G2TT
来源类型Discussion paper
规范类型论文
来源IDDP4438
DP4438 Cities and Cultures
Gianmarco Ottaviano; Giovanni Peri
发表日期2004-06-23
出版年2004
语种英语
摘要We develop general recursive methods to solve for optimal contracts in dynamic principal-agent environments with hidden states and hidden actions. In our baseline model, the principal observes nothing other than transfers. Nevertheless, optimal incentive-constrained insurance can be attained. We show that the optimal contract can be implemented as a recursive direct mechanism with a vector of utility promises as the state variable. The standard recursive formulation suffers from a curse of dimensionality that arises from the interaction of hidden income and hidden actions; this curse can be overcome by introducing judiciously chosen utility bounds for deviation behaviour off the equilibrium path. Our methods generalize to environments with multiple actions and additional states. The key to implementing these extensions is to introduce multiple layers of off-path utility bounds.
主题Public Economics
关键词Mechanism design Dynamic contracts Recursive contracts
URLhttps://cepr.org/publications/dp4438
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/533391
推荐引用方式
GB/T 7714
Gianmarco Ottaviano,Giovanni Peri. DP4438 Cities and Cultures. 2004.
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