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Contracting for Dynamic Efficiency

Author

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  • Calcott Paul

    (Victoria University of Wellington)

  • Petkov Vladimir P

    (Victoria University of Wellington)

Abstract

This paper explores implementation of efficiency in an alternating-move game. Incentives are provided with contracts that specify a scheme of monetary obligations. The analysis focuses on time-invariant payment schedules that satisfy budget balance. We derive contracting forms that generate efficient investments in Markov-perfect equilibria. Some notable solutions are highlighted: repeated transfer of ownership, partnership and Markovian expectation damages.

Suggested Citation

  • Calcott Paul & Petkov Vladimir P, 2010. "Contracting for Dynamic Efficiency," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-22, August.
    • Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:38
    DOI: 10.2202/1935-1704.1675
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    References listed on IDEAS

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