a review of the recent empirical literature on displaced workers this article reviews the empirical literature on job displacement job displacement is widespread and strongly countercyclical tending to peak during economic downturns but concentrated in indus

the role of farming experience on the adoption of agricultural technologies evidence from smallholder farmers in uganda abstractthis article investigates the relationship between adoption of and experience with agricultural technologies we use both non parametric and parametric estimations on data from rural farmers in uganda we find an inverted u relationship between adoption of and experience with agricultural technologies in banana coffee and maize this suggests that farming experience is useful in early stages of adoption of a given technology when farmers are still testing its potential benefits which later determine its retention or disadoption over time thus gradual advances in technology development and continuous retraining of farmers are essential for sustainable adoption of agricultural technologies for some crops

on the duration of agreements a model of optimal contracts between two infinitely lived parties a borrower and lender is presented and analyzed the objective is to explain the phenomenon of finite length multi period contracts it is shown how costly information acquisition can account for multi period contracts which are of bounded length comparative statics results on how contract length responds to exogenous parameters such as the cost of information acquisition are also derived copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

issue by issue negotiations the role of information and time preference abstract the alternating offers bargaining game with two pies and incomplete information has a bargaining sequential equilibrium where the strong type of the informed player restricts his offer to one pie leaving it to the other player to make an offer on the second pie an offer on both pies comes only from the weak type of informed player hence an issue by issue negotiation agenda may arise from signaling considerations journal of economic literatureclassification number c78

technology adoption under seed access constraints and the economic impacts of improved pigeonpea varieties in tanzania dry land legumes well adapted to drought prone areas have largely been neglected in the past despite the good opportunities they offer for income growth and food and nutritional security for the poor this study evaluated the adoption and impact of two farmer and market preferred and disease resistant pigeonpea varieties that were developed and promoted in semi arid tanzania the new varieties were resistant to fusarium wilt a fungal disease devastating the crop however farmers wanting to adopt new varieties did not adopt due to seed access constraints and under developed seed delivery systems adoption of new varieties is therefore analyzed using an augmented double hurdle model that allows estimating variety adoption conditional on seed access thresholds accounting for the additional information on sample separation the study identifies the crucial role of seed access local supply extension education participatory decision making capital and household assets in determining adoption the social economic benefits of the technology and policies for improved seed access were further analyzed using the extended economic surplus method dream model even under restrictive assumptions overall discounted benefits were found to be quite attractive indicating the need for additional efforts to scale up the success story analysis of changes in research benefits from relaxing the seed access constraint showed that net gains would increase by up to 30 if farmer access to improved seeds can be assured smallholder farmers are the major beneficiaries along with consumers and rural net buyers who gain from productivity induced lower market prices

bargaining with imperfect enforcement the game theoretic bargaining literature insists on a noncooperative bargaining procedure but implicitly assumes cooperative implementation of agreements in reality courts cannot implement agreements costlessly and parties often prefer to use noncooperative implementation we present a bargaining model which incorporates the idea that agreements may be enforced noncooperatively we show that this has a substantial impact in limiting the inequality of agreements and results in a nonmonotonicity of the discount rate the model also explains why some parties may have incentives to deliberately write incomplete contracts as a way to enhance their bargaining power

proposal for a contingency debt sustainability framework summary we argue that the new debt sustainability framework ndsf of the world bank and imf is centered on the country policy and institutional assessment cpia to suit the aid allocation mechanism of the international development association ida but fails to deal effectively with the economic vulnerability of low income countries instead we propose a contingency debt sustainability framework cdsf which identifies the sources of vulnerability and compensates for exogenous shock and trend factors without giving rise to significant moral hazard implications the cdsf is thus suitable to effectively shield low income countries from the main external causes undermining their achievement of debt sustainability

contractual solutions to the hold up problem this paper considers a general version of the hold up problem where n agents first make relation specific investments and then must agree on some collective action it is shown that first best solutions exist under a variety of different assumptions about the nature of information asymmetries

commitment and fairness in a dynamic regulatory relationship this paper considers a multiperiod model of a regulated firm that has stationary private information which may be revealed through performance if it cannot make commitments to future policies the regulator has an incentive to exploit any information the firm reveals and laffont and tirole show that there is no regulatory policy that is separating over any closed interval a fairness arrangement is proposed in which the firm agrees not to quit if in future periods the regulator allows it to earn a nonnegative profit given the type it revealed in earlier periods the properties of such arrangements are studied and an example is presented in which both the firm and the regulator prefer a fairness arrangement to a policy feasible without commitment

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

simple contracts renegotiation under asymmetric information and the hold up problem abstract in this article it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non trivial it is argued that the default decision may be interpreted as a simple contract that the parties have written ex ante this result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold up problem to be solved even if the parties valuations are private information

two sided uncertainty and up or out contracts a bilateral moral hazard problem provides a rationale for up or out employment contracts the employer sets a wage higher than opportunity cost to induce the worker to invest in firm specific capital if the individual does not make the grade it is in the firm s interest ex post to fire him had the initial arrangement not included provisions for firing individuals the firm would underreport the value of the employee wrecking the incentive scheme the basic model permits both firm and worker to be risk neutral therefore it admits a straightforward multiperiod extension which we also investigate

optimal contracts under adverse selection and moral hazard a continuous time approach this article presents a continuous time agency model in the presence of adverse selection and moral hazard with a risk averse agent and a risk neutral principal under the model setup we show that the optimal controls are constant over time and thus the optimal menu consists of contracts that are linear in the final outcome we also show that when a moral hazard problem adds to an adverse selection problem the monotonicity condition well known in the pure adverse selection literature needs to be modified to ensure the incentive compatibility for information revelation the model is applied to a few managerial compensation problems involving managerial project selection and capital budgeting decisions we argue that in the third best world the relationship between the volatility of the outcome and the sensitivity of the contract depends on interactions between the managerial cost and the firm s production functions contrary to conventional wisdom sometimes the higher the volatility the higher the sensitivity of the contract the firm receiving good news sometimes chooses safer projects or invests less than it does with bad news we also examine the effects of the observability of the volatility on corporate investment decisions copyright 2005 oxford university press

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

job loss and regional mobility we study the migration behavior of displaced workers and find that job displacement increases regional mobility we find however that noneconomic factors such as family ties are very important

redundancy in an expanding labour market a case study of displaced workers from two manufacturing plants in southampton previous studies of redundancy have been derived from a restricted geographical base they have been predominantly concerned with workers made redundant by manufacturing firms in older industrial regions and have largely ignored redundancies in more buoyant labour market areas this paper examines the post redundancy experience of workers made redundant by two large manufacturing firms in southampton in the mid 1980s comparison with previous studies of redundancy in less prosperous labour markets in northern regions of the uk highlights contrasts in the proportions of workers finding alternative employment and in rates of pay working conditions and levels of job satisfaction the study also highlights the importance of gender in post redundancy experience another factor that has been neglected in previous studies

efficient informal trade theory and experimental evidence from the cape town taxi market informal sectors in developing countries are often thought of as responses to rigid and cumbersome market regulations in this paper i study informal trade as a first best outcome in the model i propose rigid regulations can be necessary to achieve efficiency even though they are always sidestepped the key assumption is that the regulations define the trading parties fall back position in case the informal bargaining process breaks down i set up a field experiment to test the model s mechanisms in the cape town market for metered taxis consistent with the model i find that sidestepping the regulations increase cost efficiency taxis take the shortest route the price is however unaffected suggesting informal bargaining leads to a pareto improvement

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

on the design of stable joint ventures abstract an analytical model is developed to study the problem of designing stable joint ventures aimed at jointly developing and supplying a new technology the analysis focuses on the extent to which traditional motives for joint ventures like cost sharing synergy effects or technological spillovers may shape the incentives for firms to cheat on the arrangement and hence despite larger cooperative benefits endanger the formation of a stable agreement the cheating firm although supplying the contractually specified inputs to the venture manages to keep its knowhow proprietary while benefiting from the loyal partner s know how through spillovers from the venture only if know how can be kept sufficiently proprietary within the venture will synergy effects stimulate the formation of a stable joint venture increasing the profitability of cooperation while at the same time stifling the incentives to cheat but if know how becomes difficult to appropriate synergy effects may increase the incentives to cheat resulting in no agreement at least when both parties have perfect foresight

the interaction of implicit and explicit contracts in repeated agency abstract in a repeated principal agent model in which the agent s actions are observable to the principal but not verifiable in court the agent s incentives derive both from salary payments based on verifiable signals and from implicit promises by the principal of bonuses for good behavior explicit short term contracts are designed to enhance the effectiveness of the infinite horizon implicit contract between principal and agent in a constrained efficient equilibrium bonuses smooth the consumption path of the risk averse agent by moving in the opposite direction from salaries total consumption and expected discounted utility for the rest of the game journal of economic literature classification numbers c7 c73 d8

rent shifting and the order of negotiations abstract when two sellers negotiate terms of trade with a common buyer the order in which the negotiations occur can affect the buyer s payoff this suggests that the buyer may have preferences over which seller to negotiate with first we find that when the efficient outcome calls for the buyer to purchase from only one seller the buyer weakly prefers to negotiate first with the inefficient seller and when the efficient outcome calls for the buyer to purchase from both sellers the buyer prefers to negotiate first with the seller that has less bargaining power or offers a smaller stand alone surplus all else being equal these conclusions hold whether or not penalty clauses are feasible

contractual contingencies and renegotiation in a dynamic model of asymmetric information between the owner of a firm and a manager we investigate the optimal set of contingencies on which an incentive contract should depend when renegotiation is possible in particular we characterize the circumstances in which the contracting parties find it desirable to deliberately restrict what the owner can monitor thereby limiting the contractible contingencies our findings thus provide an endogenous explanation for contract simplicity in contrast to those based on transactions costs or bounded rationality

the importance of the agenda in bargaining abstract this paper discusses a multi issue bargaining game in which the players set up an agenda and negotiate on the issues sequentially according to this agenda we demonstrate that the agenda might play an important role in the bargaining and discuss the relationship between the agenda and the final outcome of the bargaining game assuming that players have conflicting evaluations regarding the importance of the issues under negotiation we identify the type of agenda each player prefers we also show that in such cases the outcome of the bargaining game need not to be efficient by demonstrating the strategic use of the agenda the paper explains the phenomenon of bargaining on the agenda

contracts without memory in multiperiod agency models abstract settings are considered in which optimal multiperiod contracts can have no memory i e where second period payments do not need to depend on first period outcomes if contracts have no memory a repeated agency game can be played myopically there are no gains to long term relationships conditions on preferences for a no memory contract are presented in an agency game with moral hazard on the act selection preference separability and domain additivity imply the existence of a no memory contract in a setting without moral hazard but with asymmetric information on the outcome domain additivity implies no memory

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

moral hazard and secured lending in an infinitely repeated credit market game we analyze repeated moral hazard with discounting in a competitive credit market with risk neutrality even without learning or risk aversion long term bank borrower relationships are welfare enhancing the main result is that the borrower obtains an infinite sequence of unsecured loans at below spot market cost following the first good project realization this contract produces first best action choices prior to this stage the borrower gets secured loans with above market borrowing cost the optimal contract thus displays a selective memory feature taking only one of two forms at any given point in time depending on prior history we consider an infinitely repeated bank borrower relationship with moral hazard and universal risk neutrality and explore the ramifications of credit contract duration when the two well known benefits of long term contracting learning and improved risk sharing are absent our objectives are twofold the first is to analyze an infinitely repeated game with discounting in a credit market context we thus relate the theory of repeated games to financial intermediation theory particularly to issues of moral hazard and collateral related distortions the second objective is to understand noteworthy stylized facts of credit markets such as durability in credit relationships lower borrowing costs for established borrowers and unsecured loans for established borrowers versus secured loans for newer borrowers while these practices may be partly due to learning we show that learning is not essential to rationalize them even if information decays rapidly and banks learn nothing about borrowers through time these aspects of credit contracting arise in a repeated game context our main results are as follows first despite universal risk neutrality and the absence of learning a durable bank relationship benefits the borrower 2 the intuition is that the long term contracting permitted by a durable relationship enables the bank to efficiently tax and subsidize the borrower through time to reduce the use of costly collateral second the average welfare loss due to moral hazard per period is positive even as the time horizon goes to infinity third the optimal infinite horizon contract has the striking property that following the period

the productivity and income effects of adoption of improved soybean varieties and agronomic practices in malawi abstract soybean constitutes an important component of the maize based smallholder cropping systems in malawi and holds considerable potential for countering soil fertility decline enhancing household food and nutrition security and raising rural incomes a number of yield enhancing improved soybean varieties and agronomic practices isvaps have been developed and disseminated in malawi but there is limited evidence on the adoption and impacts of these technologies this paper assesses the productivity and income effects of adopting isvaps using plot level data collected from a nationally representative sample of 1237 soybean growing households in malawi our results show that over a third of the sampled households have adopted isvaps furthermore results from a stochastic dominance analysis showed that soybean yields and net crop incomes for adopters are significantly higher than those of non adopters over the entire probability distribution of isvaps adoption endogenous switching regression model results further demonstrated that adoption of isvaps is associated with an average of 61 yield gain and 53 income gain for adopters overall the results point to the need for further scaling of isvaps for greater adoption and impact on the livelihoods of smallholder farmers in malawi

preference representation and randomization in principal agent contracts abstract conditions on an agent s preferences that induce a demand for ex ante randomization are derived when the agent has constant absolute risk aversion in wealth but additive separable preferences in wealth and effort optimal contracts often require randomization under additive separability the principal can use randomization to exploit the interaction between incentive considerations and the agent s outside opportunities however when the agent has constant absolute risk aversion in wealth but multiplicative separable preferences participation and incentive considerations separate hence optimal contracts do not exhibit ex ante randomization

incomplete written contracts undescribable states of nature this paper extends the classic two armed bandit problem to a many agent setting in which n players each face the same experimentation problem the difference with the single agent problem is that agents can now learn from the experiments of others thus experiementation produces a public good and a free rider problem in experimentation naturally arises more interestingly future experimentation by others encourages current individual experimentation the paper provides an analysis of the set of markov equilibria in terms of the free rider effect and the encouragement effect

urban shrinkage and resurgence in germany this article questions the strict parallelism of demographic and economic development in characterising urban shrinkage in germany as the cases of several ruhr cities and east german cities prove urban economic growth can be achieved thanks to the substantial presence of modern industries and business services and despite declines in population size serious shrinkages of halle cottbus and schwerin are primarily due to failures in the post industrial transformation process recent policy measures strongly oriented towards slowing the downsizing process of population via e g urban regeneration strategies do not appear to be sufficient for achieving urban resurgence in these cities more active industrial policy measures are required there to create a competitive high tech manufacturing sector to stimulate innovation activities and to boost its growth interdependence with modern local services and r d infrastructure

moral hazard renegotiation and forgetfulness when a principal and an agent operate with simple contracts in equilibrium renegotiation will occur after the agent takes her action since renegotiation makes incentive contracts non credible the principal may prefer non renegotiable monitoring options the current literature does not fully reconcile these predictions with the observation of simple non renegotiated incentive contracts we model a principal agent interaction in a social learning framework and assume that when renegotiation is not observed agents may forget its feasibility with infinitesimal probability in the unique stable state of our model renegotiation occurs with infinitesimal frequency and second best simple incentive contracts appear with non negligible frequency

notes on bribery and the control of corruption abstract existing models of corruption that allow for bribery have ignored an important recursive problem when an auditor or a policeman bargains over a bribe with a person he has arrested he has to take into account the fact that he may in turn be caught for taking this bribe and be involved in a similar bargain but from the other side the purpose of this paper is to provide a simple model for capturing this recursion having done so it goes on to analyse some conditions for the control of corruption these turn out to be different from what conventional wisdom suggests

modeling farmers decisions on tea varieties in vietnam a multinomial logit analysis this article analyzes households choice on tea varieties in vietnam by using a multinomial logit model the modeling takes into account the issue of unobserved individual heterogeneity and the endogeneity of some explanatory variables use of chemical and organic fertilizers the results show that important factors influencing the decision to adopt one type of tea varieties include income age household size farming contract and use of organic fertilizers but also membership of professional associations such as the tea association and the farmers union

repeated moral hazard with a time inconsistent agent abstract i consider a repeated principal agent model with moral hazard in which the agent has preferences which are widely used to capture time inconsistency i analyze the case where the agent is sophisticated in the sense that he is fully aware of his inconsistent discounting i characterize the optimal wage scheme for such an agent and compare it to time consistent benchmarks the marginal cost of rewarding the agent for high output today exceeds the marginal benefit of delaying these rewards until tomorrow in this sense the principal does not smooth the agent s rewards over time when facing a sophisticated agent it is optimal for the principal to reward the good performance more and punish the bad performance more in the early period relative to the optimal wage scheme for a time consistent agent

adverse selection in dynamic moral hazard this paper studies a multiperiod moral hazard problem under two assumptions i contracts are subject to renegotiations ii the agent s action has long term effects the action is also interpreted as a choice of characteristic or type renegotiation proof contracts that implement various actions including random ones are characterized under appropriate conditions the equilibrium involves the principal implementing a random action therefore the equilibrium has standard properties of adverse selection models

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

accounting information in financial contracting the incomplete contract theory perspective this paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research we argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved by discussing its rich theoretical implications we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency

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

first things first the agenda formation problem for multi issue committees abstract the paper focuses on sequential bargaining procedures in which parties are allowed to differ in several respects we first highlight the strategic effects in the bargaining game and the often conflicting incentives that players need to take into account in forming their preferences over agendas we then show that there is a pareto superior agenda among the issue by issue procedures this consists in setting the most important issue first unless this is difficult urgent in the sense that there is probability of game breakdown after a rejection in the negotiations over this issue in this case parties prefer to negotiate over the easy issue first

understanding different migrant selection patterns in rural and urban mexico abstract the productive characteristics of migrating individuals emigrant selection affect welfare the empirical estimation of the degree of selection suffers from a lack of complete and nationally representative data this paper uses a dataset that addresses both issues the enet mexican labor survey which identifies emigrants right before they leave and allows a direct comparison to non migrants this dataset presents a relevant dichotomy it shows negative selection for urban mexican emigrants to the united states for the period 2000 2004 together with positive selection in mexican emigration out of rural mexico to the united states in the same period three theories that could explain this dichotomy are tested whereas higher skill prices in mexico than in the us are enough to explain half of the negative selection result in urban mexico its combination with network effects and wealth constraints fully accounts for positive selection in rural mexico

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

non cooperative bargaining and union formation we study a union formation decision problem when workers consist of two groups distinguished by different productivities workers may form either a joint union or two separate unions the whole decision process is modelled as an extensive form bargaining game workers form a joint union when the sizes or productivities of the groups are similar in the first case there is a wage differential which is more less than proportional to the productivity difference if the size of the more productive is smaller larger than that of the less productive in the second case there is no wage differential in this paper we study a union formation decision problem when workers consist of two groups distinguished by different productivities they may form either a joint union or two separate unions depending on the relative size and productivity of the two groups the whole decision process is modelled as an extensive form bargaining game in which the two groups of workers bargain with each other as well as with a firm the labour market is sharply distinguished from the goods market by the widespread practice of collective bargaining usually several groups of workers with different characteristics for example skill level or geographical location are represented as a single unit and or several employers form a single bargaining unit against a giant union this multiplicity of bargaining units creates a complicated bargaining structure and makes the outcome hard to analyse the purpose of this paper is to provide a model which captures this complexity and at the same time clarifies the underlying structure of bargaining power although economists have been aware of the multiplicity problem for a long time it has been received little rigorous theoretical treatment until recently davidson 1985 examined the possible gains that can be obtained by trade unions through joint bargaining in an oligopolistic industry there is a positive externality due to the fact that a higher wage rate in one firm generates a larger demand hence a higher wage in competing firms when a joint union is organized these externalities are internalized to the benefit of workers horn and wolinsky 1985 investigated the equilibrium pattern of unionization in an industry where a firm employs two types of workers they found that workers tend to form a single union when the two types are substitutes in the sense that the incremental contribution of one group to the firm s revenue is decreasing with respect to the size of the other group since workers bargaining power comes from the loss that they can

contracting for technology improvement the effect of asymmetric bargaining power and investment uncertainty abstract investment in technology improvement ti measures that reduce the consumption rate of input commodities like fuel energy water etc yields significant economic and sustainability benefits yet evidence shows that the so called holdup problem leads to inefficient levels of investment in ti the suppliers refrain from investing in ti because they fear that a buyer with greater bargaining power will use ti related cost reductions to push prices down in the purchase bargaining process and thereby further reduce the supplier s profit margin conventional wisdom suggests that higher bargaining power on the buyer s side aggravates this problem in a two tier supplier buyer setting we study the role of relative bargaining power along with technology uncertainty i e the risk associated with investment return on ti investment levels by the supplier we challenge conventional wisdom to show that there is an inverse u shaped relationship between buyer bargaining power and ti investment by the supplier and characterize how technology uncertainty moderates this relationship we study and rank various contracting arrangements commonly used in industry including the price commitment and shared investment contracts to remedy the investment inefficiencies resulting from the bargaining process

the design of contracts and remedies for breach in the first part of this article hypothetical contracts providing for all possible uncertain contingencies are considered in the next part contracts providing for only some contingencies are examined and are shown to be advantageous due both to difficulties that could arise in making and enforcing contingent terms and to the presence of implicit substitutes for them in the following major part of the article two of these substitutes for contingent terms are analyzed remedies for breach and the opportunity for renegotiation the existence of both is demonstrated to induce parties to behave approximately as they would under detailed contracts

randomization in coalition contracts this article analyzes a much debated clause in the coalition contract between spd and fdp in rheinland pfalz two parties write a contract based on which decisions under incomplete information have to be made at a later point in time it is shown that a complex complete contract can achieve the first best outcome however a simple incomplete contract can implement the first best outcome only if use of seemingly inefficient randomization is made

the game of negotiations ordering issues and implementing agreements abstract we use a two issue bargaining model with asymmetric information to study agent choice of how to structure bargaining we uncover the settings in which different agenda structures are chosen in equilibrium how the order in which issues are bargained over matters and what impact the rules for implementing agreements have if agreements are implemented as they are reached easy issues are negotiated first and hard issues later if agreements are implemented only after all issues are settled then it is size that matters with large issues settled first all parties prefer the former rules of implementation to the latter

adoption of improved chickpea varieties kribhco experience in tribal region of gujarat india abstract the study aims to track adoption of improved chickpea varieties and assess their on farm benefits in some remote and backward tribal villages in gujarat india where few newly developed varieties were introduced by a non government organization it also determines key factors which were influencing their adoption the study found that adoption of improved chickpea varieties was gradually increasing by replacing a prominent local variety duration of crop maturity farm size yield risk and farmers experience of growing chickpea crop were significantly influencing their adoption the on farm benefits as a result of improved varieties were realized in terms of increased yield levels higher income and labor productivity more marketable surplus price premium and stabilized yields in fluctuating weather breeding short duration varieties with stable yield levels under varying weather and organizing seed multiplication and dissemination in regions where moisture stress is a problem during maturity of chickpea are the major suggestions

migration and employment after an economic shock regional characteristics and migration patterns this study addresses the migration dynamics of workers after their workplace has closed it analyses to what extent migration responses differ between regions with different characteristics for ind

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

producer opportunism in retailing contracts this paper analyzes the role of ex post producer opportunism on the optimal design of vertical restraints it considers vertical contracts as starting points of ex post renegotiation it shows that the alleged room for franchisor opportunism that seems quite important in franchising contracts can be seen as an insurance device when part of the goal of the contract is to provide a stable payoff to the franchisee this conclusion holds for various opportunistic strategies direct eviction of initial retailers excessive entry of new retailers on the market or resale price maintenance used to encourage voluntary exit of initial retailers

compensatory aid and debt relief a case study of uganda abstract we propose a contingency financing framework to assist low income countries in the achievement of debt sustainability the framework relies on an accounting method to quantify external shocks to the balance of payments and provides compensatory financing to offset their impact we apply the framework to the case of uganda during the period 1988 2002 and find that it would have been highly effective in identifying and offsetting the adverse liquidity implications of shocks to the country s trade balance

limited contract enforcement and strategic renegotiation this paper presents a strategic theory of contract renegotiation in this theory suboptimal contracts are put in place initially to protect one party against undesirable a ctions by another party and are renegotiated once the danger is past the authors develop a model to establish the cases in which simple contracts cannot achieve desirable outcomes so that only a complicated contract or renegotiation will serve unlike most previous accounts of contract renegotiation this theory does not rely on exogenous uncertainty to motivate renegotiation copyright 1988 by american economic association

efficient reliance and damage measures for breach of contract this article considers a situation where the buyer or the seller of a good must engage in expenditures on specific capital before the exchange either to prepare to use the product or to prepare to sell it it is assumed that postbreach bargaining is possible and carried out in a cooperative fashion and that buyers and sellers form expectations about the outcome of such bargaining in a specific way without enforceable contracts the potential appropriability of specific rents results in inefficiently low levels of investment three damage measures commonly used to enforce contracts are shown to produce inefficiently high levels of investment and to be pareto ranked from best to worst as follows specific performance expectation damages and reliance damages

public versus private ownership quantity contracts and the allocation of investment tasks abstract the government wants a certain good or service to be provided should the required assets be publicly or privately owned or should a partnership be formed building on the incomplete contracting approach we argue that the initially specified quantity of an ex ante describable basic good can have important effects on investment incentives which has been neglected in the literature so far we also study how the tasks of investing in quality improvements and cost reductions should be assigned we show how the optimal contracts and governance structures depend on the exogenous parameters of the model such as the nature of the investments and the parties bargaining powers

on the value of commitment with asymmetric information several recent papers have emphasized that long term relationships can be efficiently governed by short term contracts provided that there is no asymmetric information at the contracting dates this excludes not only adverse selection problems but also moral hazards problems in which hidden actions generate private information over the future in this paper we show in the context of a multiperiod principal agent relationship with adverse selection that renegotiable short term contracts can be as efficient as long term renegotiation proof contracts on the other hand spot contracting may fail to achieve long run efficiency not only because of intertemporal smoothing as with symmetric information but also because of ratchet effects and time inconsistency in the optimal structure of informational rents thus some limited commitment seems to be a necessary and sufficient condition to achieve long run efficiency

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

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

performance measures in earnings based financial covenants in debt contracts this paper examines how performance measures are defined in major earnings based financial covenants in loan contracts to shed light on the economic rationales underlying the contractual use of performance measures i find an earnings based covenant is typically based on a performance measure close to earnings before interest tax amortization and depreciation expenses ebitda however my empirical analyses show that ebitda is less useful in explaining credit risk than earnings before interest and tax expenses ebit and even the bottom line net income thus measuring credit risk cannot fully explain the choice of accounting performance measures in earnings based covenants i conjecture that contracting parties choose an ebitda related measure instead of a measure calculated after depreciation and amortization expenses e g ebit to make the performance measure less sensitive to investment activities which can be controlled through other contractual terms such as a restriction on capital expenditure and provide empirical evidence consistent with this conjecture

repeated principal agent relationships with lending and borrowing abstract it is shown optimal long term contracts are strictly better than a series of unrelated short term contracts for two reasons long term contracts allow risk to be spread over time and the agent s intertemporal choices provide information about the unobservable random variable

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

human capital investment specialization and the wage effects of voluntary labor mobility ahstract analyses of voluntary labor mobility suggest that job search facilitates job change while specific training inhibits mobility further given that specific skills cannot be transferred between jobs and since both search and training are costly it is reasonable for workers to specialize in search or specific training on a given job training or search specialization however implies that estimation methods which treat the incidence of a quit as exogenous underestimate mobility effects on wages the larger wage effects reported here result from simultaneous estimation but also reflect more accurate measurement of wage growth between jobs

incomplete contracts and signaling this article presents a principal agent model in which asymmetric information leads to contractual incompleteness i show that in the presence of transactions costs incompleteness may act as a signal of the principal s type two types of transactions costs are considered those incurred ex ante drafting costs and those incurred ex post enforcement or verification costs i prove that in the presence of either of these costs asymmetric information leads to more contractual incompleteness than full information does

returning to work regional determinants of re employment after major redundancies abstractusing matched employer employee data on roughly 429 000 workers made redundant from large plant closures or major downsizing in sweden between 1990 and 2005 this paper analyses the role of the regional industry mix specialization related and unrelated variety in the likelihood of returning to work the results show that a high presence of same or related industries speeds up the re employment process while high concentrations of unrelated activities do not the role of related activities is particularly evident in the short run and in regions with high unemployment consequently the prospect of successful diversification is enhanced in regions with related industries

the multiperiod principal agent problem in repeated principal agent models long term contracts can improve on short term contracts only if they commit either principal or agent to a payoff in some future circumstance lower than could be obtained from a short term contract negotiated if that circumstance occurs we show that efficient contracting under moral hazard alone does not require long term commitment from the principal provided a short term contract can punish the agent sufficiently in a sense made precise it requires no commitment from the agent either then linking payoffs in one period to outcomes in previous periods does not improve the tradeoff between incentives and risk sharing

farmers perceptions and adoption of new agricultural technology evidence from analysis in burkina faso and guinea west africa economists investigating consumer demand have accumulated considerable evidence showing that consumers generally have subjective preferences for characteristics of products and that their demand for products is significantly affected by their perceptions of the product s attributes however the role of farmers preferences in adoption decisions have received very limited attention in adoption studies conducted by economists this paper tests the hypothesis that farmers perceptions of technology characteristics significantly affect their adoption decisions the analysis conducted with tobit models of modern sorghum and rice varietal technologies in burkina faso and guinea respectively strongly supports this hypothesis our results provide a strong case for future adoption studies to expand the range of variables used away from the broad socio economic demographic and institutional factors to include farmers subjective perceptions of the characteristics of new agricultural technologies