Optimal stationary contract with two-sided imperfect enforcement and persistent adverse selection
Article dans une revue: We consider an infinitely-repeated principal–agent relationship run with stationary contracts. The agent has private information on his persistent cost parameter and, under limited enforcement, both parties can breach the contract. The optimal stationary contract with limited enforcement is made of two distinct pieces. For the most efficient types of the agent, the contract entails bunching with a fixed payment and a fixed output. For less efficient types, the contract exhibits downward output distortions below the Baron–Myerson level that would have been achieved had enforcement been costless.
Auteur(s)
David Martimort, Aggey Semenov, Lars Stole
Revue
- Economics Letters
Date de publication
- 2017
Mots-clés JEL
Mots-clés
- Contract enforcement
- Optimal control
- Adverse selection
- Stationary contract
Pages
- 18-22
URL de la notice HAL
Version
- 1
Volume
- 159