Journal article
Optimal multilateral contracts
Economic theory, Vol.4(2), pp.167-187
03/1994
DOI: 10.1007/BF01221199
Abstract
The purpose of this paper is to derive the structure of optimal multilateral contracts in a costly state verification model with multiple agents who may be risk averse and need not be identical. We consider two different verification technology specifications. When the verification technology is deterministic, we show that the optimal contract is a multilateral debt contract in the sense that the monitoring set is a lower interval. When the verification technology is stochastic, we show that transfers and monitoring probabilities are decreasing functions of wealth. The key economic problem in this environment is that optimal contracts areinterdependent. We are able to resolve this interdependency problem by using abstract measure theoretic tools.
Details
- Title: Subtitle
- Optimal multilateral contracts
- Creators
- Stefan KrasaAnne P Villamil
- Resource Type
- Journal article
- Publication Details
- Economic theory, Vol.4(2), pp.167-187
- DOI
- 10.1007/BF01221199
- ISSN
- 0938-2259
- eISSN
- 1432-0479
- Language
- English
- Date published
- 03/1994
- Academic Unit
- Economics
- Record Identifier
- 9984083204002771
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