107 research outputs found
Dynamic contracts with moral hazard and adverse selection
No full textWe study a novel dynamic principal–agent setting with moral hazard and adverse selection (persistent as well as repeated). In the model, an agent whose skills are his private information faces a finite sequence of tasks, one after the other. Upon arrival of each task, the agent learns its level of difficulty and then chooses whether to accept or refuse each task in turn and how much effort to exert. Although his decision to accept or refuse a task is publicly known, the agent's effort level is his private information. We characterize optimal contracts and show that the per-period utility of the agent approaches his per-period utility when his skills are publicly known, as the discount factor and the time horizon increase
Wage Bargaining, Labor Turnover, and the Business Cycle: A Model with Asymmetric Information
No full textThis paper presents a wage bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand shocks affect the equilibrium in a way that produces procyclical quits and countercyclical layoffs.These results are obtained without resorting to assumptions of nominal wage rigidity, long-term contracting, or aggregate price misperceptions.
Can Foreign Aid Accelerate Stabilization?
No full textThis paper studies the effect of foreign aid on economic stabilization. Following Alesina and Drazen (1991), we model the delay in stabilizing as the result of a distributional struggle: reforms are postponed because they are costly and each distributional faction hopes to reduce its share of the cost by outlasting its opponents in obstructing the required policies. Since the delay is used to signal each faction's strength, the effect of the transfer depends on the role it plays in the release of information. We show that this role depends on the timing of the transfer: foreign aid decided and transferred sufficiently early into the game leads to earlier stabilization; but aid decided or transferred too late is destabilizing and encourages further postponement of reforms.
A Service of zbw Tournaments with Midterm Reviews Tournaments with Midterm Reviews *
No full textStandard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abstract In many tournaments investments are made over time and conducting a review only once at the end, or also at points midway through, is a strategic decision of the tournament designer. If the latter is chosen, then a rule according to which the results of the different reviews are aggregated into a ranking must also be determined. This paper takes a first step in the direction of answering how such rules are optimally designed. A characterization of the optimal aggregation rule is provided for a two-agent two-stage tournament. In particular, we show that treating the two reviews symmetrically may result in an equilibrium effort level that is inferior to the one in which only a final review is conducted. However, treating the two reviews lexicographically by first looking at the final review, and then using the midterm review only as a tie-breaking rule, strictly dominates the option of conducting a final review only. The optimal mechanism falls somewhere in between these two extreme mechanisms. It is shown that the more effective the first-stage effort is in determining the final review's outcome, the smaller is the weight that should be assigned to the midterm review in determining the agents' ranking. * We wish to thank Maya Eden, Eyal Winter and Paul Schweinzer for helpful conversations. Motty Perry gratefully acknowledges financial support from the ISF 032-1548
An Efficient Multi-Unit Ascending Auction
No full textWe provide an ascending auction that yields an efficient outcome when there are many identical units for sale and bidders have interdependent values and downward-sloping demand. Our ascending auction both extends and generalizes Ausubel's (2004) and yields the same outcome as Perry and Reny's (2002) generalization of Vickrey's (1961) sealed-bid auction. There are two key features of our auction. Bidders are permitted both to express different demands against different bidders, as well as to increase their demands. The equilibrium strategies are closely related to the familiar "drop out when price equals value" strategy of the English auction. Copyright The Review of Economic Studies Limited, 2005.
An Example of Price Formation in Bilateral Situations: A Bargaining Model with Incomplete Information.
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