Laurence Ales

Non-Exclusive Dynamic Contracts, Competition, and the Limits of Insurance

We study how the presence of non-exclusive contracts limits the amount of insurance provided in a decentralized economy. We consider a dynamic Mirrleesian economy in which agents are privately informed about idiosyncratic labor productivity shocks. Agents sign privately observable insurance contracts with multiple firms (i.e., they are non-exclusive). Contracts specify both labor and savings requirements. Firms have no restriction on the contracts they can offer and interact strategically. In equilibrium, contrary to the case with exclusive contracts, a standard Euler equation holds, and the marginal rate of substitution between consumption and leisure is equated to the workers marginal productivity. Also, each agent receives zero net present value of transfers. These conditions imply the equilibrium allocation is equivalent to a standard incomplete markets model. To sustain this equilibrium, more than one firm must be active and must also offer latent contracts to deter deviations to more profitable contingent contracts. In this environment, the non-observability of contracts removes the possibility of additional insurance beyond self-insurance.

Tasks, Talents and Taxes

A large positive literature emphasizes the role of technological change in driving the demand for skill and talent. We consider the normative implications of such tech- nical change for policy design.

Innovation and Crowdsourcing Contests

In an innovation contest, an organizer seeks solutions to an innovation-related problem from a group of independent agents. Agents, who can be heterogeneous in their ability levels, exert efforts to improve their solutions, and their solution qualities are uncertain due to the innovation and evaluation processes. In this chapter, we present a general model framework that captures main features of a contest, and encompasses several existing models in the literature. Using this framework, we analyze two important decisions of the organizer: a set of awards that will be distributed to agents and whether to restrict entry to a contest or to run an open contest. We provide a taxonomy of contest literature, and discuss past and current research on innovation contests as well as a set of exciting future research directions.