Self-evident events and the value of linking
Jimmy Chan and
Wenzhang Zhang
Journal of Economic Theory, 2023, vol. 212, issue C
Abstract:
We study a T-period contracting game between a group of players without access to external financing. We show that the long-term efficiency loss is bounded from below by the need to vary incentives across self-evident events. When T is large, the efficiency bound can be approached by a contract that involves side payments between players. Our results apply to all monitoring structures and strategy profiles. They encompass the inefficiency result in Abreu et al. (1991), as well as the approximate-efficiency results in Compte (1998), Obara (2009), and Chan and Zhang (2016).
Keywords: Repeated partnerships; Value of linking; Self-evident events; Repeated games; General monitoring (search for similar items in EconPapers)
JEL-codes: C73 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S002205312300087X
Full text for ScienceDirect subscribers only
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:eee:jetheo:v:212:y:2023:i:c:s002205312300087x
DOI: 10.1016/j.jet.2023.105691
Access Statistics for this article
Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell
More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().