Moral hazard contracts: Does one size fit all?

We show that firms' practice of anonymous contracts (“one-size-fits-all”) can be reconciled with standard agency theory if careers are marked by frequent transitions between employers, and agents have career concerns because complete long-term contracts are not feasible.     

An Empirical Investigation of 1983 Farm Mortgagors in Western Canada

Cross-sectional data from the 1984 Farm Credit Corporation (FCC) survey are used to investigate the characteristics of farm operators who participated in the 1983 long-term agricultural credit market and to investigate the determinants of loan size. Discriminant analysis is used to analyze differences in socioeconomic characteristics among FCC clients, borrowers from other government agencies, borrowers from private sources, and nonborrowers, while regression models, adjusted for sampling bias, are used to reveal the determinants of size of long-term loans from the FCC. The results are tentative due to the cross-sectional properties of the data, but they seem to show that the Farm Credit Corporation is fulfilling its stated aims both in its selection of clients and in its tendency to grant larger loans to the clients it is mandated to serve. Les données sectorielles du sondage en 1984 de la Société du crédit agricole (SCA) sont utilisées pour examiner les caractéristiques des opérateurs d'exploitations agricoles qui ont participé au marché du crédit agricole è long terme en 1983 et pour examiner les déterminants de l'importance de l'emprunt. Une analyse discriminante est utilisee pour étu-dier les différences dans les caractéristiques socioéconomiques parmi les clients de la SCA, les emprunteurs è d'autres agences gouvernementales, les emprunteurs à des sources privées, et ceux qui n'empruntent pas, tandis que les modeles de regression, reajustes pour le biais de llechantillonnage, sont utilises pour reveler les determinants de 1'importance des emprunts a long terme à la SCA. Les resultats sont provisoires du aux qualites sectorielles des donnees, mais ils indiquent que la Societe du credit agricole semble accomplir ses objectifs enonces à la fois dans sa selection de clients et dans sa tendance à accorder de plus gros emprunts aux clients qu'elle doit servir.     

The Effect of Mortgage Price and Default Risk on Mortgage Spreads

Variations over time in mortgage yield spreads should reflect changes in the underlying prepayment option value; moreover, the relationship between mortgage yield spreads and interest rate dynamics should weaken as the value of the borrowers prepayment option declines. We verify this hypothesis through an empirical analysis of residential mortgage yield spread behavior, and we also present evidence that the strength of the relationship between mortgage spreads and interest rate dynamics weakens (strengthens) as the level of default risk increases (decreases). This result is consistent with the competing risks effect between a borrowers option to prepay or default. Our results demonstrate the importance of accounting for mortgage price discount to par as well as default risk when developing time series of mortgage yields.     

Predation,Protection, and Accumulation: Endogenous Property Rights in an Overlapping Generations Growth Model

We study a simple growth model with overlapping generations in which property rights are insecure. Insecurity of property rights leads to predation. Due to predation some of the resources are used for protection purposes. Both predation and protection remove resources from the accumulation process. In the model individuals allocate their labor between working for firms and appropriating output from them. Firms allocate their capital between production and protection. Without government, the model generates a unique but inefficient equilibrium. We show that in this equilibrium the level of output is increasing in the rate of effectiveness of protection, the relative utility of honesty, and the discount rate. Further, the equilibrium level of output is dynamically inefficient. We then extend the model to include a government as the sole provider of the public good “protection”. Protection is assumed to be financed by a capital tax imposed on firms. The model then yields multiple equilibria, with both a stable high-protection low-predation equilibrium, and a stable low-protection high-predation equilibrium. Which equilibrium a country is most likely to achieve, and how difficult it is for a country to move to the more desirable low-predation high-protection equilibrium, depend crucially on the parameters of the model describing the economy’s institutional structure. Hence, the results of the model support the emphasis placed by the World Bank on the importance for growth of strengthening institutional structures in developing countries.JEL Code: D23, D90, O41     

Mathematische Programmierung und ihre Anwendung auf die Wirtschaft

Zusammenfassung Wir betrachten hier die Anwendung deterministischer und stochastischer Methoden auf Probleme der Wirtschaftswissenschaften. Verschiedene Versionen des deterministischen Programmierens (h. h. Fälle in denen keine zufälligen Variablen auftreten) werden zuerst behandelt. Wenn die Parameter der verschiedenen Versionen des deterministischen Programmierens zufällige Variable sind, haben wir stochastische Programme. Schließlich befaßt sich der letzte Abschnitt mit den Algorithmen für die Berechnung der Lösungen.

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On the application of deterministic and stochastic programming methods to problems of economics

We consider here the application of deterministic and stochastic programming methods to problems of economics. Various versions of deterministic programming (i. e. cases in which there are no random variables) are treated first. If the parameters of the various forms of deterministic programming are random variables, we obtain stochastic programming. In the last paragraph we concern ourselves with algorithms for the calculation of solutions.

     

Competition and collusion in bilateral markets

In this paper, the core of a market game which constitutes the set of equilibria in the process of competitive contracting and recontracting is criticized as a solution concept for not being immune against theory absorption in the sense that knowledge of the core on part of the traders may result in a collusive stabilization of some dominated imputation. It is pointed out that a stable set (or, von Neumann-Morgenstern) solution does not suffer from this deficiency. Moreover, it is argued that stable set solutions provide an adequate analytical framework for the study of collusion, and are in this respect superior to the approach (relying on the core concept) chosen by Aumann in his work on disadvantageous monopolies. For symmetric bilateral market games — generated by markets involving the exchange of only two commodities, one of which also serves as a means of side payment and utility transfer, among two types of traders — with one seller and one up to three buyers all symmetric solutions are determined. Furthermore, a symmetric solution for markets with equal, but otherwise arbitrary, numbers of sellers and buyers is given. The symmetric stable sets of imputations are interpreted as rational standards of behavior providing the consistent and defensible rules of division necessary to make a cartel agreement viable.This research was partially supported by a grant given to New York University, Department of Economics, by the Office of Naval Research. (# N00014-76-C-0033). A first version of the paper was presented at the Third World Congress of the Eeconomtric Society, Toronto, Aug. 20–26, 1975, under the title Symmetric Solutions of Bilateral Market Games.     

A novel design of heartbeat monitoring system for the motor vehicle

Many traffic accidents take place throughout the world every day claiming lives as well as commodities and people involved in the accidents have to stay long periods at the hospitals. Traffic accidents are caused by many reasons. One of the reasons is the driver's having a heart attack just before the accident took place. If the heartbeat of the driver can continuously be measured, then most probably one of the reasons of traffic accidents can be eliminated. The designed model aims to measure the driver's heartbeat using infrared imaging. Some car models already have a driver heartbeat monitoring system and it measures the heartbeats by using the back seat electrodes. But these systems are expensive and unique to their models and what is more; its adaptation to other car models can pose a difficulty. Implementing on the car's rear-view mirror this new design monitoring system is very cheap and also it can be mounted to all motor vehicles easily.