Abstract
We consider a common agency context where socially desired exclusive dealing clauses cannot be enforced. Customers sequentially negotiate nonexclusive credit or insurance contracts from multiple risk-neutral firms in a market with free entry. Each contract is subject to moral hazard arising from a common noncontractible effort decision. Outcomes of a class of Markov equilibria are characterized by a corresponding notion of constrained efficiency. These may involve more rationing than in a context of exclusive contracts. Increases in public provision or competition can result in increased prices on the private market, owing to an induced reduction in customer effort.
Original language | English (US) |
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Pages (from-to) | 443-465 |
Number of pages | 23 |
Journal | RAND Journal of Economics |
Volume | 29 |
Issue number | 3 |
DOIs | |
State | Published - 1998 |
ASJC Scopus subject areas
- Economics and Econometrics