Impatience vs. Incentives
16 Pages Posted: 4 Nov 2012 Last revised: 3 Mar 2015
Date Written: March 2, 2015
Abstract
This paper studies the dynamics of long-term contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.
Keywords: Oscillation, Cycles, Self-Enforcing contracts, Differential discounting, Dynamic contracts, Principal-agent models
JEL Classification: D86
Suggested Citation: Suggested Citation
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