Reputazione, flessibilità e durata ottima dei contratti
We study the optimal length of a delegation contract in an incomplete information model where an agent plays a (possibly) repeated game on behalf of his principal. A short-term contract provides the principal with the flexibility to replace an agent who has proved not to be suitable for his job, while a long-term contract allows the agent to build a reputation for being trustworthy in his relationships with third parties. When contracts are renewable, the relationship between principal and agent may sometimes turn out to be stable even with short-term contracts. In this paper we show that this implies a non-monotonic relation between the importance of reputation and the optimal length of delegation contracts. In particular, in games where reputation is very important, short-term delegation contracts can be optimal. The implications of our analysis are illustrated by means of a few examples: the problem of credibility in the management of monetary policy, vertical relationships within firms, the strategic interactions between lenders and borrowers.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:mul:jb33yl:doi:10.1428/14113:y:2004:i:2:p:233-268. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.