EconPapers    
Economics at your fingertips  
 

Competitive Markets without Commitment

Nick Netzer () and Florian Scheuer ()

Journal of Political Economy, 2010, vol. 118, issue 6, 1079 - 1109

Abstract: In the presence of a time-inconsistency problem with agency contracts, we show that competitive markets can implement allocations that Pareto-dominate those achieved by a benevolent government, and they induce more effort. We analyze a model with moral hazard and a two-sided lack of commitment. After agents have chosen their work, firms can modify contracts and agents can switch firms. If the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals, it is Pareto superior to a government's allocation with a complete breakdown of incentives. Moreover, competitive markets without commitment implement more effort in equilibrium under general conditions.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/658497 (application/pdf)
http://dx.doi.org/10.1086/658497 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Competitive Markets without Commitment (2010) Downloads
Working Paper: Competitive Markets without Commitment (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/658497

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2020-09-15
Handle: RePEc:ucp:jpolec:doi:10.1086/658497