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An Equilibrium Analysis of Search and Breach of Contract, I: Steady States

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  • Peter A. Diamond
  • Eric Maskin

Abstract

We study the steady-state equilibrium of models where individuals meet pairwise in a costly stochastic search process and negotiate contracts to product output. Different meetings yield different outputs, and so an individual in a contract may wish to continue search to find a better match. If he is successful, he will break his original contract. In anticipation of possible breaches, contracts may provide for compensation to be paid to the breached-against partner. We examine the effects that several alternative damage rules have on equilibrium search and breach behavior.

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Bibliographic Info

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 10 (1979)
Issue (Month): 1 (Spring)
Pages: 282-316

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Handle: RePEc:rje:bellje:v:10:y:1979:i:spring:p:282-316

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Cited by:
  1. Keane, Michael P. & Todd, Petra E. & Wolpin, Kenneth I., 2011. "The Structural Estimation of Behavioral Models: Discrete Choice Dynamic Programming Methods and Applications," Handbook of Labor Economics, Elsevier.
  2. Charles North, 2001. "Remedies for misrepresentation in applications in the presence of fraudulent intent," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(2), pages 162-176, June.
  3. Bester, H., 1991. "Bargaining V.S. Price Competition in a Market with Quality Uncertainty," Papers 9113, Tilburg - Center for Economic Research.
  4. Ricardo Lagos & Nobuhiro Kiyotaki, 2004. "A Model of Job and Worker Flows," 2004 Meeting Papers 36, Society for Economic Dynamics.
  5. Sergei Koulayev, 2008. "Estimating search with learning," Working Papers 08-29, NET Institute, revised Oct 2008.
  6. Alain Béraud, 2008. "La Place De La Notion De Chômage Involontaire Dans La Théorie Keynésienne De L’Emploi," THEMA Working Papers 2008-16, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  7. Nicolas L. Jacquet, 2007. "Inefficient Worker Turnover," Working Papers 17-2007, Singapore Management University, School of Economics.
  8. Patricia M. Anderson & Simon M. Burgess, 1995. "Empirical Matching Functions: Estimation and Interpretation Using Disaggregate Data," NBER Working Papers 5001, National Bureau of Economic Research, Inc.
  9. Bonilla, Roberto, 2008. "Contracts and on-the-job search," Labour Economics, Elsevier, vol. 15(3), pages 512-536, June.
  10. Morvay, Endre, 2012. "Munkapiac keresési súrlódásokkal
    [Job-seeking on the labour market, with frictions]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 139-163.

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