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Persistent Private Information

Author

Listed:
  • Noah Williams

    (Princeton University)

Abstract

This paper studies the design of optimal contracts in dynamic environments where agents' private information is persistent. In particular, I focus on a continuous time version of an insurance problem similar to Green (1987) and Thomas and Worall (1990), where a risk averse agent would like to borrow from a risk neutral lender to stabilize his income stream. The income stream is private information to the borrower and is persistent. I show that a first order approach to contracting applies, and this allows me to characterize the optimal contract.

Suggested Citation

  • Noah Williams, 2007. "Persistent Private Information," 2007 Meeting Papers 158, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:158
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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