Learning in Relational Contracts
American Economic Journal: Microeconomics
vol. 14,
no. 1, February 2022
(pp. 284-329)
Abstract
We study relational contracts between a firm and a worker with mutual uncertainty about match quality. The worker's actions are publicly observed and generate both output and information about the match quality. We show that the relational contracts may be inefficient. We characterize the inefficiency through a holdup problem on the contemporaneous output. In the frequent action limit, these inefficiencies persist if and only if information degrades at least at the same rate at which impatience vanishes. We characterize optimal relational contracts and show that they involve actions that yield both a lower payoff and less information than another action.Citation
Kostadinov, Rumen, and Aditya Kuvalekar. 2022. "Learning in Relational Contracts." American Economic Journal: Microeconomics, 14 (1): 284-329. DOI: 10.1257/mic.20190203Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- D86 Economics of Contract: Theory
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials
- J41 Labor Contracts
- J63 Labor Turnover; Vacancies; Layoffs
There are no comments for this article.
Login to Comment