Arbeitspapier

Contracting with Endogenously Incomplete Commitment: Escape Clauses

We study mechanism design under endogenously incomplete commitment as it arises in contracting with escape clauses. An escape clause permits the agent to end a contractual relationship under specified circumstances, after which the principal can offer an ex-post contract. Escape clauses are valuable when the maximal number of initial contracts is smaller than the number of agent types. We identify a sufficient condition for incentive optimality of ex-post contracting. Escape clauses are always incentive optimal under severely constrained contracting. On the margin, the optimal escape clause balances the benefit of a better-adapted contract against an increase in dynamic inefficiency.

Sprache
Englisch

Erschienen in
Series: IFN Working Paper ; No. 1390

Klassifikation
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Expectations; Speculations
Economics of Contract: Theory
Thema
Constrained contracting
Escape clauses
Endogenously incomplete commitment
Ratchet effect
Revelation principle

Ereignis
Geistige Schöpfung
(wer)
Tangerås, Thomas P.
Gick, Wolfgang
Ereignis
Veröffentlichung
(wer)
Research Institute of Industrial Economics (IFN)
(wo)
Stockholm
(wann)
2021

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Tangerås, Thomas P.
  • Gick, Wolfgang
  • Research Institute of Industrial Economics (IFN)

Entstanden

  • 2021

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