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Articles 1 - 3 of 3
Full-Text Articles in Social and Behavioral Sciences
Mixed Equilibria Are Unstable In Games Of Strategic Complements, Aaron S. Edlin, Federico Echenique
Mixed Equilibria Are Unstable In Games Of Strategic Complements, Aaron S. Edlin, Federico Echenique
Aaron Edlin
In games with strict strategic complementaries, properly mixed Nash equilibria - equilibria that are not in pure strategies - are unstable for a broad class of learning dynamics.
Cadillac Contracts And Up-Front Payments: Efficient Investment Under Expectation Damages, Aaron S. Edlin
Cadillac Contracts And Up-Front Payments: Efficient Investment Under Expectation Damages, Aaron S. Edlin
Aaron Edlin
This article shows that up-front payments can eliminate the overinvestment effect identified by Shavell (1980), by controlling which party breaches a contract. At the same time, "Cadillac" contracts (contracts for a very high quality or quantity) can protect against underinvestment due to Williamsonian holdups. This combination provides efficient investment incentives when courts use expectation damages as a remedy for breach. The expectation damages remedy is therefore well-suited to multidimensional but one-sided investment problems, in contrast to specific performance, which is well-suited to two-sided but unidimensional investment problems.
Two-Part Marginal Cost Pricing Equilibria With N Firms: Sufficient Conditions For Existence And Optimality, Aaron S. Edlin, Mario Epelbaum
Two-Part Marginal Cost Pricing Equilibria With N Firms: Sufficient Conditions For Existence And Optimality, Aaron S. Edlin, Mario Epelbaum
Aaron Edlin
We explore the interactions among firms with increasing returns regulated to break even by pricing with two-part tariffs. We provide conditions for existence and for efficiency of general equilibria with n-firms. This involves finding hookup fees that are voluntarily paid and cover the firms' losses from marginal cost pricing-a problem that because of both substitution and income effects is complicated by multiple firms using two-part tariffs, but that must be solved to ensure the continuity of demands necessary to prove break-even equilibria exist.