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The Role of Bounded Rationality and Imperfect Information in Subgame Perfect Implementation: An Empirical Investigation
Aghion, Philippe; Fehr, Ernst; Holden, Richard; … - Institute for the Study of Labor (IZA) - 2015
In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo's subgame perfect implementation mechanism induces truth-telling in practice, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty...
Persistent link: https://www.econbiz.de/10011265296
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An Economic Model of Child Custody
Francesconi, Marco; Muthoo, Abhinay - Institute for the Study of Labor (IZA) - 2003
This paper develops a model of child custody based on an incomplete-contract approach to the allocation of property rights. Because of the presence of transaction costs in marriage, altruistic parents cannot contract upon the investments they make into their children, but can reduce the...
Persistent link: https://www.econbiz.de/10005703298
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Optimal Incentive Contracts under Inequity Aversion
Englmaier, Florian; Wambach, Achim - Institute for the Study of Labor (IZA) - 2005
We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a...
Persistent link: https://www.econbiz.de/10005566722
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Delegation of Authority as an Optimal (In)complete Contract
Roider, Andreas - Institute for the Study of Labor (IZA) - 2004
The present paper aims to contribute to the literature on the foundations of incomplete contracts by providing conditions under which simple delegation of authority is the solution to the complete-contracting problem of the parties. We consider a hold-up framework where both parties profit from...
Persistent link: https://www.econbiz.de/10005566762
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Contracting with Private Information
Hagedorn, Marcus - Institute for the Study of Labor (IZA) - 2003
This paper adds to the current literature on incomplete contracting that argues that deviating from a complete information, transaction-cost free environment may be may generate valuable insights. We achieve this by assuming bargaining with asymmetric information. We consider the consequences of...
Persistent link: https://www.econbiz.de/10005762029
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Discretionary Latitude and Relational Contracting
Wu, Steven Y.; Roe, Brian E. - Institute for the Study of Labor (IZA) - 2007
We use economic experiments to examine the nature of relational trading under a menu of incomplete contracts ranging from the repeat purchase mechanism of Klein and Leffler (1981) to highly incomplete contracts that are completely unenforceable by third-parties. Our results suggest that, with...
Persistent link: https://www.econbiz.de/10005762063
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Handing Out Guns at a Knife Fight: Behavioral Limitations of Subgame-Perfect Implementation
Fehr, Ernst; Powell, Michael; Wilkening, Tom - Institute for the Study of Labor (IZA) - 2014
The assumption that payoff-relevant information is observable but not verifiable is important for many core results in contract, organizational and institutional economics. However, subgame-perfect implementation (SPI) mechanisms – which are based on off-equilibrium arbitration clauses that...
Persistent link: https://www.econbiz.de/10010891173
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Construction Contracts (or: "How to Get the Right Building at the Right Price?")
Chakravarty, Surajeet; MacLeod, W. Bentley - Institute for the Study of Labor (IZA) - 2006
Most contracts that individuals enter into are not written from scratch; rather, they depend upon forms and terms that have been successful in the past. In this paper, we study the structure of form construction contracts published by the American Institute of Architects (AIA). We show that...
Persistent link: https://www.econbiz.de/10005233914
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Corruption as a Barrier to Entry: Theory and Evidence
Campos, Nauro F.; Estrin, Saul; Proto, Eugenio - Institute for the Study of Labor (IZA) - 2010
Conventional wisdom depicts corruption as a tax on incumbent firms. This paper challenges this view in two ways. First …, by arguing that corruption matters not so much because of the value of the bribe ("tax"), but because of another less … studied feature of corruption, namely bribe unavoidability. Second, we argue that the social costs of corruption arise not …
Persistent link: https://www.econbiz.de/10008682953
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Informal Sector and Corruption: An Empirical Investigation for India
Dutta, Nabamita; Kar, Saibal; Roy, Sanjukta - Institute for the Study of Labor (IZA) - 2011
corruption in every sector is remarkably high. Stifling bureaucratic interference and corruption at every stage of economic … governance allowing substantial corruption in the system. Based on a study of 20 Indian states, we empirically show that higher … corruption increases level of employment in the informal sector. Further, our analysis also shows that for higher levels of …
Persistent link: https://www.econbiz.de/10008868134