ECONOMICS

The nature of oligopolistic product markets distort both resource allocation and the distribution of incomes

The nature of oligopolistic product markets distort both resource allocation and the distribution of incomes

Introduction

The contract theory literature has studied, in depth, how asymmetric information affects the relationship between a principal and an agent. Most of this literature has focused on isolated pairs of hierarchies, where the principal is a monopolist and the optimal contract will give some rents in excess of the reservation utility to ensure revelation and optimally solve a trade-o¤ between incentives and efficiency by allowing some distortions away from the first-best. (Schmidt 2005)

Discussion

A ...