AbstractWe obtain a recursive formulation for a general class of contracting problems involving incentive constraints. These constraints make the corresponding maximization sup problems non-recursive. Our approach consists of studying a recursive Lagrangian. Under standard general conditions, there is a recursive saddle-point (infsup) functional equation (analogous to a Bellman equation) that characterizes the recursive solution to the planner's problem and forward-looking constraints. Our approach has been applied to a large class of dynamic contractual problems, such as contracts with limited enforcement, optimal policy design with implementability constraints, and dynamic political economy models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2011/15.
Date of creation: 2011
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
Recursive methods; dynamic optimization; Ramsey equilibrium; time inconsistency; limited participation; contract default; saddle-points; Lagrangian multipliers.;
Other versions of this item:
- Albert Marcet & Ramon Marimon, 2011. "Recursive Contracts," Working Papers 552, Barcelona Graduate School of Economics.
- Albert Marcet & Ramon Marimon, 2011. "Recursive Contracts," CEP Discussion Papers dp1055, Centre for Economic Performance, LSE.
- Albert Marcet & Ramon Marimon, 1994. "Recursive contracts," Economics Working Papers 337, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 1998.
- Marcet, A. & Marimon, R., 1998. "Recursive Contracts," Economics Working Papers eco98/37, European University Institute.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brian D. Wright & Kenneth M. Kletzer, 2000.
"Sovereign Debt as Intertemporal Barter,"
American Economic Review,
American Economic Association, vol. 90(3), pages 621-639, June.
- Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," International Finance 0003004, EconWPA.
- Kenneth M. Kletzer and Brian D. Wright., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research (CIDER) Working Papers C98-100, University of California at Berkeley.
- Kletzer, Kenneth M. & Wright, Brian D., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research, Working Paper Series qt4qg3c42v, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Mele, Antonio, 2011.
"Repeated moral hazard and recursive Lagrangeans,"
30310, University Library of Munich, Germany.
- Davide Debortoli & Ricardo Nunes, 2007. "Loose commitment," International Finance Discussion Papers 916, Board of Governors of the Federal Reserve System (U.S.).
- Harold Cole & Felix Kubler, 2010.
"Recursive Contracts, Lotteries and Weakly Concave Pareto Sets,"
PIER Working Paper Archive
10-038, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Harold Cole & Felix Kubler, 2012. "Recursive Contracts, Lotteries and Weakly Concave Pareto Sets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(4), pages 479-500, October.
- Felix Kubler & Harold L. Cole, 2011. "Recursive Contracts, Lotteries and Weakly Concave Pareto Sets," 2011 Meeting Papers 59, Society for Economic Dynamics.
- Harold L. Cole & Felix Kubler, 2011. "Recursive Contracts, Lotteries and Weakly Concave Pareto Sets," NBER Working Papers 17064, National Bureau of Economic Research, Inc.
- Eva Carceles-Poveda & Albert Marcet & Alexis Anagnostopoulos, 2008. "Equity Financing," 2008 Meeting Papers 954, Society for Economic Dynamics.
- Patrick J. Kehoe & Fabrizio Perri, 2002.
"International Business Cycles with Endogenous Incomplete Markets,"
Econometric Society, vol. 70(3), pages 907-928, May.
- Patrick J. Kehoe & Fabrizio Perri, 2000. "International business cycles with endogenous incomplete markets," Staff Report 265, Federal Reserve Bank of Minneapolis.
- Patrick J. Kehoe & Fabrizio Perri, 2000. "International Business Cycles with Endogenous Incomplete Markets," NBER Working Papers 7870, National Bureau of Economic Research, Inc.
- Levine, Paul & Currie, David, 1987. "The design of feedback rules in linear stochastic rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 11(1), pages 1-28, March.
- David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987.
"International real business cycles,"
426, Federal Reserve Bank of Minneapolis.
- Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2009.
"Power Fluctuations and Political Economy,"
EIEF Working Papers Series
0911, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2009.
- Albert Marcet & Thomas J. Sargent & Juha Seppala, 1996.
"Optimal taxation without state-contingent debt,"
Economics Working Papers
170, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2001.
- Matthias Messner & Nicola Pavoni, 2004.
"On the Recursive Saddle Point Method,"
255, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Nicola Pavoni & Ramon Marimon & Matthias Messner, 2005. "On the Recursive Saddle Point Method," 2005 Meeting Papers 294, Society for Economic Dynamics.
- Matthias Messner & Nicola Pavoni, 2004. "On the Recursive Saddle Point Method," Levine's Bibliography 122247000000000050, UCLA Department of Economics.
- Roberto Chang, 1996. "Credible monetary policy with long-lived agents: recursive approaches," Working Paper 96-20, Federal Reserve Bank of Atlanta.
- Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1990. "Toward a Theory of Discounted Repeated Games with Imperfect Monitoring," Econometrica, Econometric Society, vol. 58(5), pages 1041-63, September.
- Christopher Phelan & Ennio Stacchetti, 2001.
"Sequential Equilibria in a Ramsey Tax Model,"
Econometric Society, vol. 69(6), pages 1491-1518, November.
- Kocherlakota, Narayana R, 1996.
"Implications of Efficient Risk Sharing without Commitment,"
Review of Economic Studies,
Wiley Blackwell, vol. 63(4), pages 595-609, October.
- Narayana Kocherlakota, 2010. "Implications of Efficient Risk Sharing Without Commitment," Levine's Working Paper Archive 2053, David K. Levine.
- German Rojas, 1993. "Optimal taxation in a stochastic growth model with public capital: Crowding-in effects and stabilization policy," Economics Working Papers 62, Department of Economics and Business, Universitat Pompeu Fabra.
- Alvarez, Fernando & Stokey, Nancy L., 1998. "Dynamic Programming with Homogeneous Functions," Journal of Economic Theory, Elsevier, vol. 82(1), pages 167-189, September.
- Kydland, Finn E. & Prescott, Edward C., 1980. "Dynamic optimal taxation, rational expectations and optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 79-91, May.
- Árpád Ábrahám & Nicola Pavoni, 2005. "The Efficient Allocation of Consumption under Moral Hazard and Hidden Access to the Credit Market," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 370-381, 04/05.
- Thomas, Jonathan & Worrall, Tim, 1990. "Income fluctuation and asymmetric information: An example of a repeated principal-agent problem," Journal of Economic Theory, Elsevier, vol. 51(2), pages 367-390, August.
- Andrés Velasco & Jess Benhabib & Aldo Rustichini, 2001. "Public spending and optimal taxes without commitment," Review of Economic Design, Springer, vol. 6(3), pages 371-396.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.