haku: @journal_id 1399 / yhteensä: 95
viite: 77 / 95
| Tekijä: | Sen, A. |
| Otsikko: | Termination clauses in long-term contracts |
| Lehti: | Journal of Economics and Management Strategy
1996 : WINTER, VOL. 5:4, p. 473-496 |
| Asiasana: | ECONOMICS MANAGEMENT STRATEGY |
| Kieli: | eng |
| Tiivistelmä: | Many long-term contracts incorporate a termination clause. This paper argues that when agents have hidden information , such a clause has a beneficial incentive effect - it enables a principal to screen agent's private information at a lower cost. In a two-period model, this paper characterizes the optimal long-term contract with a termination clause, which specifies that the principal will switch agents in the second period when the first-period cost is high. The analysis delineates how the optimality of this clause depends on the intertemporal cost correlation structure , on the limits to agents' liability, and on the principal's degree of commitment. |
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