Relational contracts when the agent's productivity inside the relationship is correlated with outside opportunities
An agent can choose to forego benefits from side opportunities and to instead provide benefits to the principal. In return, the principal offers rewards. If this exchange is not contractible, typically repeated interaction will be required to sustain it. This model allows the agent's productivity in contractible and possibly also non-contractible actions inside the relationship to be correlated with productivity in side activities. This arguably realistic assumption yields several novel implications for the feasibility of relational contracts and for agent selection by principals. The analysis reveals, for example, that optimal agent productivity is often non-monotonic in the importance, to the principal, of ensuring agent reliability.
|Date of creation:||May 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- William Fuchs, 2005.
"Contracting with Repeated Moral Hazard and Private Evaluations,"
2005 Meeting Papers
431, Society for Economic Dynamics.
- William Fuchs, 2007. "Contracting with Repeated Moral Hazard and Private Evaluations," American Economic Review, American Economic Association, vol. 97(4), pages 1432-1448, September.
- William Fuchs, 2005. "Contracting with Repeated Moral Hazard and Private Evaluations," Game Theory and Information 0511007, EconWPA.
- William Fuchs, 2005. "Contracting with Repeated Moral Hazard and Private Evaluations," Discussion Papers 04-012, Stanford Institute for Economic Policy Research.
- Sylvain Chassang, 2010. "Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 448-65, March.
- Steve Cicala & Roland G. Fryer, Jr. & Jörg L. Spenkuch, 2011.
"A Roy Model of Social Interactions,"
NBER Working Papers
16880, National Bureau of Economic Research, Inc.
- Georgy Egorov & Konstantin Sonin, 2005.
"Dictators and Their Viziers: Agency Problems in Dictatorships,"
Economics Working Papers
0053, Institute for Advanced Study, School of Social Science.
- Georgy Egorov & Konstantin Sonin, 2011. "Dictators And Their Viziers: Endogenizing The Loyalty–Competence Trade‐Off," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 903-930, October.
- Egorov, Georgy & Sonin, Konstantin, 2004. "Dictators and Their Viziers: Agency Problems in Dictatorships," CEPR Discussion Papers 4777, C.E.P.R. Discussion Papers.
- Georgy Egorov & Konstantin Sonin, 2005. "Dictators and Their Viziers: Agency Problems in Dictatorships," William Davidson Institute Working Papers Series wp735, William Davidson Institute at the University of Michigan.
- Georgy Egorov & Konstantin Sonin, 2004. "Dictators and Their Viziers: Agency Problems in Dictatorships," Working Papers w0043, Center for Economic and Financial Research (CEFIR).
- Kristen Keith & Abagail McWilliams, 1995.
"The wage effects of cumulative job mobility,"
Industrial and Labor Relations Review,
ILR Review, Cornell University, ILR School, vol. 49(1), pages 121-137, October.
- Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
- Jonathan Levin, 2000.
"Relational Incentive Contracts,"
01002, Stanford University, Department of Economics.
- Munasinghe, Lalith & Sigman, Karl, 2004. "A hobo syndrome? Mobility, wages, and job turnover," Labour Economics, Elsevier, vol. 11(2), pages 191-218, April.
- Laing, Derek, 1994.
"Involuntary Layoffs in a Model with Asymmetric Information Concerning Worker Ability,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(2), pages 375-92, April.
- Laing, D., 1990. "Involuntary Layoffs in a Model with Asymmetry Information Concerning Worker Ability," Papers 12-90-4, Pennsylvania State - Department of Economics.
- Glazer, Amihai, 2002.
"Allies as rivals: internal and external rent seeking,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 48(2), pages 155-162, June.
- Glazer, A., 1999. "Allies as Rivals: Internal and External Rent Seeking," Papers 99-00-10, California Irvine - School of Social Sciences.
- Wagner, Alexander F., 2011. "Board independence and competence," Journal of Financial Intermediation, Elsevier, vol. 20(1), pages 71-93, January.
- Thomas, Jonathan & Worrall, Tim, 1988. "Self-enforcing Wage Contracts," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 541-54, October.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8378. 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 references are entirely missing, you can add them using this form.