Arbeitspapier

Incomplete contracts in dynamic games

I develop a dynamic model of costly private provision of public goods where agents can also invest in cost-reducing technologies. Despite the n+1 stocks in the model, the analysis is tractable and the (Markov perfect) equilibrium unique. The framework is used to derive optimal incomplete contracts in a dynamic setting. If the agents can contract on provision levels, but not on investments, they invest suboptimally little, particularly if the contract is short-term or close to its expiration date. To encourage sufficient investments, the optimal and equilibrium contract is more ambitious if it is short-lasting, and it is tougher to satisfy close to its expiration date. If renegotiation is possible, such a contract implements the first best. The results have important implications for how to design a climate treaty.

Sprache
Englisch

Erschienen in
Series: Discussion Paper ; No. 1504

Klassifikation
Wirtschaft
Economics of Contract: Theory
International Fiscal Issues; International Public Goods
Climate; Natural Disasters and Their Management; Global Warming
International Agreements and Observance; International Organizations
Thema
dynamic private provision of public goods
dynamic common-pool problems
dynamic hold-up problems
incomplete contracts
renegotiation design
climate change and climate agreements

Ereignis
Geistige Schöpfung
(wer)
Harstad, Bård
Ereignis
Veröffentlichung
(wer)
Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
(wo)
Evanston, IL
(wann)
2010

Handle
Letzte Aktualisierung
20.09.2024, 08:21 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Harstad, Bård
  • Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science

Entstanden

  • 2010

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