Monotone Contracts

Daniel Bird and Alexander Frug

No 1085, Working Papers from Barcelona School of Economics

Abstract: We develop a framework for deriving dynamic monotonicity results in long-term stochastic contracting problems with symmetric information. Specifically, we construct a notion of concave separable activity that encompasses many prevalent contractual components (e.g., wage, effort, level of production, etc.). We then provide a tight condition under which such activities manifest a form of seniority in every contracting problem in which they are present: any change that occurs in the level of the activity over time favors the agent. Our work unifies and significantly generalizes many existing results and can also be used to establish monotonicity results in other settings of interest.

Keywords: dynamic contracting; activities; seniority (search for similar items in EconPapers)
JEL-codes: D86 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-cta, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Monotone contracts (2019)
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