Marcet, Albert and Marimon, Ramon (2011) Recursive contracts. CEP Discussion Papers (CEPDP1055). London School of Economics and Political Science. Centre for Economic Performance, London, UK.
![]() |
Text
- Published Version
Download (443kB) |
Abstract
We obtain a recursive formulation for a general class of contracting problems involving incentive constraints. These constraints make the corresponding maximization (sup) problems non recursive. Our approach consists of studying a recursive Lagrangian. Under standard general conditions, there is a recursive saddle-point (infsup) functional equation (analogous to a Bellman equation) that characterizes the recursive solution to the planner's problem and forward-looking constraints. Our approach has been applied to a large class of dynamic contractual problems, such as contracts with limited enforcement, optimal policy design with implementability constraints, and dynamic political economy models.
Item Type: | Monograph (Discussion Paper) |
---|---|
Official URL: | https://cep.lse.ac.uk/_new/publications/discussion... |
Additional Information: | © 2011 The Author(s) |
Divisions: | Centre for Economic Performance |
Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory |
JEL classification: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks |
Date Deposited: | 22 Feb 2024 16:09 |
Last Modified: | 16 May 2024 12:34 |
URI: | http://eprints.lse.ac.uk/id/eprint/121737 |
Actions (login required)
![]() |
View Item |