IDEAS home Printed from https://ideas.repec.org/p/cie/wpaper/9803.html
   My bibliography  Save this paper

Robustness in Contracts: Inferring Strategies from Past Play

Author

Listed:
  • Tridib Sharma

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

It is generally understood that in situations of asymmetric information, the principal is better off committing to long term contracts than committing to short term contracts. The result holds true even when long term contracts are constrained to be renegotiation proof. The paper argues that the longrun renegotiation proof contracts, which the literature uses as benchmarks for comparison, are not robust to the possibility of certain kinds of renegotiation. The renegotiations that we have in mind are those which (potentially)take place after the principal comprehends previous strategies of the agent by using behavioral or statistical techniques. We show that for 'high' discount factors the principal is not strictly better off by committing to longrun contracts that are robust to renegotiations.

Suggested Citation

  • Tridib Sharma, 1998. "Robustness in Contracts: Inferring Strategies from Past Play," Working Papers 9803, Centro de Investigacion Economica, ITAM.
  • Handle: RePEc:cie:wpaper:9803
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cie:wpaper:9803. 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: (Diego Dominguez). General contact details of provider: http://edirc.repec.org/data/ciitamx.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.