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Essays on relational contracts

Ishihara, Akifumi (2011) Essays on relational contracts. PhD thesis, London School of Economics and Political Science.

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This dissertation contains three essays on self-enforcing implicit contracts in economic transactions and politics. Chapter 2 studies a repeated agency model with two tasks where the agent has private information on the first task and there is no verifiable performance signal for the second task. The equilibrium level of the first task is determined so as to guarantee the credibility of the relational contracts to provide incentives for the second task. It implies interesting economic results including non-monotonic relation between the discount factor and the total surplus, social desirability of unverifiability, and implications for organization design. Chapter 3 studies a model of political contribution of dynamic common agency where state-contingent agreements must be self-enforced. First, we investigate the punishment strategy for supporting the self-enforcing mechanism. The most severe punishment strategy on the principals takes the form of a two-phase scheme in general. Second, we characterize the payoff set of the equilibria on which the same decision is chosen by the agent through implicit agreements and examine whether it can achieve the same payoff as in the standard static menu auction model. It implies that there could be an equilibrium outcome in a static menu auction that cannot be supported in our model for any discount factor. Chapter 4 studies repeated political competition with policy-motivated citizen candidates. The dynamic relationship could cause strategic candidacy in two-candidate competition, such as in circumstances where two candidates stand for election and one of them has no chance to win. The candidate can choose her implementing policy depending on the set of the rival candidates in the election and the rival candidate actually has an incentive to stand even with no chance to win since it can induce policy compromises from the winning candidate.

Item Type: Thesis (PhD)
Additional Information: © 2011 Ishihara Akifumi
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Felli, Leonardo and Prat, Andrea

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