Dynamic Incentive Contracts with Uncorrelated Private Information and History Dependent Outcomes

Gérard Gaudet, Pierre Lasserre and Ngo Long

CIRANO Working Papers from CIRANO

Abstract: In existing papers on dynamic incentive contracts, the dynamic structure of the principal-agent relationship arises exclusively from the ability of the principal to learn about the hidden information over time. In this paper we deal with a different source of dynamics, which is considered standard in all areas of economics other than the information literature: we study situations where current opportunities depend on past and current actions, notwithstanding any information conveyed by the actions. Standard examples include investment, Learning by doing, and R&D. In order to focus on this neglected source of dynamics, we restrict our attention to situations involving asymmetric information in each period, but without any intertemporal informational correlation, so that no dynamic effect arises from informational asymmetries directly. This makes comparisons with static results both easier and more interesting. La dynamique des modèles actuels de contrats incitatifs provient de la capacité du principal, à partir des actions observées dans le présent, d'apprendre quelque chose sur l'information qui ne lui sera pas directement accessible dans le futur. Nous étudions ici une autre source de dynamique, négligée dans la littérature sur l'information0501s standard dans toutes les autres branches de la science économique, et qui résulte du fait que les actions courantes définissent les opportunités futures. C'est ce qui se passe lorsqu'il y a investissement, apprentissage, R-D, etc. Pour bien identifier les propriétés dynamiques résultant de ce type de situations dans les modèles de principal-agent avec information asymétrique, nous nous en tenons à des modèles où il n'y a aucune corrélation entre information présente et information future, si bien qu'aucun effet dynamique ne résulte directement de l'asymétrie d'information.

Keywords: Incentive contracts; Dynamic; Asymmetric information; Principal agent relationship; Investment; Learning by doing; Contrats incitatifs; Dynamique; Information asymétrique; Relation principal-agent; Investissement; Learning by doing. (search for similar items in EconPapers)
Date: 1995-09-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cirano.qc.ca/files/publications/95s-37.pdf

Related works:
Journal Article: DYNAMIC INCENTIVE CONTRACTS WITH UNCORRELATED PRIVATE INFORMATION AND HISTORY-DEPENDENT OUTCOMES (1996)
Working Paper: Dynamic Incentive Contracts with Uncorrelated Private Information and History Dependent Outcomes (1993)
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:cir:cirwor:95s-37

Access Statistics for this paper

More papers in CIRANO Working Papers from CIRANO Contact information at EDIRC.
Bibliographic data for series maintained by Webmaster ().