Non-Commitment and Savings in Dynamic Risk-Sharing Contracts

We characterize the solution to a model of consumption smoothing using financing under non-commitment and savings. We show that, under certain conditions, these two different instruments complement each other perfectly. If the rate of time preference is equal to the interest rate on savings, perfect smoothing can be achieved in finite time. We also show that, when random revenues are generated by periodic investments in capital through a concave production function, the level of smoothing achieved through financial contracts can influence the productive investment efficiency. As long as financial contracts cannot achieve perfect smoothing, productive investment will be used as a complementary smoothing device.

Contentious Contracts

This paper offers an explanation of rationally contracts where incompeteness refers to unforeseen contingencies. Agents enter a relationship with two-sided moral hazard in which a commitment to discard parts of the joint resources may be ex ante efficient.

A model of dynamic liquidity contracts

I study long-term financial contracts between lenders and borrowers in the absence of perfect enforceability and when both parties are credit constrained. Borrowers repeatedly have projects to undertake and need external financing. Lenders can commit to contractual agreements whereas borrowers can renege any period. I show that equilibrium contracts feature interesting dynamics: the economy exhibits efficient investment cycles; absence of perfect enforcement and shortage of capital skew the cycles toward states of liquidity drought; credit is rationed if either the lender has too little capital or if the borrower has too little collateral. This paper's technical contribution is its demonstration of the existence and characterization of financial contracts that are solutions to a non-convex dynamic programming problem.

The reform of electronic consumer contracts in Europe: towards an effective legal framework?

Christine Riefa is a lecturer in Consumer Law and Intellectual Property Law at Brunel University in the UK. She is an elected board member of the International Association of Consumer Law and an academic correspondent to the Euro-American Chair for the legal protection of consumers (University of Cantabria, Spain). In 2009-2010, Dr Riefa is a Fulbright EU Scholar-in-Residence at Cleveland-Marshall College of Law, Ohio USA. A first version of this article was presented at the Summer School in Consumer Law, organised by the GREDICC (Groupe de recherche en droit international et comparé de la consummation), UQAM, Montréal, 29th June – 4th July 2009.

The costs of alcohol, illegal drugs, and tobacco in Canada, 2002.

Objective: The aim of this study was to estimate costs attributable to substance use and misuse in Canada in 2002. Method: Based on information about prevalence of exposure and risk relations for more than 80 disease categories, deaths, years of life lost, and hospitalizations attributable to substance use and misuse were estimated. In addition, substance-attributable fractions for criminal justice expenditures were derived. Indirect costs were estimated using a modified human capital approach. Results: Costs of substance use and misuse totaled almost Can. $40 billion in 2002. The total cost per capita for substance use and misuse was about Can. $1,267: Can. $463 for alcohol, Can. $262 for illegal drugs, and Can. $541 for tobacco. Legal substances accounted for the vast majority of these costs (tobacco: almost 43% of total costs; alcohol: 37%). Indirect costs or productivity losses were the largest cost category (61%), followed by health care (22%) and law enforcement costs (14%). More than 40,000 people died in Canada in 2002 because of substance use and misuse: 37,209 deaths were attributable to tobacco, 4,258 were attributable to alcohol, and 1,695 were attributable to illegal drugs. A total of about 3.8 million hospital days were attributable to substance use and misuse, again mainly to tobacco. Conclusions: Substance use and misuse imposes a considerable economic toll on Canadian society and requires more preventive efforts.