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Contractive Dual Methods for Incentive Problems

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  • Matthias Messner
  • Nicola Pavoni
  • Christopher Sleet

Abstract

Several recent papers have proposed recursive Lagrangian-basedmethods for solving dynamic contracting problems. Thesemethods give rise to Bellman operators that incorporate either a dual inf-sup or a saddle point operation. We give conditions that ensure the Bellman operator implied by a dual recursive formulation is contractive. JEL codes: C61, C73, D82, E61. Keywords: Dynamic Contracts, Duality, Dynamic Programming, Contraction Mapping Theorem.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 466.

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Date of creation: 2012
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Handle: RePEc:igi:igierp:466

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  1. Antonio Mele, 2008. "Repeated Moral Hazard and Recursive Lagrangeans," 2008 Meeting Papers 482, Society for Economic Dynamics.
  2. Juan Pablo RincÛn-Zapatero & Carlos RodrÌguez-Palmero, 2003. "Existence and Uniqueness of Solutions to the Bellman Equation in the Unbounded Case," Econometrica, Econometric Society, Econometric Society, vol. 71(5), pages 1519-1555, 09.
  3. Harold L. Cole & Felix Kubler, 2011. "Recursive Contracts, Lotteries and Weakly Concave Pareto Sets," NBER Working Papers 17064, National Bureau of Economic Research, Inc.
  4. Matthias Messner & Nicola Pavoni, 2004. "On the Recursive Saddle Point Method," Levine's Bibliography 122247000000000050, UCLA Department of Economics.
  5. Boud, John III, 1990. "Recursive utility and the Ramsey problem," Journal of Economic Theory, Elsevier, Elsevier, vol. 50(2), pages 326-345, April.
  6. V. Filipe Martins-da-Rocha & Yiannis Vailakis, 2010. "Existence and Uniqueness of a Fixed Point for Local Contractions," Econometrica, Econometric Society, Econometric Society, vol. 78(3), pages 1127-1141, 05.
  7. Emmanuel Farhi & Iván Werning, 2007. "Inequality and Social Discounting," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 365-402.
  8. Matthias Messner & Nicola Pavoni & Christopher Sleet, 2011. "Recursive methods for incentive problems," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 381, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Jorge DurÂn, 2000. "On dynamic programming with unbounded returns," Economic Theory, Springer, Springer, vol. 15(2), pages 339-352.
  10. Matkowski, Janusz & Nowak, Andrzej S., 2008. "On Discounted Dynamic Programming with Unbounded Returns," MPRA Paper 12215, University Library of Munich, Germany.
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Cited by:
  1. Matthias Messner & Nicola Pavoni & Christopher Sleet, 2012. "Recursive Methods for Incentive Problems," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(4), pages 501-525, October.
  2. Messner Matthias & Pavoni Nicola & Sleet Christopher, . "Recursive Methods for Dynamic Incentive Problems," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 2012-E13, Carnegie Mellon University, Tepper School of Business.

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