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On partial contracting

  • Mathias Dewatripont
  • Philippe Aghion
  • Patrick Rey

This paper investigates contracting situations where giving away some control rights enhances both the donor's and the receiver's incentives to cooperate in the future. We define a partial contracting framework with nonverifiable actions for which either control is contractible (contractible control actions) or the right to transfer control ex post to another party is contractible (transferable control actions). Under incomplete information, when control over particular actions is transferable but not contractible, it can be optimal to give one party the right to transfer control over a particular action to the other party, in order for that party to build a reputation regarding her willingness to cooperate in the future. © 2002 Elsevier Science B.V. All rights reserved.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/9627.

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Date of creation: 2002
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Publication status: Published in: European Economic Review (2002),p.745-753
Handle: RePEc:ulb:ulbeco:2013/9627
Note: SCOPUS: ar.j
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  1. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  2. Watson, Joel, 1999. "Starting Small and Renegotiation," Journal of Economic Theory, Elsevier, vol. 85(1), pages 52-90, March.
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