This paper analyzes the issue of commitment in S. Grossman and O. Hart's model of optimal labor contracts under asymmetric information about firm profitability. The author extends his framework by allowing employment to vary over time, at equidistant intervals. When both parties can precommit ex ante not to renegotiate the contract, this replicates the Grossman-Hart outcome each subperiod. When precommitment is not possible, information revealed through the contract can create Pareto-improving renegotiation opportunities, and the issue of optimal information revelation arises. The paper analyzes the impact of ex post Pareto-improving renegotiations on the optimal contract. Copyright 1989, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Volume (Year): 104 (1989) Issue (Month): 3 (August) Pages: 589-619 Download reference. The following formats are available: HTML
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Helmut Bester & Roland Strausz, 2003.
"Contracting with Imperfect Commitment and Noisy Communication,"
Discussion Papers
2, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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