Relational Contracts with Private Information on the Future Value of the Relationship: The Upside of Implicit Downsizing Costs

• 成果类型: Article
• 署名作者: Fahn, Matthias; Klein, Nicolas
• 署名单位: Johannes Kepler University Linz; Johannes Kepler University Linz; Leibniz Association; Ifo Institut; Universite de Montreal; Universite de Montreal
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20170294
• 发表日期: 2019
• 页码: 33-58
• 关键词: firm performance; EMPLOYMENT

摘要

We analyze a relational-contracting problem, in which the principal has private information about the future value of the relationship. In order to reduce bonus payments, the principal is tempted to claim that the value of the future relationship is lower than it actually is. To induce truth-telling, the optimal relational contract may introduce distortions after a bad report. For some levels of the discount factor, output is reduced by more than would be sequentially optimal. This distortion is attenuated over time even if prospects remain bad. Our model thus provides an alternative explanation for indirect short-run costs of downsizing.