|
on Contract Theory and Applications |
| By: | Mohamed Belhaj (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Frédéric Deroïan (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales) |
| Abstract: | A principal targets agents organized in a network of local complementarities, in order to increase the sum of agents' effort. We consider bilateral public contracts à la Segal (1999). The paper shows that the synergies between contracting and non-contracting agents deeply impact optimal contracts: they can lead the principal to contract with a subset of the agents, and to refrain from contracting with central agents. |
| Keywords: | multi-agent contracting,network,synergies,aggregate effort,optimal group targeting |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01790947&r=cta |
| By: | Miller, David (Dept. of Economics, University of Michigan); Olsen, Trond E. (Dept. of Business and Management Science, Norwegian School of Economics); Watson, Joel (Dept. of Economics, University of California, San Diego) |
| Abstract: | We study relational contracting and renegotiation in environments with external enforcement of long-term contractual arrangements. An external, long-term contract governs the stage games the contracting parties will play in the future (depending on verifiable stage-game outcomes) until they renegotiate. In a contractual equilibrium, the parties choose their individual actions rationally, they jointly optimize when selecting a contract, and they take advantage of their relative bargaining power. Our main result is that in a wide variety of settings, in each period of a contractual equilibrium the parties agree to a semi-stationary external contract, with stationary terms for all future periods but special terms for the current period. In each period the parties renegotiate to this same external contract, effectively adjusting the terms only for the current period. For example, in a simple principal-agent model with a choice of costly monitoring technology, the optimal contract specifies mild monitoring for the current period but intense monitoring for future periods. Because the parties renegotiate in each new period, intense monitoring arises only off the equilibrium path after a failed renegotiation. |
| Keywords: | Relational contracts; negotiation; external enforcement |
| JEL: | D00 D20 D21 D80 D86 |
| Date: | 2018–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2018_008&r=cta |