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The Time Structure of Self-Enforcing Agreements

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  • Debraj Ray

    () (Department of Economics, New York University, 269 Mercer Street, New York, NY 10003, U.S.A.)

Abstract

A principal and an agent enter into a sequence of agreements. The principal faces an interim participation constraint at each date, but can commit to the current agreement; in contrast, the agent has the opportunity to renege on the current agreement. We study the time structure of agreement sequences that satisfy participation and no-deviation constraints and are (constrained) efficient. We show that every such sequence must, after a finite number of dates, exhibit a continuation that maximizes the "agent's" payoff over all such efficient, self-enforcing sequences. Additional results are provided for situations with transferable payoffs. Copyright The Econometric Society 2002.

Suggested Citation

  • Debraj Ray, 2002. "The Time Structure of Self-Enforcing Agreements," Econometrica, Econometric Society, vol. 70(2), pages 547-582, March.
  • Handle: RePEc:ecm:emetrp:v:70:y:2002:i:2:p:547-582
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