Contracts, Externalities and Incentives in Shopping Malls

Eric D. Gould, B. Peter Pashigian and Canice Prendergast

No 3598, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper demonstrates that mall store contracts are written to internalize externalities through both an efficient allocation and pricing of space and an efficient allocation of incentives across stores. Certain stores generate externalities by drawing customers to other stores, while many stores primarily benefit from external mall traffic. Therefore, to varying degrees, the success of each store depends upon the presence and effort of other stores, and the effort of the developer to attract customers to the mall. Using a unique dataset of mall tenant contracts, we show that rental contracts are written to: (i) efficiently price the net externality of each store, and (ii) align the incentives to induce optimal effort by the developer and each mall store according to the externality of each store’s effort.

Keywords: contracts; externalities; incentives (search for similar items in EconPapers)
JEL-codes: J33 L20 R0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-lab and nep-mic
Date: 2002-10
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Related works:
Journal Article: Contracts, Externalities, and Incentives in Shopping Malls (2005)
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