Relational Incentive Contracts

S-Tier
Journal: American Economic Review
Year: 2003
Volume: 93
Issue: 3
Pages: 835-857

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced. This paper studies the design of self-enforced relational contracts. I show that optimal contracts often can take a simple stationary form, but that self-enforcement restricts promised compensation and affects incentive provision. With hidden information, it may be optimal for an agent to supply the same inefficient effort regardless of cost conditions. With moral hazard, optimal contracts involve just two levels of compensation. This is true even if performance measures are subjective, in which case optimal contracts terminate following poor performance.

Technical Details

RePEc Handle
repec:aea:aecrev:v:93:y:2003:i:3:p:835-857
Journal Field
General
Author Count
1
Added to Database
2026-01-25