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The Time Structure of Self‐Enforcing Agreements
Author(s) -
Ray Debraj
Publication year - 2002
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.1111/1468-0262.00295
Subject(s) - continuation , commit , sequence (biology) , interim , stochastic game , constraint (computer aided design) , principal (computer security) , computer science , mathematical optimization , mathematical economics , mathematics , history , geometry , archaeology , database , biology , genetics , programming language , operating system
A principal and an agent enter into a sequence of agreements. The principal faces an interim participation constraint at each date, but can commit to the current agreement; in contrast, the agent has the opportunity to renege on the current agreement. We study the time structure of agreement sequences that satisfy participation and no‐deviation constraints and are (constrained) efficient. We show that every such sequence must, after a finite number of dates, exhibit a continuation that maximizes the agent's payoff over all such efficient, self‐enforcing sequences. Additional results are provided for situations with transferable payoffs.