Econometrica: Jul 2015, Volume 83, Issue 4

Impatience versus Incentives
p. 1601-1617

M. M. Opp and J. Y. Zhu

This paper studies the dynamics of long‐term contracts in repeated principal–agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto‐optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.

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