Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 2002, Volume 70, Issue 2

The Time Structure of Self‐Enforcing Agreements

https://doi.org/10.1111/1468-0262.00295
p. 547-582

Debraj Ray

A principal and an agent enter into a sequence of agreements. The principal faces an interim participation constraint at each date, but can commit to the current agreement; in contrast, the agent has the opportunity to renege on the current agreement. We study the time structure of agreement sequences that satisfy participation and no‐deviation constraints and are (constrained) efficient. We show that every such sequence must, after a finite number of dates, exhibit a continuation that maximizes the payoff over all such efficient, self‐enforcing sequences. Additional results are provided for situations with transferable payoffs.


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