Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171625
Authors: 
Becker, Johannes Gerd
Gersbach, Hans
Year of Publication: 
2013
Series/Report no.: 
Economics Working Paper Series 13/182
Abstract: 
We consider an in nitely 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.
Subjects: 
principal-agent model
repeated game
reappointment
stationary Markovian strategies
threshold strategies
threshold contracts
asymmetric information
commitment
JEL: 
C83
D82
D86
H11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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