Washington University in Saint Louis
I examine a dynamic agency model of imperfect public monitoring over finite T instances where signals depend arbitrarily on past actions and exhibit moderate serial correlation. In this general environment, I propose a class of simple contracts, the test contracts, derive sharp equilibrium characterizations for each T and establish sufficient conditions for test contracts to be near-optimal when T is large. The construction makes only use of a uniform probability bound that is prescribed by concentration inequalities and a uniform payoff bound that holds naturally in many applications. The result depends on few details of the signal process and is robust even if the contract designer's knowledge about such details is incomplete.
Number of Pages in PDF File: 35
Keywords: dynamic contract; robust incentives
JEL Classification: D86working papers series
Date posted: July 6, 2013 ; Last revised: July 21, 2014
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