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Grouping agents with persistent types

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  • James Malcomson

Abstract

Employees are divided into grades. Toyota places suppliers into only a small number of categories. This paper shows that grouping of privately informed and persistent agent types arises naturally in relational incentive contracts when agent type is continuous. Malcomson (2016) showed that full separation is not possible if, following full revelation of an agent's type, payoffs for principal and agent are on the Pareto frontier.

Suggested Citation

  • James Malcomson, 2021. "Grouping agents with persistent types," Economics Series Working Papers 941 JEL classification: C, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:941
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    File URL: https://ora.ox.ac.uk/objects/uuid:df13589f-aef2-40fa-ba2c-67be95651119
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    Cited by:

    1. W. Bentley MacLeod & James M. Malcomson, 2023. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment: Thirty Years On," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 179(3-4), pages 470-499.

    More about this item

    Keywords

    persistent private information; renegotiation-proofness; type pooling; relational incentive contracts;
    All these keywords.

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