Computing Multi-Period, Information-Constrained Optima

Christopher Phelan and Robert M. Townsend

The Review of Economic Studies, 1991, vol. 58, issue 5, 853-881

Abstract: This paper presents a detailed theoretical derivation and justification for methods used to compute solutions to a multi-period (including infinite-period), continuum-agent, unobservedeffort economy. Actual solutions are displayed illustrating cross-sectional variability in consumption and labour effort in the population at a point in time and variability for a typical individual over time. The optimal tradeoff between insurance and incentives is explored and the issue of excess variability is addressed by consideration of the analogue full-information economy and various restricted-contracting regimes.

Date: 1991
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Related works:
Working Paper: Computing Multi-Period, Information Constrained Optima (2010)
Working Paper: Computing Multiperiod, Information-Constrained Optima (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:58:y:1991:i:5:p:853-881.

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