| In my dissertation, I study equilibrium and optimal contracting between parties in relationships with asymmetric information. The welfare and private properties of incomplete contracting are analyzed both in imperfectly and perfectly competitive markets. The first essay analyzes the welfare effects of incomplete contracting in a principal-agent set-up. I study Resale Price Maintenance, a complete contract, and quantity fixing, an incomplete one, in a successive monopolies framework with information asymmetries. Both contracts entail a double marginalization driven by information rents distributed to the retailer. When firms behave non-cooperatively, the principal imposes retail price restrictions, and the impact of complete contracting on consumers' surplus is ambiguous. When, firms maximize ex ante joint profits, policy recommendations are unambiguous: if the preferred contracting mode from an ex ante viewpoint entails retail price restrictions, it also raises consumers' surplus, thereby producing a Pareto improvement relative to incomplete contracts. The second essay examines the welfare effects of contracting incompleteness when agents' preferences and productivity depend on their health status, and occupational choices affect individual health distributions. Efficiency requires agents of the same type to obtain different expected utilities if assigned to different occupations. Workers with riskier jobs get higher (lower) expected utilities if health affects production (consumption) capabilities. Competitive equilibria are first-best if complete contracts are enforceable, but typically not if only incomplete ones are traded. Compensating wage differentials are incompatible with ex-ante efficiency. The third essay provides a rationale for contracting incompleteness in a competing organizations set-up. I show that principals dealing with competing agents may leave contracts silent on some verifiable performance measures when certain aspects of agents' activity are noncontractible. Two effects are at play once one moves from a complete to an incomplete contract. First, reducing the number of screening instruments has a detrimental effect on principals' profits as it makes information revelation more costly. Second, it may create strategic value by forcing competing organizations to behave in a more friendly manner at the competitive stage. |
