Ferdinando Colombo, Guido Merzoni

Reputazione, flessibilità e durata ottima dei contratti

  • Abstract

Informations and abstract


We study the optimal length of a delegation contract in an incomplete information model where an agent plays a (possibly) repeated game on behalf of his principal. A short-term contract provides the principal with the flexibility to replace an agent who has proved not to be suitable for his job, while a long-term contract allows the agent to build a reputation for being trustworthy in his relationships with third parties. When contracts are renewable, the relationship between principal and agent may sometimes turn out to be stable even with short-term contracts. In this paper we show that this implies a non-monotonic relation between the importance of reputation and the optimal length of delegation contracts. In particular, in games where reputation is very important, short-term delegation contracts can be optimal. The implications of our analysis are illustrated by means of a few examples: the problem of credibility in the management of monetary policy, vertical relationships within firms, the strategic interactions between lenders and borrowers.

Trova nel catalogo di Worldcat

Article first page

Article first page