Impatience vs. Incentives

16 Pages Posted: 4 Nov 2012 Last revised: 3 Mar 2015

See all articles by Marcus M. Opp

Marcus M. Opp

Stockholm School of Economics - Department of Finance; Swedish House of Finance

John Zhu

University of Kansas

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

Opp, Marcus M. and Zhu, John, Impatience vs. Incentives (March 2, 2015). Econometrica, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2170610 or http://dx.doi.org/10.2139/ssrn.2170610

Marcus M. Opp (Contact Author)

Stockholm School of Economics - Department of Finance ( email )

SE-113 83 Stockholm
Sweden

Swedish House of Finance

Drottninggatan 98
111 60 Stockholm
Sweden

John Zhu

University of Kansas ( email )

1300 Sunnyside Drive
Lawrence, KS 66045-7585
United States

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