Repeated moral hazard with effort persistence
No 08-04, Working Paper from Federal Reserve Bank of Richmond
I study a problem of repeated moral hazard in which the effect of effort is persistent over time: each period's outcome distribution is a function of a geometrically distributed lag of past efforts. I show that when the utility of the agent is linear in effort, a simple rearrangement of terms in his lifetime utility translates this problem into a related standard repeated moral hazard. The solutions for consumption in the two problems are observationally equivalent, implying that the main properties of the optimal contract remain unchanged with persistence. To illustrate, I present the computed solution of an example. ; See also: WP 07-07
Keywords: Economics; Microeconomics (search for similar items in EconPapers)
Date: 2008, Revised 2008
New Economics Papers: this item is included in nep-bec, nep-cta and nep-hpe
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Journal Article: Repeated moral hazard with effort persistence (2010)
Working Paper: Repeated Moral Hazard with Effort Persistence (2005)
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