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http://ssrn.com/abstract=2290373
 
 

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Test Contract


Anqi Li


Washington University in Saint Louis

September 1, 2014


Abstract:     
In dynamic agency models with imperfect public monitoring over finite T instances where signals can depend arbitrarily on past actions and exhibit moderate serial correlation, one can implement near-efficient outcomes when T is large if there exists a performance test statistic that has sufficiently concentrated measures and conveys enough information about the agent's true profit contribution asymptotically. Conversely, in a large class of agency models with frequent actions, asymptotic near-efficiency obtains only if this condition is satisfied. To show 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: 41

Keywords: dynamic agency; robust incentives

JEL Classification: D86

working papers series


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Date posted: July 6, 2013  

Suggested Citation

Li, Anqi, Test Contract (September 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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