Repeated moral hazard and recursive Lagrangeans

Antonio Mele

Journal of Economic Dynamics and Control, 2014, vol. 42, issue C, 69-85

Abstract: This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques à laMarcet and Marimon (2011) to problems with hidden actions. The method has many advantages with respect to the promised utilities approach (Abreu et al., 1990): it is a significant improvement in terms of simplicity, tractability and computational speed. Solutions can be easily computed for hidden actions models with several endogenous state variables and several agents, while the promised utilities approach becomes extremely difficult and computationally intensive even with just one state variable or two agents.

Keywords: Repeated moral hazard; Recursive Lagrangean; Computational methods; Collocation (search for similar items in EconPapers)
JEL-codes: C61 C63 D82 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Repeated moral hazard and recursive Lagrangeans (2011)
Working Paper: Repeated moral hazard and recursive Lagrangeans (2010)
Working Paper: Repeated Moral Hazard and Recursive Lagrangeans (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:42:y:2014:i:c:p:69-85

DOI: 10.1016/j.jedc.2014.03.007

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