Contractual Structure and Endogenous Matching in Partnershipso
We analyze optimal contracts and optimal matching patterns in a simple model of partnership where there is a double-sided moral hazard problem and potential partners differ in their productivity in two tasks. It is possible for one individual to accomplish both tasks (sole production) and there are no agency costs associated with this option but partnerships are a better option if comparative advantages are significant. We show that the presence of moral hazard can reverse the optimal matching pattern relative to the first best, and that even if partnerships are optimal for an exogenously given pair of types, they may not be observed in equilibrium when matching is endogenous, suggesting that empirical studies on agency costs are likely to underestimate their extent by focusing on the intensive margin and ignoring the extensive margin.
|Date of creation:||Feb 2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pierre-André Chiappori & Bernard Salanié, 2002.
"Testing Contract Theory : A Survey of Some Recent Work,"
2002-11, Centre de Recherche en Economie et Statistique.
- Pierre André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory: A Survey of Some Recent Work," CESifo Working Paper Series 738, CESifo Group Munich.
- Patrick Legros & Andrew Newman, 1996.
"Wealth effects, distribution, and the theory of organization,"
ULB Institutional Repository
2013/7036, ULB -- Universite Libre de Bruxelles.
- Legros, Patrick & Newman, Andrew F., 1996. "Wealth Effects, Distribution, and the Theory of Organization," Journal of Economic Theory, Elsevier, vol. 70(2), pages 312-341, August.
- Archishman Chakraborty & Alessandro Citanna, .
"Occupational choice, incentives and wealth distribution,"
GSIA Working Papers
225, Carnegie Mellon University, Tepper School of Business.
- Chakraborty, Archishman & Citanna, Alessandro, 2005. "Occupational choice, incentives and wealth distribution," Journal of Economic Theory, Elsevier, vol. 122(2), pages 206-224, June.
- CITANNA, Alessandro & CHAKRABORTY, Archishman, 2001. "Occupational Choice, incentives and wealth distribution," Les Cahiers de Recherche 720, HEC Paris.
- Steven Tadelis & Jonathan Levin, 2004.
"Profit Sharing and the Role of Professional Partnerships,"
2004 Meeting Papers
156, Society for Economic Dynamics.
- Jonathan Levin & Steven Tadelis, 2005. "Profit Sharing and the Role of Professional Partnerships," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 131-171, January.
- Ackerberg, D.A. & Botticini, M., 1999.
"Endogenous Matching and the Empirical Determinants of Contract Form,"
96, Boston University - Department of Economics.
- Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Boston University - Institute for Economic Development 92, Boston University, Institute for Economic Development.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 0096, Boston University - Industry Studies Programme.
- Patrick Legros & Andrew Newman, 2002.
"Monotone matching in perfect and imperfect worlds,"
ULB Institutional Repository
2013/7032, ULB -- Universite Libre de Bruxelles.
- Patrick Legros & Andrew F. Newman, 2002. "Monotone Matching in Perfect and Imperfect Worlds," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 925-942.
- Legros, Patrick & Newman, Andrew F, 2002. "Monotone Matching in Perfect and Imperfect Worlds," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 925-42, October.
- Michael Kremer & Eric Maskin, 1996.
"Wage Inequality and Segregation by Skill,"
NBER Working Papers
5718, National Bureau of Economic Research, Inc.
- Serfes, Konstantinos, 2005. "Risk sharing vs. incentives: Contract design under two-sided heterogeneity," Economics Letters, Elsevier, vol. 88(3), pages 343-349, September.
- Kaniska Dam, 2003.
"The Principal-Agent Matching Market,"
CESifo Working Paper Series
945, CESifo Group Munich.
- Kaniska Dam & David Pérez-Castrillo, 2001. "The Principal-Agent Matching Market," UFAE and IAE Working Papers 503.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- DAM, Kaniska & PEREZ-CASTRILLO, David, . "The principal-agent matching market," CORE Discussion Papers RP -1903, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-55, December.
- Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-68, May.
When requesting a correction, please mention this item's handle: RePEc:cep:stieop:024. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.