A Theory of Credibility under Commitment
Daniel Monte ()
The B.E. Journal of Theoretical Economics, 2010, vol. 10, issue 1, 1-15
The ability to commit to a contract may increase a player's payoff. In a repeated relationship, the lack of a complete contingency contract is usually explained by the presence of contracting costs. We study optimal contracts in a specific class of credibility models: relationships in which the surplus comes solely from screening. We show that the optimal contract is to reproduce the Perfect Bayesian Equilibrium of the game without commitment. In this sense, sequential rationality constraints do not bind. Therefore, we provide an alternative explanation for why a specific class of long-term relationships may often not be contracted upon.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.degruyter.com/view/j/bejte.2010.10.1/b ... .1591.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejtec:v:10:y:2010:i:1:n:33
Ordering information: This journal article can be ordered from
Access Statistics for this article
The B.E. Journal of Theoretical Economics is currently edited by Burkhard C. Schipper
More articles in The B.E. Journal of Theoretical Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().