Generous Long-Term Contracts

Sylvain Chassang
Additional contact information
Sylvain Chassang: Princeton University

Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: I argue that in long-term consumer–producer relationships, menus of contracts can be advantageously replaced by a single generous contract such that, at any point in time, the sum of a consumer’s transfers is equal to the sum of transfers they would have made under the contract that is the best for them in hindsight. Such generous long-term contracts can increase skeptical consumers’ demand for complex and higher-powered contracts while approximately implementing the same outcomes as the underlying menu evaluated by a rational decision maker. Applications include voluntary load shedding in retail electricity markets and cost sharing in health insurance.

JEL-codes: D11 D12 (search for similar items in EconPapers)
Date: 2026-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://gceps.princeton.edu/wp-content/uploads/202 ... ongTermContracts.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:354

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().