| Publication type: | Working paper – expertise – study |
| Title: | A theory of threshold contracts |
| Authors: | Becker, Johannes Gerd Gersbach, Hans |
| DOI: | 10.3929/ethz-a-009978171 |
| Extent: | 62 |
| Issue Date: | 2013 |
| Series: | Economics Working Paper Series |
| Series volume: | 13/182 |
| Publisher / Ed. Institution: | ETH Zürich |
| Publisher / Ed. Institution: | Zürich |
| Language: | English |
| Subjects: | Markovian strategy; Asymmetric information; Commitment; Principal-agent model; Reappointment; Repeated game; Stationary; Threshold contract; Threshold strategy |
| Subject (DDC): | 330: Economics |
| Abstract: | We consider an infinitely repeated reappointment game in a principal–agent relationship. Typical examples are voter–politician or government–public servant relationships. The agent chooses costly effort and enjoys being in office until he is deselected. The principal observes a noisy signal of the agent’s effort and decides whether to reappoint the agent or not. We analyse the stationary Markovian equilibria of this game and examine the consequences of threshold contracts, which forbid reappointment if the principal’s utility is too low. We identify the circumstances under which such threshold contracts are welfare-improving or beneficial for the principal. |
| URI: | https://digitalcollection.zhaw.ch/handle/11475/16033 |
| License (according to publishing contract): | Licence according to publishing contract |
| Departement: | School of Management and Law |
| Organisational Unit: | Institute for Risk & Insurance (IRI) |
| Appears in collections: | Publikationen School of Management and Law |
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Becker, J. G., & Gersbach, H. (2013). A theory of threshold contracts. ETH Zürich. https://doi.org/10.3929/ethz-a-009978171
Becker, J.G. and Gersbach, H. (2013) A theory of threshold contracts. Zürich: ETH Zürich. Available at: https://doi.org/10.3929/ethz-a-009978171.
J. G. Becker and H. Gersbach, “A theory of threshold contracts,” ETH Zürich, Zürich, 2013. doi: 10.3929/ethz-a-009978171.
BECKER, Johannes Gerd und Hans GERSBACH, 2013. A theory of threshold contracts. Zürich: ETH Zürich
Becker, Johannes Gerd, and Hans Gersbach. 2013. “A Theory of Threshold Contracts.” Zürich: ETH Zürich. https://doi.org/10.3929/ethz-a-009978171.
Becker, Johannes Gerd, and Hans Gersbach. A Theory of Threshold Contracts. ETH Zürich, 2013, https://doi.org/10.3929/ethz-a-009978171.
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