This paper develops a two-sector model with imperfect competition in order to explore the positive and normative aspects of the share system advanced by Weitzman in his book. In this model, the degree of competitiveness is measured by a parameter /eta = [(F - l)/F], where F is the number of firms in each sector. With fixed-wage contracts, sector-specific shocks generate aggregate fluctuations in employment and output through a multiplier effect. Introducing share contracts will not yield a Pareto-dominant allocation unless the share parameter is exactly equal to /eta. When the share parameter equals /eta, welfare is increased. Thus to reap the benefits of introducing share contracts requires rather exact information on the competitiveness of the economy.

Private information, Information asymmetry, Information signal, Disclosures

This paper focuses on the importance of strategic complementarities in agents' payoff functions as a basis for macroeconomic coordination failures. Strategic complementarities arise when the optimal strategy of an agent depends positively upon the strategies of the other agents. We first analyze an abstract game and find that multiple equilibria and a multiplier process may arise when strategic complementarities are present. Often these equilibria can be Pareto ranked. We then place additional economic content on the analysis of this game by considering strategic complementarities arising from production functions, matching technologies, and commodity demand functions in a multisector, imperfectly competitive economy.