Dynamic costly state verification

Cheng Wang

Economic Theory, 2005, vol. 25, issue 4, 887-916

Abstract: I study a model of dynamic risk sharing with costly state verification (CSV). In the model, a risk neutral agent enters an infinitely repeated relationship with a risk averse agent. In each period, the risk averse agent receives a random income which is observed only by himself, unless the risk neutral agent engages in costly monitoring. I provide a set of characterizations for the optimal contract, and I show that CSV has interesting effects on the long run distribution of the agents’ expected utilities. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Dynamic costly state verification (search for similar items in EconPapers)
Date: 2005
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Working Paper: Dynamic Costly State Verification (2005)
Working Paper: Dynamic Costly State Verification
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DOI: 10.1007/s00199-004-0486-4

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