A Theory of Threshold Contracts

Arbeitspapier

We consider an in nitely repeated reappointment game in a principal- agent relationship. Typical examples are voter-politician or government- public servant relationships. The agent chooses costly effort and enjoys being in office until he is deselected. The principal observes a noisy signal of the agent's effort and decides whether to reappoint the agent or not. We analyse the stationary Markovian equilibria of this game and examine the consequences of threshold contracts, which forbid reappointment if the principal's utility is too low. We identify the circumstances under which such threshold contracts are welfare-improving or beneficial for the principal.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Economics Working Paper Series ; No. 13/182

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Survey Methods; Sampling Methods ; Asymmetric and Private Information; Mechanism Design ; Economics of Contract: Theory ; Structure, Scope, and Performance of Government
• Thema: principal-agent model ; repeated game ; reappointment ; stationary Markovian strategies ; threshold strategies ; threshold contracts ; asymmetric information ; commitment

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Becker, Johannes Gerd ; Gersbach, Hans
• Ereignis: Veröffentlichung
• (wer): ETH Zurich, CER-ETH - Center of Economic Research
• (wo): Zurich
• (wann): 2013

Weitere Informationen

• DOI: doi:10.3929/ethz-a-009978171
• Handle: http://hdl.handle.net/10419/171625
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ