Renegotiation-Proof Dynamic Contracts with Private Information
This paper studies the issue of renegotiation in a model of dynamic moral hazard. I introduce the notion of a renegotiation-proof dynamic contract. I show that the constraint of renegotiation-proofness can have the effect of setting a higher lower bound to the set of attainable expected utilities of the agent. This result extends the notion of "credit rationing" from the static models of optimal contracting to a dynamic setting, and is useful for thinking about competition for long-term contracts. This result also has implications for the long-run behavior of the expected utility of the agent under dynamic contracting. (Copyright: Elsevier)
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|Date of creation:||01 Jan 2000|
|Publication status:||Published in Review of Economic Dynamics 2000, vol. 3, pp. 296-422|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
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Web page: http://www.econ.iastate.edu
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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.:
- Bohacek Radim, 2005. "Capital Accumulation in Private Information Economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-24, December.