Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/46654 
Year of Publication: 
2005
Series/Report no.: 
UPSE Discussion Paper No. 2005,07
Publisher: 
University of the Philippines, School of Economics (UPSE), Quezon City
Abstract: 
We explore how the structure of incentives contracts adjusts to the creation of quasi-rents by the delivery of certain types of contract obligations under weak third party enforcement (TPE). The situation invites quasi-rent appropriation by some contractor. We focus on possible ex-post opportunism by the principal. We propose the concept of globally incentives compatible (GIC) contracts, where no contractor has the incentive to deviate ex-post from the obligations set ex-ante in the contract. We model optimal appropriation by the principal and the response of the agent when the contract is not GIC. The conditions that guarantee GIC for principal-agent the incentives contracts under weak TPE are investigated.
Subjects: 
global incentives compatibility
quasi-rent
third party enforcement incentives contract
Document Type: 
Working Paper

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