IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The simple analytics of information and experimentation in dynamic agency

  • Thomas D. Jeitschko

    ()

    (Department of Economics, Michigan State University)

  • Leonard J. Mirman

    (Department of Economics, University of Virginia)

  • Egas Salgueiro

    ()

    (Departamento de Economia e Gestão Industrial, Universidade de Aveiro)

The dynamics of a stochastic, two–period principal–agent relationship is studied. The agent’s type remains the same over time. Contracts are short term. The principal designs the second contract, taking the information available about the agent after the first period into account. Compared to deterministic environments significant changes emerge: First, fully separating contracts are optimal. Second, the principal has two opposing incentives when designing contracts: the principal ‘experiments,’ making signals more informative; yet dampens signals, thereby reducing up–front payments. As a result, ‘good’ agents’ targets are ratcheted over time.

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.

File URL: https://www.ua.pt/egi/ReadObject.aspx?obj=10998
Our checks indicate that this address may not be valid because: 500 Can't connect to www.ua.pt:443. If this is indeed the case, please notify (Marta Ferreira Dias)


Download Restriction: no

Paper provided by Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro in its series Working Papers de Economia (Economics Working Papers) with number 12.

as
in new window

Length: 25 pages
Date of creation: Jan 2004
Date of revision:
Publication status: Published in Economic Theory, 19, 549-570 (2002)
Handle: RePEc:ave:wpaper:122004
Contact details of provider: Postal: Campus Universitario de Santiago, 3810-193 Aveiro
Phone: +351 234 370 361
Fax: +351 234 370 215
Web page: http://www.ua.pt/egi/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Comparative statics of the optimal dynamic incentive contract," European Economic Review, Elsevier, vol. 31(4), pages 901-926, June.
  2. Freixas, Xavier & Guesnerie, Roger & Tirole, Jean, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 173-91, April.
  3. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  4. Leonard J. Mirman & Thomas D. Jeitschko, 2002. "Information and experimentation in short-term contracting," Economic Theory, Springer, vol. 19(2), pages 311-331.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ave:wpaper:122004. 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: (Marta Ferreira Dias)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.