Randomization in Coalition Contracts

Patrick Schmitz

Public Choice, 1998, vol. 94, issue 3-4, 53 pages

Abstract: This article analyzes a much debated clause in the coalition contract between SPD and FDP in Rheinland-Pfalz. Two parties write a contract, based on which decisions under incomplete information have to be made at a later point in time. It is shown that a complex complete contract can achieve the first best outcome. However, a simple incomplete contract can implement the first best outcome only if use of seemingly inefficient randomization is made. Copyright 1998 by Kluwer Academic Publishers

Date: 1998
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Journal Article: Randomization in coalition contracts (1998)
Working Paper: On Randomization in Coalition Contracts (1998)
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