Essays in the theory of contracts and organisations

Brzustowski, Thomas (2023) Essays in the theory of contracts and organisations. PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis contains three essays in the theory of contracts and organisations. The first chapter examines the role of information in shaping the incentives of a decision maker who cares about passing a threshold. We present a model which can be applied to the case of a young employee in an organisation with an ‘up-or-out’ promotion system. We solve for the optimal design of the informational environment in which such a young employee operates, with the objective of encouraging hard work. The optimal information structure generates outcomes such that the promotion is allocated as if the young employee received full information. However, the young employee does not benefit from the information he receives and remains exactly indifferent between receiving advice or not. The second chapter (co-authored with Alkis Georgiadis-Harris and Balazs Szentes) analyses the sale of a durable good by a seller who cannot make intertemporal commitments to a buyer with private valuation for the good. Motivated by smart contracts used in digital markets, we allow the seller to offer general dynamic contracts. The main result is that the seller’s expected payoff is bounded away from the lowest valuation, that is the Coase conjecture fails. The third chapter (co-authored with Francesco Caselli) develops a model of a dynamic economy in which production takes place in worker cooperatives. We formalise an equilibrium concept that applies to such an economy in an overlapping-generation environment. We illustrate its applicability under specific assumptions on preferences and technology. The cooperative economy follows a growth path qualitatively similar to the path followed by a capitalist economy, featuring gradual convergence to a steady state with constant output. However, the cooperative economy features a static inefficiency, in that, for a given aggregate capital stock, firm size is smaller than what a social planner would choose. On the other hand, the cooperative economy cannot be dynamically inefficient, and could accumulate capital at a rate that is higher or lower than the capitalist economy.

Item Type:	Thesis (PhD)
Additional Information:	© 2023 Thomas Brzustowski
Library of Congress subject classification:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
Sets:	Departments > Economics
Supervisor:	Szentes, Balázs
URI:	http://etheses.lse.ac.uk/id/eprint/4672

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