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.
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 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, 2000.
"Relational Incentive Contracts,"
01002, Stanford University, Department of Economics.
- Martimort, David & Semenov, Aggey & Stole, Lars, 2014.
"A Theory of Contracts With Limited Enforcement,"
53504, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.