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Dynamic Contracts for Teams

Author

Listed:
  • Kim-Sau Chung
  • Atila Abdulkadiroglu

Abstract

This paper studies repeated moral hazard in teams. Agents' actions are observable to each other but not to the principal. For any given dynamic contract, agents always select their favorite subgame perfect equilibrium in the corresponding dynamic game. The optimal dynamic contract must take that into account and explicitly creates bad continuation equilibria after any histories so that agents can punish each other if anyone of them deviates from the desired action

Suggested Citation

  • Kim-Sau Chung & Atila Abdulkadiroglu, 2004. "Dynamic Contracts for Teams," 2004 Meeting Papers 153, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:153
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    More about this item

    Keywords

    dynamic contract; moral hazard; collusion;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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