This article presents a model in which markets for long-term contractual employment coexist with spot markets for labor. Assuming the absence of third-party enforcement, wage contracts are required to be incentive compatible. As a consequence, contract wages yield higher expected utility to the worker than spot-market wages so that, in equilibrium, contractual long-term jobs are rationed.

This paper studies a bargaining model of equilibrium price distributions. Consumers choose a seller at random and face search costs to switching to another store. In the market equilibrium, the prices at all stores are determined simultaneously as the perfect equilibrium of a bargaining game. In this game, the buyer has the outside option to search for another seller. Differences between the sellers' types create price dispersions; typically the number of active sellers increases with higher search costs. The market equilibrium converges to the competitive equilibrium under perfect information when search costs become small.

The article develops a bargaining model of spatial competition. Sellers compete by choosing locations in a market region. Consumers face a cost to moving from one place to another. The price of the good is determined as the perfect equilibrium of a bargaining game between seller and buyer. In this game, the buyer has the outside option to move to another seller and so the prices at all stores are interdependent. Existence of a location-price equilibrium is established. The outcome approaches the perfectly-competitive one if the consumer's cost of traveling becomes negligible or if the number of sellers tends to infinity. Copyright 1989 by The Econometric Society.

This paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism. We show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent. In contrast with the conventional revelation principle, however, the agent may not use this strategy with probability one. Our results apply to contracting problems between a principal and a single agent. By reducing such problems to well-defined programming problems they provide a basic tool for studying imperfect commitment.