Moral Hazard and Non-Exclusive Contracts

This paper studies equilibria for economies characterized by moral hazard (hidden action), in which the set of contracts marketed in equilibrium is determined by the interaction of financial intermediaries. The crucial aspect of the environment that we study is that intermediaries are restricted to trade non-exclusive contracts: the agents' contractual relationships with competing intermediaries cannot be monitored ( or are not contractible upon).EFFICIENCY ; ASYMETRIC INFORMATION

Competitive Equilibria with Asymmetric Information: Existence with Entry Fees.

This paper studies competitive equilibria in economies characterized by the presence of asymmetric information, where non-exclusive contracts with payoffs dependent on the agents' private information are traded on competitive markets. For such economies competitive equilibria may not exist with linear prices. We show that (non-trivial) competitive equilibria exist, under general conditions, with two part tariffs, i.e. if the cost of trading each contract consists of an entry fee and a linear component in the quantity traded.GENERAL EQUILIBRIUM ; ASYMMETRIC INFORMATION ; COMPETITION

Managerial Hedging and Portfolio Monitoring

Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between shareholders and a manager when the manager can hedge his incentive compensation using financial markets and shareholders cannot perfectly monitor the manager’s portfolio in order to keep him from hedging the risk in his compensation. In particular, shareholders can monitor the manager’s portfolio stochastically, and since monitoring is costly governance is imperfect. If managerial hedging is detected, shareholders can seize the payoffs of the manager’s trades. We show that at the optimal contract: (i) the manager’s portfolio is monitored only when the firm performs poorly, (ii) the more costly monitoring is, the more sensitive is the manager’s compensation to firm performance, and (iii)conditional on the firm’s performance, the manager’s compensation is lower when his portfolio is monitored, even if no hedging is revealed by monitoring.executive compensation, incentives, monitoring, corporate governance.

Exclusive Contracts and the Institution of Bankruptcy

This paper studies the institution of bankruptcy when exclusive contracts cannot be enforced ex ante, e.g., a bank cannot monitor whether the borrower enters into contracts with other creditors. The institution of bankruptcy enables the bank to enforce its claim to any funds that the borrower has above a fixed “bankruptcy protection” level. Bankruptcy improves on non-exclusive contractual relationships but is not a perfect substitute for exclusivity ex ante. We characterize the effect of bankruptcy provisions on the equilibrium contracts which borrowers use to raise financing

Teaching by example and induced beliefs in a model of cultural transmission

We augment standard models of cultural transmission with an explicit account of social learning, grounded in the information transmission literature. Youngsters observe the behavioral trait of a role model and form beliefs about the desirability of that trait. Adults have better information about each trait and have a paternalistic attitude toward their children. This makes them reluctant to adopt myopic behavior to avoid setting a negative example to their children. This signaling distortion increases in the influence parents have over their offspring. We extend the model to allow parental influence to depend on the population frequency of each trait and show that cultural complementarity does not imply convergence to a homogeneous population. We find empirical support for a positive relationship between parental influence and propensity to exert self-restraint by looking at alcohol and tobacco consumption

Religious pro-sociality? Experimental evidence from a sample of 766 Spaniards

This study explores the relationship between several personal religion-related variables and social behaviour, using three paradigmatic economic games: the dictator (DG), ultimatum (UG), and trust (TG) games. A large carefully designed sample of the urban adult population in Granada (Spain) is employed (N = 766). From participants' decisions in these games we obtain measures of altruism, bargaining behaviour and sense of fairness/equality, trust, and positive reciprocity. Three dimensions of religiosity are examined: (i) religious denomination; (ii) intensity of religiosity, measured by active participation at church services; and (iii) conversion out into a different denomination than the one raised in. The major results are: (i) individuals with “no religion” made decisions closer to rational selfish behaviour in the DG and the UG compared to those who affiliate with a “standard” religious denomination; (ii) among Catholics, intensity of religiosity is the key variable that affects social behaviour insofar as religiously-active individuals are generally more pro-social than non-active ones; and (iii) the religion raised in seems to have no effect on pro-sociality, beyond the effect of the current measures of religiosity. Importantly, behaviour in the TG is not predicted by any of the religion-related variables we analyse. While the results partially support the notion of religious pro-sociality, on the other hand, they also highlight the importance of closely examining the multidimensional nature of both religiosity and pro-social behaviour