This paper studies moral hazard contracts that may be renegotiated after an agent chooses an unobservable effort. Unlike in previous models, a contract here contains only one compensation scheme, and the agent has all the bargaining power in the renegotiation stage. Using a relatively weak forward-induction refinement, all equilibria are shown tb be (second-best) efficient. Renegotiation occurs in every equilibrium. If the effort set is rich, the only equilibrium initial contract is a sales contract, i.e., a scheme which sells the project to the agent. This captures the idea that a party (the principal) who has an inherently weak renegotiation position will sometimes insist on a simple initial contract.

This paper examines the relationship between inflation and wage indexation in the postwar United States using data on the prevalence of cost-of-living adjustments in major collective bargaining agreements. The author finds that increases in inflation precede increases in wage indexation but reductions in inflation do not precede reductions in wage indexation. There is virtually no evidence that wage indexation affects inflation. Copyright 1995 by MIT Press.

In many advertising-intensive industries one observes market share persistence, i.e., firms maintaining lead market shares over long periods of time. I hypothesize that firms that have the largest stock of well-established brands, a stock that I term brand capital, are most likely to introduce new products in response to new market information about consumer preferences. Firms with less brand capital delay their introductions until the uncertainty concerning the market size is reduced. I present empirical support in a study of new product introductions in the U.S. beverage industry.

Earnings announcements, Block trades, Information asymmetry, Permanent price effects

Recent theoretical models suggest debt and dividends can serve as substitute free cash flow control or signaling devices. I examine share price responses to announcements of straight debt issues and test whether there are systematic differences between low and high dividend payout firms. Share price response is significantly positive for low growth-low dividend payout firms, and is negatively related to cross-sectional dividend payout. The results support arguments that debt and dividends are substitutes. The results also support arguments that debt provides free cash flow or signaling benefits, but suggest the benefits are significant only for firms with low levels of substitutes. I also document that low growth-low dividend payout firms enter capital markets less frequently, but find no relation between share price response and this frequency.

Occupational sex segregation and its relationship with wages during 1973-93 are examined. Wage level and wage change models are estimated using Current Population Survey data matched with measures of occupational skills and job disamenities. Standard analysis confirms that wage levels are substantially lower in predominantly female occupations. Gender composition effects are reduced by about a quarter for women and by over one-half for men following control for skill-related occupational characteristics. Longitudinal analysis indicates that two-thirds or more of the standard gender composition effect is accounted for by occupational characteristics and unmeasured worker skill or taste differences. Copyright 1995 by University of Chicago Press.

Abstract. This paper examines the association between analysts' forecast errors at the earnings announcement date and the revisions to those forecasts during the preceding year. The study is an initial effort to use archival data from expert decision makers to test behavioral theories that have support in laboratory environments. Consistent with findings of conservatism in laboratory experiments, we find that analysts systematically underweight new information. This finding is most pronounced when the analysts are consistently revising their estimates downward throughout the year. Résumé. Les auteurs examinent le lien entre les erreurs prévisionnelles des analystes à la date de déclaration des bénéfices et les révisions dont ces prévisions ont fait l'objet au cours de l'exercice précédent. Il s'agit là d'une première tentative d'utilisation des données d'archives des experts en matière décisionnelle dans le but de tester les théories comportementales qui ont été démontrées en laboratoire. Conformément aux observations faites en laboratoire en ce qui a trait à la prudence, les auteurs constatent que les analystes accordent systématiquement trop peu de poids à l'information nouvelle/Cette constatation est très marquée lorsque les analystes révisent continuellement leurs estimations à la baisse au cours de l'année.

Management control, Moral Hazard, Just-in-Time management, Motivation