Li, Jin and Matouschek, Niko (2013) Managing conflicts in relational contracts. American Economic Review, 103 (6). pp. 2328-2351. ISSN 0002-8282
Full text not available from this repository.Abstract
A manager and a worker are in an infinitely repeated relationship in which the manager privately observes her opportunity costs of paying the worker. We show that the optimal relational contract generates periodic conflicts during which effort and expected profits decline gradually but recover instantaneously. To manage a conflict, the manager uses a combination of informal promises and formal commitments that evolves with the duration of the conflict. Finally, we show that liquidity constraints limit the manager's ability to manage conflicts but may also induce the worker to respond to a conflict by providing more effort rather than less.
| Item Type: | Article |
|---|---|
| Official URL: | http://doi.org/10.1257/aer.103.6.2328 |
| Divisions: | Management |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management |
| Date Deposited: | 10 Oct 2017 10:10 |
| Last Modified: | 17 Feb 2024 00:10 |
| URI: | http://eprints.lse.ac.uk/id/eprint/84532 |
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