IDEAS home Printed from https://ideas.repec.org/p/cmu/gsiawp/395.html
   My bibliography  Save this paper

Dynamic Costly State Verification

Author

Listed:
  • Cheng Wang

Abstract

I study a model of dynamic risk sharing with costly state verification (CSV). In the model, a risk neutral agent enters an infinitely repeated relationship with a risk averse agent. In each period, the risk averse agent receives a random income which is observed only by himself, unless the risk neutral agent engages in costly monitoring. I provide a set of characterizations for the optimal contract, and I show that CSV has interesting effects on the long run distribution of the agents’ expected utilities. Copyright Springer-Verlag Berlin/Heidelberg 2005
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Cheng Wang, "undated". "Dynamic Costly State Verification," GSIA Working Papers 2000-26, Carnegie Mellon University, Tepper School of Business.
  • Handle: RePEc:cmu:gsiawp:395
    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.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, pages 1875-1891.
    2. Antinolfi, Gaetano & Carli, Francesco, 2015. "Costly monitoring, dynamic incentives, and default," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 105-119.
    3. Zhang, Yuzhe & Ravikumar, B., 2012. "Optimal auditing and insurance in a dynamic model of tax compliance," Theoretical Economics, Econometric Society, vol. 7(2), May.
    4. Cyril Monnet & Erwan Quintin, 2005. "Optimal contracts in a dynamic costly state verification model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 867-885, November.
    5. Karine Gobert & Michel Poitevin, 2006. "Non-commitment and savings in dynamic risk-sharing contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 357-372.
    6. Ravikumar, B & Zhang, Yuzhe, 2010. "Optimal auditing in a dynamic model of tax compliance," MPRA Paper 22924, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, pages 1875-1891.
    2. Jonathan Hoddenbagh & Mikhail Dmitriev, 2017. "The Financial Accelerator and the Optimal State-Dependent Contract," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 43-65, March.
    3. Ravikumar, B. & Zhang, Yuzhe, 2010. "Optimal Auditing in a Dynamic Model of Tax Compliance," MPRA Paper 23218, University Library of Munich, Germany.
    4. Cesar Tamayo, 2015. "Investor protection and optimal contracts under risk aversion and costly state verification," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 547-577, August.
    5. Langberg, Nisan, 2008. "Optimal financing for growth firms," Journal of Financial Intermediation, Elsevier, vol. 17(3), pages 379-406, July.
    6. Antinolfi, Gaetano & Carli, Francesco, 2015. "Costly monitoring, dynamic incentives, and default," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 105-119.
    7. Piskorski, Tomasz & Westerfield, Mark M., 2016. "Optimal dynamic contracts with moral hazard and costly monitoring," Journal of Economic Theory, Elsevier, vol. 166(C), pages 242-281.
    8. Cole, Harold L., 2013. "Self-enforcing stochastic monitoring and the separation of claims," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 632-649.
    9. Popov, Latchezar, 2016. "Stochastic costly state verification and dynamic contracts," Journal of Economic Dynamics and Control, Elsevier, vol. 64(C), pages 1-22.
    10. Hisashi Nakamura, 2012. "A Continuous-Time Analysis of Optimal Restructuring of Contracts with Costly Information Disclosure," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, pages 119-147.
    11. Edward Simpson Prescott, 2004. "Auditing and bank capital regulation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 47-63.
    12. Armenter, Roc & Mertens, Thomas M., 2013. "Fraud deterrence in dynamic Mirrleesian economies," Journal of Monetary Economics, Elsevier, pages 139-151.

    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:cmu:gsiawp:395. 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: (Steve Spear). General contact details of provider: http://www.tepper.cmu.edu/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 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.