develop two contracts and provide explicit formulae to enable credible forecast information sharing the first is a nonlinear capacity reservation contract under which the manufacturer agrees to pay a fee to reserve capacity the second is an advance purchase contract under which the manufacturer is induced to place a firm order before the supplier secures the component capacity used to build the end product these contracts serve a strategic role in information sharing the capacity reservation contract enables the supplier to detect the manufacturer s private forecast information while the advance purchase contract enables the manufacturer to signal her forecast information we show that channel coordination is possible even under asymmetric forecast information by combining the advance purchase contract with an appropriate payback agreement through our structural and numerical results we also show that the degree of forecast information asymmetry and the risk adjusted profit margin are two important drivers that determine supply chain efficiency and which contract to adopt

on the role of commitment in a principal agent relationship with an informed principal abstract in many circumstances a principal who has private information when contracting with an agent may perform some further action simultaneously with or after the agent s choice of an action we analyze such a principal agent relationship with an informed principal as a noncooperative game and distinguish two extensive form games first the principal can commit to his subsequent action at the time of contracting second the principal s announcement for his action is not binding at the time of performance we show that commitment by the principal leads to separation and no commitment leads to pooling journal of economic literatureclassification numbers c72 d82

the supply of off farm labor a random coefficients approach a joint model of off farm labor decisions for farm operator and spouse is presented attention is given to operator and spouse participation decisions as well as associated problems of multiple sample selectivity biases two stage fixed and random coefficient methods corrected for possible selectivity biases are used to estimate supply function parameters results indicate that supply function parameters are random variation in important supply parameters is investigated results also illustrate the importance of spouse decisions on off farm labor supply function structure

secondary job holding in germany since 2003 the number and ratio of multiple jobholders has more than doubled although the german labour market has been experiencing a strong and sustained upswing this study analyses multiple j

multiple job holding among male workers in greece livanos i and zangelidis a multiple job holding among male workers in greece regional studies this paper studies the incidence of multiple job holding in greece and contributes to the literature by examining its determinants its variance across different regions and the effect of the business cycle on its occurrence the empirical analysis highlights the importance of both pecuniary and non pecuniary motives behind multiple job holding and reveals significant variations in its incidence across regions with areas that have a large primary sector having higher multiple job holding rates finally multiple job holding is found to be pro cyclical with the probability of holding a second job estimated to increase during economic expansion livanos i et zangelidis a les emplois multiples masculins en grece regional studies l article cherche a etudier la frequence des emplois multiples en grece et contribue a la documentation en examinant ses determinants sa variance a travers les diverses regions

the determinants of recovery rates in the us corporate bond market we examine recovery rates of defaulted bonds in the us corporate bond market based on a complete set of traded prices and volumes a study of the trading microstructure around various types of default events is provided we document temporary price pressure with high trading volumes on the default day and the following 30 days and low trading activity thereafter based on this analysis we determine market based recovery rates and quantify various liquidity measures we study the relation between the recovery rates and these measures considering additionally a comprehensive set of bond characteristics firm fundamentals and macroeconomic variables

job amenity and the incidence of double work abstract the hypothesis that workers in jobs associated with an amenity are more prone to moonlighting is derived and tested if earnings fall for such jobs it is rational to have two jobs while for jobs with no amenity a fall in earnings causes a rational worker to leave the sector altogether an amenity can be expected for instance for workers in primary sectors and evidence that farmers at an increasing rate have double occupations are provided the comparative statics on the models shows among other things that wage increases outside the amenity sector may have different effects than wage decreases inside the sector the models are tested on data on farmers and to some extent the regressions support the theoretical models

the determinants of bank loan recovery rates in good times and bad new evidence abstract we find that factors explaining bank loan recovery rates differ depending on the state of an underlying credit cycle our modelling approach incorporates a two state markov switching mechanism to capture underlying economic conditions this latent credit cycle variable helps to explain differences in observed recovery rates over time using us bank default loan data from moody s ultimate recovery database and covering the pre and post global financial crisis gfc period the paper develops and implements a dynamic model for bank loan recovery rates we accommodate the distinctive empirical features of the recovery rate data while incorporating a large number of possible determinants we find that certain loan specific and other variables hold different explanatory power with respect to recovery rates in good versus bad times in the credit cycle i e depending on underlying credit market conditions our findings demonstrate the importance of accounting for counter cyclical expected recovery rates when determining capital retention levels

recovery rates uncertainty certainly matters abstract previous studies identify default rate as the main systematic determinant of bond recovery rates we revisit this paradigm by investigating the impact of another factor economic uncertainty based on a wide sample of american default issues and relying on beta regression models well suited for the bounded heteroskedastic and skewed sample of recovery rates we analyze the determinants of recovery rate distributions we find economic uncertainty to be of paramount importance as it proves to be the most important systematic determinant of recovery rate distributions significant for both their mean and dispersion by contrast default rate remains a key determinant of the dispersion of these distributions but not for their means considering this evidence is critical to the sound implementation of stochastic recovery rate models used by financial institutions for the computation of regulatory capital

systematic effects among loss given defaults and their implications on downturn estimation abstract banks are obliged to provide downturn estimates for loss given defaults lgds in the internal ratings based approach while downturn conditions are characterized by systematically higher lgds it is unclear which factors may best capture these conditions as lgds depend on recovery payments which are collected during varying economic conditions in the resolution process it is challenging to identify suitable economic variables using a bayesian finite mixture model we adapt random effects to measure economic conditions and to generate downturn estimates we find that systematic effects vary among regions i e the us and europe and strongly deviate from the economic cycle our approach offers straightforward supportive tools for decision makers risk managers are enabled to select their individual margin of conservatism based on their portfolios while regulators might set a lower bound to guarantee conservatism in comparison to other approaches our proposal appears to be conservative enough during downturn conditions and inhibits over conservatism

the sensitivity of an empirical model of married women s hours of work to economic and statistical assumptions this study undertakes a systematic analysis of several theoretic and statistical assumption s used in many empirical models of female labor supply using a singl e data set psid 1975 labor supply data the author is able to replic ate most of the range of estimated income and substitution effects fo und in previous studies in this field he undertakes extensive specif ication tests and finds that most of this range should be rejected du e to statistical and model misspecifications the two most important assumptions appear to be the tobit assumption used to control for sel f selection into the labor force and exogeneity assumptions on the wi fe s wage rate and her labor market experience copyright 1987 by the econometric society

the costs of bankruptcy chapter 7 liquidation versus chapter 11 reorganization our paper explores a comprehensive sample of small and large corporate bankruptcies in arizona and new york from 1995 to 2001 bankruptcy costs are very heterogeneous and sensitive to the measurement method used we find that chapter 7 liquidations appear to be no faster or cheaper in terms of direct expense than chapter 11 reorganizations however chapter 11 seems to preserve assets better thereby allowing creditors to recover relatively more our paper also provides a large number of further empirical regularities our paper analyzes the largest sample of corporate bankruptcies to date we research approximately 300 cases from the arizona and new york federal bankruptcy courts from 1995 to 2001 these cases consist of 1 both publicly traded and privately held corporations and 2 both chapter 7 liquidations and chapter 11 reorganizations this sample is practically the entire population of unique corporate bankruptcies in these courts our paper s primary objective is to measure how the two available bankruptcy procedures differ especially but not only in terms of cost we explore four variables namely the change in the estate s value during bankruptcy a measure of indirect costs the time spent in bankruptcy another and more common measure of indirect costs the expenses submitted to and approved by the bankruptcy court a measure of direct costs and the recovery rates for creditors and apr violations our most important findings are that chapter 7 liquidations are not cheaper than chapter 11 reorganizations particularly after we control for endogenous self selection of firms into bankruptcy procedure bankruptcy professionals attorneys accountants trustees regularly end up with most of the post bankruptcy firm s value in chapter 7 arturo bris is at imd yale school of management and ecgi ivo welch is at brown uni

family composition and off farm participation decisions in israeli farm households this article studies the relationship between the off farm participation behavior of farm operators and their spouses and the demographic composition of the household we focus on farm families without parents siblings or partners and examine the effects of the existence of elderly children of the farm couple we find that both the father and the mother tend to reduce their participation in off farm work as the number of elderly children rises this result holds even after controlling for observed characteristics we also find that the effect of elderly children stems from considerations related to both farm production and household production

liquidity constraints as a cause of moonlighting an investigation of whether some workers respond to liquidity constraints by moonlighting is carried out using a unique large data set it is found that workers are more likely to moonlight if 1 they have low current incomes relative to their educational attainment and 2 they plan to purchase a house or a car during the next six months

gender differences in observed and offered wages in canada 1980 according to the 1981 census of canada the female rate of pay is 30 percent less than the male rate the average female wage offer however is only around one half of that received by males other things being equal slightly more than one half of the difference in observed wages can be explained by diffe rences in wage related characteristics between males and females two fifths of the disparity between wage offers can be explained by the same set of factors analysis of the distribution of wage offers indicates greater wage inequality in the canadian labor market than suggested by study of observed wages

multiple job holding in the united kingdom evidence from the british household panel survey this article examines the determinants of multiple job holding in the uk we address these issues using data from the first 11 waves of the british household panel survey bhps which covered the period from 1991 to 2001 evidence from the bhps does not support the hypotheses of main job hours constrained and main job insecurity we argue that the incentive for moonlighting in the uk is due to financial pressures and the desire for heterogeneous jobs the empirical work is carried out separately for men and women

the value of creditor control in corporate bonds this paper introduces a measure that captures the premium in bond prices that is due to the value of creditor control we estimate the premium as the difference in the bond price and an equivalent synthetic bond without control rights that is constructed using credit default swap cds contracts we find empirically that this premium increases as firm credit quality decreases and around important credit events such as defaults bankruptcies and covenant violations the increase is greatest for bonds most pivotal to changes in control changes in bond and cds liquidity do not appear to drive increases in the premium

family labour supply and fertility a two regime model the central hypothesis of the new micro economics of fertility was examined i e because children are female time intensive fertility is inversely related to the mothers wage a theoretical model of lifetime family labor supply and completed fertility which forms the basis for the subsequent empirical investigation is presented empirical estimates of the model are provided using 1971 canadian census data the 1 period model of completed family size and lifetime labor supply indicates that fertility and labor supply behavior of families where the wife participates in the labor market will differ from that of families with never participating wives the systematic differences arise because families with nonworking wives face the additional binding constraint of an inflexible supply of wifes time to the home a comparison of these 2 regimes allows inferences concerning the female time intensity of children and the substitutability of husbands and wifes time in the context of the 1 period model the relevant criterion for separating families into the 2 regimes is the lifetime rather than current participation status the evidence suggests that when this procedure is followed much doubt is cast on the conventional wisdom that children are female time intensive the usual inverse relation found between wifes wage or education and completed family size appears to be the result of a complex interaction between wage rates lifetime labor force participation and fertility some support is found for complementarity between the home time of the husband and wife but the evidence is not totally consistent results of the female participation equation strongly suggest complementarity proxies for the husbands lifetime labor supply suggest weak or zero complementarity when the sample is split by current participation of the wife rather than lifetime participation then the results support conventional wisdom concerning the female time intensity of children and replicate kneisners finding of complementarity between husband and wifes time reconciling these differences within the framework of the 1 period model is difficult since it yields no predictions concerning current variables yet since the wifes lifetime participation is the correct criterion for allocating families to the 2 regimes under the 1 period model doubt must remain concerning the female time intensity of children until the current lifetime results are reconciled

a comparison of the labor force behavior of married women in the united states and canada with special attention to the impact of income taxes estimation results are presented for the probability of working the hourly wage rate and the annual hours of work for wives in seven different age groups in both the u s and canada federal and state or provincial taxes are incorporated into the analysis an iterative estimation method is employed to circumvent the statistical problems resulting from the dependence of the hours of work on the tax rate and the dependence of the tax rate on the hours of work authors

pricing derivatives on financial securities subject to credit risk this article provides a new methodology for pricing and hedging derivative securities involving credit risk two types of credit risks are considered the first is where the asset underlying the derivative security may default the second is where the writer of the derivative security may default we apply the foreign currency analogy of jarrow and turnbull 1991 to decompose the dollar payoff from a risky security into a certain payoff and a spot exchange rate arbitrage free valuation techniques are then employed this methodology can be applied to corporate debt and over the counter derivatives such as swaps and caps the purpose of this article is to provide a new theory for pricing and hedging derivative securities involving credit risk two sources of credit risk are identified and analyzed the first is where the asset underlying the derivative security may default paying off less than promised this is the case for example with imbedded options on corporate debt the second is the credit risk introduced by the writer of the derivative security who may also default examples include over the counter writers of options on eurodollar futures swaps and swaptions for pricing derivative securities involving credit risk there are currently two approaches the first views these derivatives as contingent claims not on the financial securities themselves but as compound options on the assets underlying the financial securities this is the case for example with the pricing of imbedded options on corporate debt see merton 1974 1977 black and cox 1976 ho and singer 1982 chance 1990 and kim ramaswamy and sundaresan 1993 or the pricing of vulnerable options see johnson and stulz 1987 in practice however this valuation methodology is difficult to use first the assets underlying the financial security are often not tradeable and therefore their values are not observable this makes application of the theory and estimation of the relevant parameters problematic second as in the case of corporate debt all of the other liabilities of the firm senior to the corporate debt must first and simultaneously be valued this generates significant computational difficulties as a result this approach has not

the puzzling pattern of multiple job holding across u s labor markets multiple job holding mjh rates differ substantially across u s regions states and metropolitan areas rates decrease markedly with respect to labor market size these patterns have been largely overlooked despite being relatively fixed over at least the past 20 years this article explores explanations for these persistent differences we account for roughly two thirds of the mean absolute deviation in mjh across local labor markets msas the results suggest that variation in mjh across labor markets is driven by labor market differences in job opportunities and worker preferences most important in explaining variation in mjh are msa industry and occupation structure ancestry shares commute times and to a lesser extent labor market churn

implications of breach remedy and renegotiation design for innovation and capacity amanufacturer writes supply contracts with n buyers then the buyers invest in innovation and the manufacturer builds capacity finally demand is realized and the firms renegotiate the supply contracts to achieve an efficient allocation of capacity among the buyers the court remedy for breach of contract specific performance versus expectation damages affects how the firms share the gain from renegotiation and hence how the firms make investments ex ante the firms may also engage in renegotiation design inserting simple clauses into the supply contract to shape the outcome of renegotiation for example when a buyer grants a financial hostage to the manufacturer or is charged a per diem penalty for delay in bargaining the manufacturer captures the gain from renegotiation tradable options which grant buyers the right to trade capacity without intervention from the manufacturer return the gain from renegotiation to the buyers this paper proves that under surprisingly general conditions the firms can coordinate their investments with the simplest of supply contracts fixed quantity contracts this may require renegotiation design and certainly requires that the firms understand the breach remedy and set their contract parameters accordingly

multiple job holding the artist s labour supply approach this article analyses a labour supply model in which individuals maximize a utility function that depends on leisure time consumption and time devoted to an activity that is termed artistic this activity may generate income that depends nonlinearly on hours dedicated to it the individual can also work in the labour market an activity that does not increase utility by itself in exchange for an hourly wage and obtain income not related to hours conditions are obtained that sort individuals into two groups part time and full time artists deriving their labour supply functions in both activities the predictions of the model are tested empirically using a sample of musicians from a uruguayan performing rights society increases in outside wages drive part time artists out of the labour market but no significant increase in arts hours is detected higher nonlabour income also reduces nonarts work time of part time artists but does not have a significant impact in their arts hours conversely arts

signaling new product reliability with after sales service contracts prior studies on performance based contracting pbc for after sales services have highlighted its advantages over traditional resource based contracting rbc when products are established and their reliability is known to all parties we develop a game theoretic model to investigate how these insights are affected when the vendor is privately informed about the reliability of a newly developed product a novel feature of our model is the interaction between reliability signaling private information and the vendor s discretionary investment in spares inventory private action which arises naturally in the setting we consider we find that this interaction leads to contrasting equilibrium outcomes under the two contracts rbc induces the vendor to focus on inventory savings leading to underinvestment in spares whereas pbc induces the vendor to focus on reliability signaling achieved through overinvestment in inventory as a result neither contract is efficient we investigate two means to mitigate this inefficiency but either approach has caveats a making inventory verifiable removes the trade off between reliability signaling and inventory investment but results in diverging contract preferences between the vendor and the buyer b pooling inventories across multiple buyers saves inventory costs but it also hinders reliability signaling potentially exacerbating inefficiency this paper was accepted by yossi aviv operations management

signalling and renegotiation in contractual relationships this paper examines how the possibility of renegotiation affects contractual outcomes in signaling games when an infinite number of rounds of renegotiations are allowed before contracts are executed the main results of the paper are 1 contracts may still contain distortions 2 the popular efficient separating equilibrium outcome is never an equilibrium outcome with renegotiation 3 incentive compatibility constraints can be generalized to incorporate renegotiation 4 equilibrium outcomes can be separating and nevertheless depend on the uninformed player s prior and 5 renegotiation in signaling games may lead to outcomes similar to equilibrium outcomes of screening games in which multiple contract purchases are allowed copyright 1993 by the econometric society

moonlighting multiple motives and gender differences this paper examines the incidence and reasons for moonlighting with a focus on gender differences the study specifies and estimates a bivariate probit model of labour supply and the decision to hold more than one job it is found that the factors leading men and women to moonlight are similar a wage decomposition analysis reveals that 93 percent of the differential between male and female moonlighters wages is not explained by differences in characteristics and little connection is found between an individual s human capital and their moonlighting wage finally it is found that moonlighters are less likely to report their income

utility based estimation of labour supply functions in the regular and irregular sectors recent theoretical work on labor supply has shown that the tax and transfer system can induce some individuals to work in the irregular labor market models designed to represent such behavior are unable to sign unambiguously the impact of the marginal tax rate as well as many key exogenous parameters on the hours supplied in the irregular market except under strong restrictions on preferences in this paper the authors estimate a simultaneous labor supply model that allows testing some of the more common assumptions found in the literature using a unique data set on the underground economy of the metropolitan area of quebec city canada estimates of elasticities with respect to predetermined variables are presented moreover they test and empirically reject the assumptions of perfect substitution between regular and irregular work activities as well as additive separability of the utility function copyright 1992 by royal economic society

canadian contributions to family economics canadian scholars have made substantial contributions to the relatively new field of family economics these include new models of how men and women match in marriage markets and of how decisions are made in multi person households several were early contributors to the literature on married women s labour supply and labour supply in a family context and helped to develop empirical methods in this area a particular focus has been on the impacts of policy relevant parameters such childcare costs on family labour supply and child well being new work on child development the impact of early life conditions and the processes of intergenerational transmission also highlight the importance of family context in determining economic well being

a time series analysis of labour absence in australia the authors find evidence from australian time series data supporting two hypotheses about the determination of labor absence first labor absence modeled in a utility maximizing framework that stresses the opportunity cost of labor absence receives considerable support from the data variables that change the slope and or shift the budget constraint facing workers affect labor absence secondly the authors find tentative evidence that coercive or difficult work environments which apparently affect job satisfaction adversely affect labor absence in particular it appears that labor absence is a leading indicator of a deteriorating industrial relations environment characterized by increased industrial disputation copyright 1989 by mit press

warranties as signals under consumer moral hazard this article examines the use of prices and warranties as signals of product quality to consumers who choose how to maintain their purchases the seller s incentives are strongly affected by the interaction of quality and maintenance in determining product reliability two different assumptions about this interaction are made a separating equilibrium in which high quality is signalled with a low warranty and low price is shown to be possible in both cases

wage differentials and moonlighting by civil servants evidence from cote d ivoire and peru as part of their efforts to reduce fiscal deficits many governments have allowed public sector salaries to erode often on the assumption that government workers are overpaid vis a vis those in the private sector that assumption is tested by analyzing public private pay differentials in cote d ivoire and peru switching regressions models are estimated using full information maximum likelihood fiml and the results are compared to those obtained using ordinary least squares ols techniques the ols yields seriously biased estimates of the pay structure suggesting that public wages are higher than private wages the fiml estimates show the opposite our probit analysis also shows that the wage disadvantage of civil servants is a determinant of the greater prevalence of moonlighting among public than private employees the evidence suggests that reductions in employment rather than pay while being less palatable in the short term will be more effective in the long run

can yardstick competition reduce waiting times yardstick competition is a regulatory scheme for local monopolists e g hospitals where the monopolist s reimbursement is linked to performance relative to other equivalent monopolists this re

is it all about money an examination of the motives behind moonlighting multiple job holding is an important labour market phenomenon in this article we examine individuals motives for multiple job holding specifically we estimate an empirical model of the motivation for moonlighting assuming that individuals hold a second job for either financial or for nonpecuniary motives our results contribute to a better understanding of multiple job holding we find that multiple job holding is used by individuals as a way to deal with the financial difficulties or the increased financial commitments in their household individuals are more likely to moonlight for money in the early stages of their adult life finally individuals with more labour market experience are more likely to moonlight for pecuniary than nonpecuniary reasons

warranties as a signal of quality in this paper we demonstrate through an example that in oligopolistic markets it is only in special cases that warranties can serve as signals of quality warranties are perfect signals only in cases in which the intrinsic attributes of products are neither too clustered nor too widely spaced otherwise multiple separating equilibria arise and the informational content of warranties is limited

the shadow margins of labor market slack we use a mix of new and existing data to develop the aggregate hours gap ahg a novel measure of labor market underutilization our measure differentiates individuals by detailed categories of labor market participation and uses data on their desired work hours as a measure of their potential labor supply we show that desired hours vary widely by demographics and detailed labor force status and that the gap between desired and actual work hours is strongly positively correlated with reported search effort the aggregate hours gap suggests a more sluggish labor market recovery since the great recession than either the official unemployment rate or alternative measures of labor market underutilization modest amounts of underutilization among the part time employed and a substantial degree of underutilization among those out of the labor force account for the disparity the aggregate hours gap also does well in accounting for wage movements over our sample period

the impact of royalty contract revision in a multistage strategic r d alliance this paper investigates the impact of royalty revision on incentives and profits in a two stage research and development r d stage and marketing stage alliance with a marketer and an innovator the marketer offers royalty contracts to the innovator we find that the potential for royalty revision leads to more severe distortions in the optimal initial royalty contracts offered by the marketer we show that if the innovator plays a significant role in the marketing stage the marketer should offer a low royalty rate initially and then revise the royalty rate up later otherwise she should do the opposite we identify two major effects of royalty revision first royalty revision provides the marketer with a flexibility to dynamically adjust royalty rates across the two stages of the alliance to better align the innovator s incentives this incentive realigning effect improves the marketer s profit second royalty revision makes it harder for the marketer to obtain private information from the innovator because the innovator worries that the marketer will take advantage of the information to revise the initial contract to a more favorable one to herself later this information revealing effect hurts the marketer s profit we characterize in what kind of alliances marketers would benefit the most from royalty revision so that managers should clearly establish the expectation for royalty revision and in what kind of alliances markerters would not benefit from royalty revision so that managers should commit not to revise the initial royalty contract with royalty contracts that are contingent on the r d outcome of the r d stage we find that contingent contract structure could be either substitutable by fully capturing the incentive re aligning effect or complementary by weakening the information revealing effect to royalty revision depending on whether the innovator plays a significant role in the marketing stage managers may need to use a contingent contract if possible either to replace or with royalty revision accordingly to improve profits this paper was accepted by kamalini ramdas entrepreneurship and innovation

tanzanian formal sector workers participation in informal production a theoretical model is developed explaining formal sector workers participation in the informal sector a reduced form informal sector participation function is derived from a specific utility function a specific informal sector production function and a specific informal sector earnings function the participation function can be estimated consistently and provides a solution to the problem that informal sector wages in developing countries are hard to observe a sample of tanzanian formal sector workers is used to estimate the participation function a majority of tanzanian formal sector workers participate in informal production participation in informal production is inversely related to household income to living in dar es salaam and to being a mother with small children participation is positively related to age and multiple job holding seems to play a very different role in the transition from work to retirement in tanzania compared to industrialized countries