Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185763
Authors: 
Mettral, Thomas
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper No. 93
Abstract: 
I show that deterministic dynamic contracts between a principal and an agent are always at least as profitable to the principal as stochastic ones, if the so-called first-order approach in dynamic mechanism design is satisfied. The principal commits, while the agent\'s type evolution follows a Markov process. My results demonstrate, even when allowing for potential correlation of stochastic contracts across periods that the usual restriction in the literature to deterministic contracts is admissible, as long as the first-order approach is valid.
Subjects: 
contract theory
principal-agent theory
dynamic contracting
JEL: 
D82
D86
Document Type: 
Working Paper

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