Contractual distortions in a market with frictions

• 成果类型: Article
• 署名作者: Inderst, R
• 署名单位: University of London; London School Economics & Political Science; University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2003.07.004
• 发表日期: 2004
• 页码: 155-176
• 关键词: Screening; Contract design; Countervailing incentives

摘要

This paper analyses contract design in a decentralized market environment with frictions. While principals (e.g., firms) have all contractual power, their market power is constrained as agents (e.g., workers) can choose to wait and search for better offers. We find that results depend crucially on how market frictions affect agents' utilities. With type-independent costs of search and waiting, equilibrium contracts are always first-best. If agents are impatient and discount future payoffs, however, distortions vanish only gradually. In the latter case, we also characterize equilibrium offers and show that the market exhibits two types of externalities, both of which are absent in the case of type-independent costs of search. (C) 2003 Elsevier Inc. All rights reserved.