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Discounted quotas

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  • Frankel, Alexander

Abstract

This paper extends the concept of a quota contract to account for discounting and for the possibility of infinitely many periods: a discounted quota fixes the number of expected discounted plays on each action. I first present a repeated principal-agent contracting environment in which menus of discounted quota contracts are optimal. I then recursively characterize the dynamics of discounted quotas for an infinitely repeated iid problem. Dynamics are described more explicitly for the limit as interactions become frequent, and for the case where only two actions are available.

Suggested Citation

  • Frankel, Alexander, 2016. "Discounted quotas," Journal of Economic Theory, Elsevier, vol. 166(C), pages 396-444.
    • Handle: RePEc:eee:jetheo:v:166:y:2016:i:c:p:396-444
    DOI: 10.1016/j.jet.2016.08.001
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    More about this item

    Keywords

    Dynamic contracts; Credence goods; Delegation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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