Moral Hazard, Targeting and Contract Duration in Agri-Environmental Policy

This paper extends the multi-period agri-environmental contract model of Fraser (2004) so that it contains a more realistic specification of the inter-temporal penalties for non-compliance, and therefore of the inter-temporal moral hazard problem in agri-environmental policy design. On this basis it is shown that a farmer will have an unambiguous preference for cheating early over cheating late in the contract period based on differences in the expected cost of compliance. It is then shown how the principal can make use of this unambiguous preference to target monitoring resources intertemporally, and in so doing, to encourage full contract duration compliance.Moral Hazard, Contract Duration, Agri-Environmental Policy, Targeting, Agribusiness, Environmental Economics and Policy, Q15, Q18, Q58,

The Public Resource Management Game

Use of public resources for private economic gain is a longstanding, contested political issue. Public resources generate benefits beyond commodity uses, including recreation, environmental and ecological conservation and preservation, and existence and aesthetic values. We analyze this problem using a dynamic resource use game. Low use fees let commodity users capture more of the marginal benefit from private use. This increases the incentive to comply with government regulations. Optimal contracts therefore include public use fees that are lower than private rates. The optimal policy also includes random monitoring to prevent strategic learning and cheating on the use agreements and to avoid wasteful efforts to disguise noncompliant behavior. An optimal policy also includes a penalty for cheating beyond terminating the use contract. This penalty must be large enough that the commodity user who would gain the most from noncompliance experiences a negative expected net return.Renewable resources, public resources policy, optimal contracts

"The Role of the Merchant Coalition in Pre-modern Japanese Economic Development: An Historical Institutional Analysis"

This paper examines the role of the merchant coalition (kabu nakama) in the eighteenth and the first half of the nineteenth century in Japan, from the standpoint of Historical Institutional Analysis (Greif[1997, 1998]). Quantitative economic history literature has made clear that market-based economic growth started around the end of the eighteenth century in Japan. On the other hand, the Bakufu, the central government, repeatedly promulgated Aitai Sumeshi Rei (Mutual Settlement Decree), prescribing that the public authorities would not accept suits on pecuniary affairs. This implies that the public system for third-party enforcement was not working well. Activities of the merchant coalition substituted for the public third-party enforcement. Many of the merchant coalitions' codes wrote that all of each coalition's members should suspend transaction with those who cheated any one of the members of the coalition. This was the multilateral punishment strategy (MPS), formulated by Greif[1993]. It is hypothesized that kabu nakama played the role of contract enforcement using the MPS, which reduced incentives for the transaction counterparts to cheat, and thereby promoted a market economy. Also, this paper empirically examines this hypothesis, using an opportunity of a natural experiment. In 1841, the Bakufu prohibited the coalition, intending to eliminate monopoly. The above hypothesis implies that prohibition of the coalition lowered the performance of the market economy. As predicted, we found that the growth rate of the real money supply contracted, that the efficiency of price arbitrage declined, and that inflation rate went up.

Surveillant assemblages of governance in massively multiplayer online games:a comparative analysis

This paper explores governance in Massively Multiplayer Online Games (MMOGs), one sub-sector of the digital games industry. Informed by media governance studies, Surveillance Studies, and game studies, this paper identifies five elements which form part of the system of governance in MMOGs. These elements are: game code and rules; game policies; company community management practices; player participatory practices; and paratexts. Together these governance elements function as a surveillant assemblage, which relies to varying degrees on lateral and hierarchical forms of surveillance, and the assembly of human and nonhuman elements.Using qualitative mixed methods we examine and compare how these elements operate in three commercial MMOGs: Eve Online, World of Warcraft and Tibia. While peer and participatory surveillance elements are important, we identified two major trends in the governance of disruptive behaviours by the game companies in our case studies. Firstly, an increasing reliance on automated forms of dataveillance to control and punish game players, and secondly, increasing recourse to contract law and diminishing user privacy rights. Game players found it difficult to appeal the changing terms and conditions and they turned to creating paratexts outside of the game in an attempt to negotiate the boundaries of the surveillant assemblage. In the wider context of self-regulated governance systems these trends highlight the relevance of consumer rights, privacy, and data protection legislation to online games and the usefulness of bringing game studies and Surveillance Studies into dialogue

"The Role of the Merchant Coalition in Pre-modern Japanese Economic Development: An Historical Institutional Analysis"

This paper examines the economic role of the merchant coalition (kabu nakama) in Japan during the the eighteenth and the first half of the nineteenth century in Japan. During this period public sector enforcement of contracts was imperfect. Kabu nakama substituted for the public sector, using a multilateral punishment strategy. When the government (Bakufu) prohibited kabu nakama in 1841, the growth rate of the real money supply contracted, efficiency of price arbitrage declined, and the inflation rate increased.

"The Role of the Merchant Coalition in Premodern Japanese Economic Development: An Historical Institutional Analysis"

This paper analyzes the role of the merchant coalition (kabu nakama) in Japan in the eighteenth and the first half of the nineteenth century, from the standpoint of Historical Institutional Analysis (Greif[1997]). The quantitative economic history literature has made clear that sustainable economic growth based on a market economy started in Japan at the end of the eighteenth century. On the other hand, from time to time the central government (Bakufu) legislated ordinances prescribing that suits on pecuniary matters would not be accepted (Aitai Sumeshi Rei). The implication is that the public system for third-party contract enforcement was not working well. The activities of merchant coalitions substituted for public third-party enforcement in premodern Japan. Many of the merchant coalitions' codes prescribed that all of each coalition's members should suspend transaction with those who cheated any one of the members of the coalition. This was the multiple punishment strategy (MPS), as formulated by Greif[1993]. The MPS of the merchant coalition reduced incentives for the players in the market to cheat, which in turn promoted development of a market economy. It is remarkable that the Japanese merchant coalition applied the MPS not only to ordinary commodity trade, but also to the putting-out system and employment. We empirically tested the above hypothesis about the function of the coalition. In 1841, the Bakufu prohibited the coalition, intending to eliminate any monopoly. This event can be regarded as a natural experiment, suitable for an investigation into the role of the coalition. The above hypothesis implies that prohibition of the coalition lowered the performance of the market economy. This implication was examined using data on the money supply and commodity prices. As predicted by the hypothesis, we found that the growth rate of the real money supply contracted and that the efficiency of price arbitrage declined.

Community Enforcement of Informal Contracts: Jewish Diamond Merchants in New York

The diamond industry is home to many unusual features: the predominance of an ethnically homogeneous community of merchants, the norm of intergenerational family businesses, and a rejection of public courts in favor of private contract enforcement. This paper explains that the diamond industry\u27s unique attributes arise specifically to meet the particularly rigorous hazards of transacting in diamonds. Since diamonds are portable, easily concealable, and extremely valuable, the risk associated with a credit sale can be especially costly. However, the industry enjoys valuable organizational efficiencies if transactions occur on credit between independent, fully incentivized agents. Thus, an efficient system of exchange will find ways to induce merchants who purchase on credit to fulfill their payment obligations. The very features that give the diamond industry an unusual profile are responsible for providing institutions to support credit sales. A system of private arbitration spreads information regarding merchants\u27 past dealings, so a reputation mechanism to monitor merchants can take hold. Intergenerational legacies, though restricting entry only to those who can inherit good reputations from family members, resolve an end-game problem and induce merchants to deal honestly through their very last transaction. And the participation of Ultra-Orthodox Jews, for whom inclusion and participation in their communities is equally paramount to their material wealth, serve important value-added services as diamond cutters and brokers without posing the threat of theft and flight

Commentary

Enforceable promises discourage lying, cheating, and stealing. Contracts that embody such promises shape institutions, distribute power, and organize markets. The Smith-King critique of elite empirical contracts scholarship reveals a field preoccupied with the first set of functions and barely interested in the second. I am loath to second-guess this view without empirical evidence of my own. Instead, I draw from it two sets of implications-one for the substantive study of contracts, the other for the relationship between contract theory and contract empiricism

Cross Compliance: what about compliance?

We reviewed some moral hazard (MH) models applied to agri-environmental policies and identified the main methodological aspects of the literature on this topics. Imperfect vs incomplete monitoring , static vs dynamic and single vs multiple agents models are the main lines along which the literature has been organised analysing each component of a MH model. Most papers point out the role of farmers' risk aversion in mitigating MH. Others highlight that the observed high rate of compliance is still somewhat paradoxical given current enforcement strategies with low fines and monitoring levels. Cross compliance confirm these findings and urges further studies on dynamic models and farmers' non profit maximising behaviour.Cross-compliance, Moral Hazard, Enforcement, Agri-environmental schemes, Agricultural and Food Policy, Q15, Q58, D82,