English, Article, Journal or magazine article edition: Competition and the Ratchet Effect Olivier Cardi; Romain Restout

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Bookmark: http://trove.nla.gov.au/version/200118
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Competition and the Ratchet Effect
Author
  • Olivier Cardi
  • Romain Restout
Physical Description
  • preprint
Notes
  • 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.
  • Non Traded Goods, Investment, Employment, Tax Multiplier
  • RePEc:gat:wpaper:0829
Language
  • English
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