On partial contracting

Mathias Dewatripont, Philippe Aghion and Patrick Rey

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: This paper investigates contracting situations where giving away some control rights enhances both the donor's and the receiver's incentives to cooperate in the future. We define a partial contracting framework with nonverifiable actions for which either control is contractible (contractible control actions) or the right to transfer control ex post to another party is contractible (transferable control actions). Under incomplete information, when control over particular actions is transferable but not contractible, it can be optimal to give one party the right to transfer control over a particular action to the other party, in order for that party to build a reputation regarding her willingness to cooperate in the future. © 2002 Elsevier Science B.V. All rights reserved.

Keywords: Contractible control; Nonverifiable actions; Partial contracting; Transferable control (search for similar items in EconPapers)
Date: 2002
Note: SCOPUS: ar.j
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Citations: View citations in EconPapers (32)

Published in: European Economic Review (2002),p.745-753

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