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.
- Language
-
Englisch
- Bibliographic citation
-
Series: IFN Working Paper ; No. 1390
- Classification
-
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Expectations; Speculations
Economics of Contract: Theory
- Subject
-
Constrained contracting
Escape clauses
Endogenously incomplete commitment
Ratchet effect
Revelation principle
- Event
-
Geistige Schöpfung
- (who)
-
Tangerås, Thomas P.
Gick, Wolfgang
- Event
-
Veröffentlichung
- (who)
-
Research Institute of Industrial Economics (IFN)
- (where)
-
Stockholm
- (when)
-
2021
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Tangerås, Thomas P.
- Gick, Wolfgang
- Research Institute of Industrial Economics (IFN)
Time of origin
- 2021
Other Objects (12)
Imperfect information and commitment in financial contracting
Contracting with Imperfect Commitment and Noisy Communication
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Contracting over commitment vs. flexibility under asymmetric information
Dynamic contracting with limited commitment and the ratchet effect
The Importance of Escape Clauses: Firm Response to Thin Capitalization Rules
The Coase conjecture with incomplete information on the monopolist's commitment
Explaining conflict in low-income countries : incomplete contracting in the shadow of the future
Contracting, [...]. Grundlagenpapier
Handbuch contracting
Imperfect information and commitment in financial contracting
Contracting with Imperfect Commitment and Noisy Communication
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Contracting over commitment vs. flexibility under asymmetric information
Dynamic contracting with limited commitment and the ratchet effect
The Importance of Escape Clauses: Firm Response to Thin Capitalization Rules
The Coase conjecture with incomplete information on the monopolist's commitment
Explaining conflict in low-income countries : incomplete contracting in the shadow of the future
Contracting, [...]. Grundlagenpapier
Handbuch contracting
Imperfect information and commitment in financial contracting
Contracting with Imperfect Commitment and Noisy Communication
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Contracting over commitment vs. flexibility under asymmetric information
Dynamic contracting with limited commitment and the ratchet effect
The Importance of Escape Clauses: Firm Response to Thin Capitalization Rules
The Coase conjecture with incomplete information on the monopolist's commitment
Explaining conflict in low-income countries : incomplete contracting in the shadow of the future
Contracting, [...]. Grundlagenpapier