Competitive Markets without Commitment
AbstractIn the presence of a time-inconsistency problem with agency contracts, we show that competitive markets can implement allocations that Pareto-dominate those achieved by a benevolent government, and they induce more effort. We analyze a model with moral hazard and a two-sided lack of commitment. After agents have chosen their work, firms can modify contracts and agents can switch firms. If the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals, it is Pareto superior to a governmentâs allocation with a complete breakdown of incentives. Moreover, competitive markets without commitment implement more effort in equilibrium under general conditions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by www.najecon.org in its series NajEcon Working Paper Reviews with number 814577000000000462.
Date of creation: 22 Mar 2010
Date of revision:
Contact details of provider:
Web page: http://www.najecon.org/
Other versions of this item:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ilja Neustadt & Peter Zweifel, 2009. "Economic Well-Being, Social Mobility, and Preferences for Income Redistribution: Evidence from a Discrete Choice Experiment," Working Papers 0909, University of Zurich, Socioeconomic Institute, revised Jan 2010.
- Jenny Simon, 2011. "Financial Markets as a Commitment Device for the Government," 2011 Meeting Papers 447, Society for Economic Dynamics.
- Wanda Mimra & Achim Wambach, 2011. "A Game-Theoretic Foundation for the Wilson Equilibrium in Competitive Insurance Markets with Adverse Selection," CESifo Working Paper Series 3412, CESifo Group Munich.
- Englmaier, Florian & Muehlheusser, Gerd & Roider, Andreas, 2010.
"Optimal Incentive Contracts under Moral Hazard When the Agent is Free to Leave,"
CEPR Discussion Papers
7914, C.E.P.R. Discussion Papers.
- Englmaier, Florian & Muehlheusser, Gerd & Roider, Andreas, 2010. "Optimal Incentive Contracts under Moral Hazard When the Agent Is Free to Leave," IZA Discussion Papers 5027, Institute for the Study of Labor (IZA).
- Englmaier, Florian & Muehlheusser, Gerd & Roider, Andreas, 2010. "Optimal Incentive Contracts under Moral Hazard When the Agent is Free to Leave," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 329, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Roland Bénabou & Jean Tirole, 2013.
"Bonus Culture: Competitive Pay, Screening, and Multitasking,"
NBER Working Papers
18936, National Bureau of Economic Research, Inc.
- Benabou, Roland & Tirole, Jean, 2013. "Bonus Culture: Competitive Pay, Screening, and Multitasking," IZA Discussion Papers 7321, Institute for the Study of Labor (IZA).
- Bénabou, Roland & Tirole, Jean, 2012. "Bonus Culture: Competitive Pay, Screening and Multitasking," IDEI Working Papers 756, Institut d'Économie Industrielle (IDEI), Toulouse.
- Bénabou, Roland & Tirole, Jean, 2012. "Bonus Culture: Competitive Pay, Screening and Multitasking," TSE Working Papers 12-367, Toulouse School of Economics (TSE).
- Bénabou, Roland & Tirole, Jean, 2013. "Bonus Culture: Competitive Pay, Screening, and Multitasking," CEPR Discussion Papers 9419, C.E.P.R. Discussion Papers.
- Maurus Rischatsch, 2009. "Simulating WTP Values from Random-Coefficient Models," Working Papers 0912, University of Zurich, Socioeconomic Institute.
- Nick Netzer & Florian Scheuer, 2010.
"Competitive screening in insurance markets with endogenous wealth heterogeneity,"
Springer, vol. 44(2), pages 187-211, August.
- Nick Netzer & Florian Scheuer, 2009. "Competitive Screening in Insurance Markets with Endogenous Wealth Heterogeneity," Working Papers 0907, University of Zurich, Socioeconomic Institute, revised Jun 2009.
- Maurus Rischatsch & Maria Trottmann, 2009. "Physician dispensing and the choice between generic and brand-name drugs – Do margins affect choice?," Working Papers 0911, University of Zurich, Socioeconomic Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).
If references are entirely missing, you can add them using this form.