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Contracting with Imperfect Commitment: Minimal Canonical Contracts

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  • Seungjin Han
  • Siyang Xiong

Abstract

Contract theory typically assumes full commitment by the principal, but many contracts fix some payoff-relevant decisions while leaving others discretionary. We ask when imperfect commitment is equivalent to full commitment. For contracts in which a committed baseline is followed by a bounded discretionary adjustment, as in commercial-insurance schedule rating or civil penalties, bounded discretion is allocation-neutral. When contractible and non-contractible decisions are distinct instruments, the equivalence fails. We characterize optimal single-principal contracts and show that simple-offer equilibria are robust under competing principals. The methodological contribution is an extended taxation principle that makes these analyses more tractable.

Suggested Citation

  • Seungjin Han & Siyang Xiong, 2026. "Contracting with Imperfect Commitment: Minimal Canonical Contracts," Papers 2605.19884, arXiv.org, revised May 2026.
    • Handle: RePEc:arx:papers:2605.19884
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    References listed on IDEAS

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    3. Qingmin Liu & Konrad Mierendorff & Xianwen Shi & Weijie Zhong, 2019. "Auctions with Limited Commitment," American Economic Review, American Economic Association, vol. 109(3), pages 876-910, March.
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