Repeated Contracting in Decentralised Markets

Sambuddha Ghosh and Seungjin Han

Department of Economics Working Papers from McMaster University

Abstract: We consider a model where multiple principals repeatedly offer short-term contracts to three or more agents with private information. Under low discounting there exists a simple class of mechanisms that sustains all equilibrium allocations that could be generated by arbitrarily complex mechanisms. This equivalence result leads to a simple algorithm for computing equilibrium payoffs; this contrasts with the one-shot setting, where closed form expressions of such payoffs do not exist. Endogenous monitoring by agents weakens incentive compatibility relative to one-shot contracting; this lowers minmax values, expanding the set of equilibrium payoffs.

Keywords: relational contracts; repeated contracting; competing mechanisms; folk theorems; endogenous monitoring (search for similar items in EconPapers)
JEL-codes: C73 D82 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2012-04, Revised 2013-05
New Economics Papers: this item is included in nep-cta and nep-gth
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Related works:
Working Paper: Repeated Contracting in Decentralised Markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2012-03

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