Competition and Incentives with Nonexclusive Contracts
AbstractWe consider a common agency context where socially desired exclusive dealing clauses cannot be enforced. Customers sequentially negotiate nonexclusive credit or insurance contracts from multiple risk-neutral firms in a market with free entry. Each contract is subject to moral hazard arising from a common noncontractible effort decision. Outcomes of a class of Markov equilibria are characterized by a corresponding notion of constrained efficiency. These may involve more rationing than in a context of exclusive contracts. Increases in public provision or competition can result in increased prices on the private market, owing to an induced reduction in customer effort.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 29 (1998)
Issue (Month): 3 (Autumn)
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Other versions of this item:
- Charles M. Kahn & Dilip Mookherjee, 1996. "Competition and Incentives with Non-Exclusive Contracts," Papers 0075, Boston University - Industry Studies Programme.
- Kahn, C.M. & Mookherjee, D., 1996. "Competition and Incentives with Non-Exclusive Contracts," Papers 75, Boston University - Industry Studies Programme.
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
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