EconPapers    
Economics at your fingertips  
 

Competition and the Ratchet Effect

Gary Charness (), Peter Kuhn () and Marie Claire Villeval ()

No 828, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: The ‘ratchet effect’ refers to a situation where a principal uses private information that is revealed by an agent’s early actions to the agent’s later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we experimentally study the robustness of the ratchet effect to the introduction of ex post competition for principals or agents. While we do observe substantial and significant ratchet effects in the baseline (no competition) case of our model, we find that ratchet behavior is nearly eliminated by labor-market competition; interestingly this is true regardless of whether market conditions favor principals or agents.

Keywords: Ratchet effect; competition; experiment; private information; labor markets (search for similar items in EconPapers)
JEL-codes: C91 D23 D82 J24 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-exp, nep-lab and nep-mic
Date: 2008
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
ftp://ftp.gate.cnrs.fr/RePEc/2008/0828.pdf (application/pdf)

Related works:
Journal Article: Competition and the Ratchet Effect (2011) Downloads
Working Paper: Competition and the Ratchet Effect (2011) Downloads
Working Paper: Competition and the Ratchet Effect (2010)
Working Paper: Competition and the Ratchet Effect (2010)
Working Paper: Competition and the Ratchet Effect (2010) Downloads
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (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:gat:wpaper:0828

Access Statistics for this paper

More papers in Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon Contact information at EDIRC.
Bibliographic data for series maintained by Nelly Wirth ().

 
Page updated 2019-06-26
Handle: RePEc:gat:wpaper:0828