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
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Englisch
- Erschienen in
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Series: Discussion Paper ; No. 1504
- Klassifikation
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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
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dynamic private provision of public goods
dynamic common-pool problems
dynamic hold-up problems
incomplete contracts
renegotiation design
climate change and climate agreements
- Ereignis
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Geistige Schöpfung
- (wer)
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Harstad, Bård
- Ereignis
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Veröffentlichung
- (wer)
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Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
- (wo)
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Evanston, IL
- (wann)
-
2010
- Handle
- Letzte Aktualisierung
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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