Renegotiation-proof contract in repeated agency |
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Authors: | Rui R Zhao |
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Institution: | aDepartment of Economics, University at Albany - SUNY, Albany, NY 12222, USA |
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Abstract: | Renegotiation-proof contracts are studied in infinitely repeated principal–agent problem. Contracts satisfying a weaker notion of renegotiation-proofness always exist. The renegotiation-proof value function has a simple characterization: It is the principal's optimal value function when an appropriate lower bound is placed on the agent's expected utility. Sufficient conditions are provided for renegotiation-proof value function in finite horizon to converge to renegotiation-proof value function in infinite horizon as time goes to infinity. |
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Keywords: | Renegotiation proof contracts Repeated principal– agent |
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