Essays in Contract Theory

Essays in Contract Theory

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In the third essay, we propose a repeated adverse selection model where the principal hires two agents to implement some policies in two regions. In each region, there is a local party which can bribe the agent to affect the policy implementation. We show that in each period there exist multiple optimal contracts which differ only in how information rents are distributed within a coalition. The multiplicity of optimal contracts allows the principal to pre-commit to some implicit distribution rules for the next period. We show that if the principal can commit to mandatory job rotation, then the expected payoff of the principal can be improved by manipulating the implicit distribution rules appropriately. On the other hand, mandatory job rotation is costly because the gain from local experience is forfeited. Whether mandatory job rotation policy is desirable depends on the tradeoff between these benefits and costs.Abstract This dissertation consists of three essays on topics of contract theory. In the first paper essay, we propose a theory to explain how evidence-based ruling affects incentive contract formation and welfare. Rulings are evidence-based ifanbsp;...

Title:Essays in Contract Theory
Author: Fei-Lung Tzang
Publisher:ProQuest - 2008

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