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Randomization in Coalition Contracts

  • Schmitz, Patrick W

This article analyzes a much debated clause in the coalition contract between SPD and FDP in Rheinland-Pfalz. Two parties write a contract, based on which decisions under incomplete information have to be made at a later point in time. It is shown that a complex complete contract can achieve the first best outcome. However, a simple incomplete contract can implement the first best outcome only if use of seemingly inefficient randomization is made. Copyright 1998 by Kluwer Academic Publishers

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Article provided by Springer in its journal Public Choice.

Volume (Year): 94 (1998)
Issue (Month): 3-4 (March)
Pages: 341-53

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Handle: RePEc:kap:pubcho:v:94:y:1998:i:3-4:p:341-53
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  1. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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