Limited observability as a constraint in contract design

• 成果类型: Article
• 署名作者: Krasa, Stefan; Williams, Steven R.
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2006.01.008
• 发表日期: 2007
• 页码: 379-404
• 关键词: limited observability; bounded rationality; contractual incompleteness

摘要

Limited observability is the assumption that economic agents can only observe a finite amount of information. Given this constraint, contracts among agents are necessarily finite and incomplete in comparison to the ideal complete contract that we model as infinite in detail. We consider the extent that finite contracts can approximate a complete contract. The objectives of the paper are: (i) to identify properties of agents' preferences that determine whether or not finiteness of contracts causes significant inefficiency; (ii) to evaluate the performance of finite contracts against the ideal optimal contract in a bilateral bargaining model. (c) 2006 Elsevier Inc. All rights reserved.