On the Ratchet Effect with Product Market Competition.
We study a two‐period industry where firms are run by agents privately informed about their (persistent) costs, and principals can only use spot contracts. We characterize novel semi‐separating equilibria where principals randomize in one or both periods. These equilibria have the following implicat...
| Publicado en: | RAND Journal of Economics (Wiley-Blackwell) Vol. 56; no. 2; pp. 216 - 231 |
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| Autores principales: | , |
| Formato: | Artículo |
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Wiley-Blackwell
Summer2025
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=185068910&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 185068910 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 07416261 56RJ jtl: RAND Journal of Economics (Wiley-Blackwell) issn: 07416261 maglogo: Y pubinfo: dt: Summer2025 vid: 56 iid: 2 pid: 480 pub: Wiley-Blackwell artinfo: ui: 185068910 10.1111/1756-2171.12499 ppf: 216 ppct: 15 formats: fmt: – @attributes: type: T – @attributes: type: P size: 282KB tig: atl: On the Ratchet Effect with Product Market Competition. aug: au: Bisceglia, Michele Piccolo, Salvatore affil: Toulouse School of Economics, Toulouse, France, Università di Bergamo, Bergamo, Italy Compass Lexecon, Milan, Italy, Università di Bergamo, Bergamo, Italy su: Economic competition Market prices Agency (Law) Organizational performance Market pricing sug: subj: Economic competition Market prices Agency (Law) Organizational performance Market pricing keyword: adverse selection competing hierarchies managerial firms Ratchet effect spot contracts adverse selection competing hierarchies managerial firms Ratchet effect spot contracts ab: We study a two‐period industry where firms are run by agents privately informed about their (persistent) costs, and principals can only use spot contracts. We characterize novel semi‐separating equilibria where principals randomize in one or both periods. These equilibria have the following implications for industry dynamics and firms' performance. First, despite some principals learning their agents' type early on, aggregate output need not increase over time: the inefficiencies generated by the adverse selection problem can be persistent over time in competitive environments. Second, a more severe adverse selection problem may result in higher market prices, thereby increasing principals' profits. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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