Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320259 
Year of Publication: 
2024
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 19 [Issue:] 3 [Year:] 2024 [Pages:] 1027-1055
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
We study a repeated principal-agent model with transferable utility, where the principal's evaluation of the agent's performance is subjective. Our focus is on equilibria which are robust to the addition of small privately observed shocks to the payoffs. Existing constructions of positive-effort equilibria are not robust to such payoff shocks. Allowing for simultaneous cheap-talk announcements makes some effort sustainable in a robust equilibrium, and payoffs can be arbitrarily close to fully efficient ones if players are sufficiently patient. In contrast to the existing literature, our near-efficient equilibria exhibit realistic features: the bonus size is reasonable, the threshold for being paid a bonus is non-trivial, and the base wage need not be negative.
Subjects: 
Private monitoring
repeated games
relational contracts
JEL: 
C73
D86
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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