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The interaction of explicit and implicit contracts

Author

Listed:
  • Schmidt, Klaus M.
  • Schnitzer, Monika

Abstract

We analyze explicit and implicit contracts in a repeated principal-agent model with observable but only partially contractable actions of the agent. It is shown that the set of implementable actions may increase or decrease if additional actions become contractable.

Suggested Citation

  • Schmidt, Klaus M. & Schnitzer, Monika, 1995. "The interaction of explicit and implicit contracts," Munich Reprints in Economics 19763, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:19763
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    References listed on IDEAS

    as
    1. Eaton, Jonathan, 1993. "Sovereign Debt: A Primer," The World Bank Economic Review, World Bank, vol. 7(2), pages 137-172, May.
    2. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1125-1156.
    3. Clive Bull, 1987. "The Existence of Self-Enforcing Implicit Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(1), pages 147-159.
    4. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
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    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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