Economics at your fingertips  

Deterministic versus stochastic contracts in a dynamic principal-agent model

Thomas Mettral ()
Additional contact information
Thomas Mettral: Humboldt-Universität zu Berlin

Economic Theory Bulletin, 2018, vol. 6, issue 2, 209-218

Abstract: Abstract I show that deterministic dynamic contracts between a principal and an agent are always at least as profitable to the principal as stochastic ones if the so-called first-order approach in dynamic mechanism design is satisfied. The principal commits, while the agent-type evolution follows a Markov process. My results demonstrate, even when allowing for potential correlation of stochastic contracts across periods that the usual restriction in the literature to deterministic contracts is admissible, as long as the first-order approach is valid.

Keywords: Contract theory; Principal-agent theory; Dynamic contracting (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Economic Theory Bulletin is currently edited by Nicholas C. Yannelis

More articles in Economic Theory Bulletin from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-05-21
Handle: RePEc:spr:etbull:v:6:y:2018:i:2:d:10.1007_s40505-018-0136-9