Recursive contracts

Albert Marcet and Ramon Marimon

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We obtain a recursive formulation for a general class of contracting problems involving incentive constraints. These constraints make the corresponding maximization (sup) problems non recursive. Our approach consists of studying a recursive Lagrangian. Under standard general conditions, there is a recursive saddle-point (infsup) functional equation (analogous to a Bellman equation) that characterizes the recursive solution to the planner's problem and forward-looking constraints. Our approach has been applied to a large class of dynamic contractual problems, such as contracts with limited enforcement, optimal policy design with implementability constraints, and dynamic political economy models.

Keywords: transactional relationships; contracts and reputation; recursive formulation; participation constraint (search for similar items in EconPapers)
JEL-codes: D80 L14 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2011-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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http://eprints.lse.ac.uk/121737/ Open access version. (application/pdf)

Related works:
Journal Article: Recursive Contracts (2019)
Working Paper: Recursive Contracts (2015)
Working Paper: Recursive Contracts (2011)
Working Paper: Recursive Contracts (2011)
Working Paper: Recursive Contracts (1998)
Working Paper: Recursive contracts (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121737

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