This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 99 No. 5 (December 2009)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Endogenous Verifiability and Relational Contracting

Article Citation

Kvaløy, Ola, and Trond E. Olsen. 2009. "Endogenous Verifiability and Relational Contracting." American Economic Review, 99(5): 2193-2208.

DOI: 10.1257/aer.99.5.2193

Abstract

Principal-agent models usually invoke the strong assumption that the parties know for sure ex ante whether a variable is verifiable or not. This paper assumes that only the probability of verification is known, and that this probability is endogenously determined. We analyze a principal-agent relationship where the verifiability of the agent's output is determined by the principal's investment in drafting an explicit contract. The model is well suited for analyzing the relationship between explicit contracting, legal courts, trust, and relational contracting. In particular, we show how trust -- established through repeated interaction -- and legal courts may induce contractual incompleteness. (JEL D82, D86)

Article Full-Text Access

Full-text Article

Authors

Kvaløy, Ola (U Stavanger)
Olsen, Trond E. (Norwegian School of Economics and Business Administration)

JEL Classifications

D82: Asymmetric and Private Information
D86: Economics of Contract: Theory


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us