A monotone comparative static result on contract incompleteness

Yasunori Watanabe ()
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Yasunori Watanabe: Manufacturing Management Research Center, The University of Tokyo

Economics Bulletin, 2008, vol. 4, issue 16, pages 1-8

Abstract: The purpose of this paper is to generalize the incomplete contract model of Bajari and Tadelis (2001) into a continuous model, and to derive the condition under which the monotone comparative statics (MCS) methods can be applied. I will show that a type of single-crossing condition on the isoprobability curves of uncertainty is necessary and sucient for the availability of the MCS methods when a player has a supermodular ex post utility function. In this case, the greater the magnitude of uncertainty, the less his optimal contract allows the project to proceed smoothly.

JEL-codes: D8 C6 (search for similar items in EconPapers)
Date: 2008-06-12
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