Relational contracts, limited liability, and employment dynamics

• 成果类型: Article
• 署名作者: Fong, Yuk-fai; Li, Jin
• 署名单位: Hong Kong University of Science & Technology; Northwestern University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2017.02.006
• 发表日期: 2017
• 页码: 270-293
• 关键词: Relational contracts; limited liability; efficiency wages

摘要

This paper studies a relational contracting model in which the agent is protected by a limited liability constraint. The agent's effort is his private information and affects output stochastically. We characterize the optimal relational contract and compare the dynamics of the relationship with that under the optimal long-term contract. Under the optimal relational contract, the relationship is less likely to survive, and the surviving relationship is less efficient. In addition, relationships always converge to a steady state under the optimal long-term contract, but they can cycle among different phases under the optimal relational contract. (C) 2017 Elsevier Inc. All rights reserved.