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Test Contract

Anqi Li

Washington University in Saint Louis

August 1, 2014

I examine what basic properties of the monitoring technology allow us to implement near-efficient outcomes in dynamic agency models with imperfect public monitoring. Specifically, in a T-period model where signals can depend arbitrarily on past actions and exhibit serial correlation, I show that near-efficiency obtains when T is large if the signal process has sufficiently concentrated measures and conveys enough information about the agent's true profit contribution, a condition that is almost tight in a class of agency models with frequent actions. To prove these results, I construct test contracts which attain robust performances for each T even if details of the signal process are not exactly known to the contract designer.

Number of Pages in PDF File: 39

Keywords: dynamic agency; robust incentives

JEL Classification: D86

working papers series

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Date posted: July 6, 2013 ; Last revised: September 29, 2014

Suggested Citation

Li, Anqi, Test Contract (August 1, 2014). Available at SSRN: http://ssrn.com/abstract=2290373 or http://dx.doi.org/10.2139/ssrn.2290373

Contact Information

Anqi Li (Contact Author)
Washington University in Saint Louis ( email )
Department of Economics
One Brookings Drive
St. Louis, MO 63130
United States
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References:  23
Citations:  1

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