Impatience versus Incentives
Econometrica · 2015 · Volume 83 · Issue 4
Abstract
This paper studies the dynamics of long-term contracts in repeated principal–agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.
Keywords
Dynamic contracts, endogenous cycles, principal–agent models, relational contracts, differential discounting, repeated games
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