Relational Incentive Contracts with Persistent Private Information
AbstractThis paper investigates relational incentive contracts with a continuum of privately observedagent types that are persistent over time. For a sufficiently productive relationship,a pooling contract exists in which all agent types continuing the relationshipchoose the same action. Necessary and sufficient conditions are given for some separationto be feasible; the parties can then do better than with full pooling. When futureactions are optimal, however, separation of all types is not possible; the finest separationachievable is into partitions each containing a non-degenerate interval of types.Separation always involves lower output initially than after separation has occurred.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 633.
Date of creation: 04 Dec 2012
Date of revision:
Relational incentive contracts; private information; ratchet effect; dynamic enforcement;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-CTA-2013-02-03 (Contract Theory & Applications)
- NEP-GTH-2013-02-03 (Game Theory)
- NEP-HRM-2013-02-03 (Human Capital & Human Resource Management)
- NEP-MIC-2013-02-03 (Microeconomics)
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.:
- Jonathan Levin, 2003.
"Relational Incentive Contracts,"
American Economic Review,
American Economic Association, vol. 93(3), pages 835-857, June.
- Martimort, David & Semenov, Aggey & Stole, Lars, 2014.
"A Theory of Contracts With Limited Enforcement,"
53504, University Library of Munich, Germany.
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