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Repeated moral hazard with effort persistence

Arantxa Jarque

Journal of Economic Theory, 2010, vol. 145, issue 6, 2412-2423

Abstract: I study a problem of repeated moral hazard where the effect of effort is persistent over time: each period's outcome distribution is a function of a geometrically distributed lag of past efforts. I show that when the utility of the agent is linear in effort, a simple rearrangement of terms in his lifetime utility translates this problem into a related standard repeated moral hazard. The solutions for consumption in the two problems are observationally equivalent, implying that the main properties of the optimal contract remain unchanged with persistence. For illustration, I present the computed solution of an example.

Keywords: Moral; hazard; Repeated; agency; Persistence (search for similar items in EconPapers)
Date: 2010
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Related works:
Working Paper: Repeated moral hazard with effort persistence (2008) Downloads
Working Paper: Repeated Moral Hazard with Effort Persistence (2005) Downloads
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