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This paper determines the optimal tenurial contract between a monopoly landlord and a tenant protected by limited liability under both adverse selection (based on the tenant’s ability) and moral hazard (based on the tenant’s choice of effort). We identify different optimal contracts depending on the tenant’s outside option. For intermediate values, there is a threshold of tenant ability depending on the outside option level below which the optimal contract is a separating sharecropping contract, and a pooling one otherwise. We also find that an increase in the outside option does not monotonically increase the tenant’s optimal effort.

This paper deals with financial contracting between a lender and a borrower with a project to finance. The borrower is protected by limited liability. We consider that the revenue from the project is observable and verifiable but its distribution is influenced by both the borrower’s choice of action and the project’s quality, which are private information. We find that debt contracts are endogenously optimal, as under moral hazard alone. Moreover, while moral hazard leads to credit rationing for the lowest-quality projects only, adding adverse selection creates a bang-bang result: either all projects or none are credit rationed.

This paper analyzes optimal contracting when an agent has private information before contracting and exerts hidden effort that stochastically affects the output. Additionally, the contract is constrained to satisfy the agentʼs ex post participation. We highlight three features of this model. First, the agent faces countervailing incentives. Second, the separation of types is never optimal. Third, the optimal constant bonus rewarding success is distorted downward below its efficient level.

The aim of the paper is to determine the impact of severance payment on the motivation of the worker to make an effort, when there is a risk for him to be dismissed once his effort was made. We highlight through a two-stage model the various factors which influence the dismissal decision by the firm and the worker's effort, such as the initial wage, the litigation costs and the relative bargaining powers of the parties when the relationship ends or goes on. In this context, we show that the impact of the severance payment paid ex post in case of dismissal on the level of effort chosen by the worker ex ante may depend on such characteristics.

We study the potential conflict between cost minimization and investment in prevention for a risky venture. A natural monopoly is regulated i) for economic purposes; ii) because it can cause losses of substantial size to third parties (the environment or people). The regulator observes the production cost without being able to distinguish the initial type (an adverse selection parameter) from the effort (a moral hazard variable). In addition, the investment in prevention is non observable (another moral hazard variable) and the monopoly is protected by limited liability. We fully characterize the optimal regulation in this context of asymmetric information plus limited liability. We show that incentives to reduce cost and to invest in safety are always compatible. But, in some cases, higher rents have to be given up by the regulator.

We investigate the effect of ambiguity and ambiguity attitude on the shape and properties of the optimal contract in an adverse selection model with a continuum of types, using the parametric model of ambiguity and ambiguity aversion called the NEO-additive model (Chateauneuf, Eichberger, and Grant, 2007). We show that it necessarily features efficiency and a jump at the top and pooling at the bottom of the distribution. Conditional on the degree of ambiguity, the pooling section may or may not be supplemented by a separating section. As a result, ambiguity adversely affects the principal’s ability to solve the adverse selection problem and therefore the least efficient types benefit from ambiguity with respect to risk. Conversely, ambiguity is detrimental to the most efficient types. This is confirmed in the comparative statics section.

We analyze optimal pricing when a monopolistic firm sells a good on a congestible network with countervailing incentives. We show that the network capacity level is crucial to determine the optimal tariff.

This paper discusses the impact of a leniency program on incentives within cartels. The objective of this program is to encourage a cartel member to confess and implicate his co-conspirators with hard evidence about their collusive agreement. We develop a simple model of cartel behavior under a first-price sealed-bid procurement auction and we show how an effective leniency program can prevent the internal coordination of cartel members.

This paper purports to study the non-linear pricing problem when a budget constraint limits the magnitude of the monetary transfer. We show that distortions even affect consumers for which the constraint does not bind.

This paper compares the optimal selling strategies with symmetric and asymmetric information when monopolist’s cost function depends both on individual and aggregate production. We show how standard underproduction and higher exclusion with incomplete information are affected.

We study the optimal non-linear pricing when an uniformed monopolist wants to change its current technology by a less costly one. With asymmetric information, we show that it has no interest to produce entirely with a more efficient technology.

We derive the optimal non-linear pricing when a monopolist has no direct prior beliefs about the consumers' preferences but only indirect prior beliefs about their utility levels and analyze the ensuing distortions.

International audience; Nous ́etudions la politique de r ́emun ́eration optimale des dirigeants d’en- treprises lorsqu’ils peuvent d ́etourner une partie des revenus sous la forme de b ́en ́efices priv ́es. Nous consid ́erons ́egalement que les dirigeants disposent d’opportunit ́es d’em- bauche ext ́erieures, li ́ees au caract`ere sp ́ecifiques ou transf ́erables de leurs comp ́etences. Dans ce cadre, nous faisons apparaˆıtre trois r ́egimes caract ́eris ́es par des niveaux de b ́en ́efices priv ́es et de salaire diff ́erents. Nos r ́esultats mettent en ́evidence la sensibilit ́e du contrat manag ́erial a` la nature des comp ́etences des dirigeants. Nous montrons que la transf ́erabilit ́e des comp ́etences des dirigeants apparaˆıt comme socialement optimale. En revanche, le r ́esultat est plus ambigu du point de vue des actionnaires.

This paper studies the design of a mining concession contract as a multi-period adverse selection problem where production is the depletion of a non renewable resource. Compared with symmetric information, we show that overproduction is optimal in the terminal phase of the resource extraction program. Moreover, asymmetric information lengthens the contract duration but reduces the scarcity rent.

This paper studies the optimal pricing of a congestible network good offered by a monopoly who faces a double asymmetry of information concerning both users' valuations and users' unit waiting costs, which leads to a random participation problem. We show that the textbook price is lower than the price with random participation.