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