Combinations of Different Length Contracts in a Multiperiod Model: Short, Medium and Long-term Contracts

Meg Adachi-Sato and Kazuya Kamiya
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Meg Adachi-Sato: School of Economics, Finance and Marketing, Royal Melbourne Institute of Technology University

No DP2018-05, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper develops a dynamic contracting model with verifi able and unverifi able outputs. We prove the following properties of equilibrium wage contracts, which are new to the literature: (i) combinations of dfferent length contracts can become equilibria, (ii) medium-term contracts can be included in the combinations, and (iii) equilibrium wage pro le dffers by the way different length contracts are combined. We also investigate a general mechanism, which includes menu and option contracts, and show that no mechanism can perform better than simple wage contracts in our environment. In short, above properties remain valid under general mechanisms.

Keywords: Dffering length contracts; Unverifi able outputs; Unveri fiable investments; Unveri fiable ability; Holdup problems (search for similar items in EconPapers)
JEL-codes: D86 J31 J41 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2018-03
New Economics Papers: this item is included in nep-cta, nep-lma and nep-mic
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