Jacques Cremer

Arm's Length Relationships

We show that lowering the cost of acquisition of information that a principal obtains about the performance of an agent may make it more difficult for the principal to commit to threats. Hence it will weaken incentives and can therefore be counterproductive. This phenomenon is explored in a framework where improving the quality of information makes a commitment not to renegotiate less credible. Applications to the theory of the firm are briefly explored.

Connectivity in the Commercial Internet

We study the backbone market in the Internet. After discussing the structure of the Internet, we use an extension of the Katz-Shapiro network model to analyze the strategies that would be used by dominant backbone. We show that a larger backbone prefers a lower quality interconnection than the smaller one. We then analyze a targeted degradation strategy where the larger backbone lowers the quality of interconnection to its smaller rivals in turn. Finally, we show that the qualitative results are robust to the possibility of multihoming by clients. Copyright 2000 by Blackwell Publishing Ltd

Gathering information before the contract is offered: The case with two states of nature

Abstract Focusing on a Baron-Myerson model with two states of nature, in the first part of the paper, we study the contract that a principal would offer to an agent when he does not know whether the agent is informed or not about the state of nature. In the second, we endogenize the information of acquisition, and show that in equilibrium a Baron-Myerson type contract will never be offered.