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| Author: | Aghion, P. Dewatripont, M. Rey, P. |
| Title: | On partial contracting |
| Journal: | European Economic Review
2002 : APR, VOL. 46:4-5, p. 745-753 |
| Index terms: | Contracts Control |
| Language: | eng |
| Abstract: | This paper investigates contracting situations where giving away some control rights enhances both the donour's and the receiver's incentives to cooperate in the future. The paper defines partial contracting framework with nonverifiable actions for which either control is contractible (contractible control actions) or the right to transfer control ex-post to another party is contractible (transferable control actions). Under incomplete information, when control over particular actions is transferable but not contractible, it can be optimal to give one party the right to transfer control over a particular action to the other party, in order for that party to build a reputation regarding her willingness to cooperate in the future. |
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