Costly monitoring, dynamic incentives, and default

• 成果类型: Article
• 署名作者: Antinolfi, Gaetano; Carli, Francesco
• 署名单位: Washington University (WUSTL); Universidade Catolica Portuguesa; Deakin University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2015.05.011
• 发表日期: 2015
• 页码: 105-119
• 关键词: Costly state verification; default; monitoring; dynamic contracts; moral hazard

摘要

We study dynamic contracts between a lender and a borrower in the presence of costly state verification and hidden effort. We prove three results. Costly monitoring is employed by the lender to optimally limit history dependence and prevent future inefficient termination of the relationship. Due to interaction between costly monitoring and dynamic incentives, the probability of monitoring may fail to be monotone in the borrower's reservation utility. Finally, following the interpretation of the costly state verification literature, we distinguish two levels of bankruptcy: one associated with restructuring and the other with liquidation. (C) 2015 Elsevier Inc. All rights reserved.