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: Sep, 1981, Volume 49, Issue 5

Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship<1127:MCAIAR>2.0.CO;2-T
p. 1127-1148

Roy Radner

The situation in which a principal-agent relationship is repeated finitely many times (T) is formulated as a sequential game. For any Pareto-optimal cooperative arrangement in the one-period game that dominates a one-period Nash equilibrium, and any positive number epsilon, there exists for every sufficiently large T a (noncooperative) epsilon equilibrium of the T-period game that yields each player an average expected utility that is at least his expected utility in the one-period cooperative arrangement, less epsilon.

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