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Theoretical Economics
Article . 2024 . Peer-reviewed
License: CC BY NC
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zbMATH Open
Article . 2024
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EconStor
Article . 2024
License: CC BY NC
Data sources: EconStor
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Relational enforcement

Authors: Achim, Peter; Knoepfle, Jan;

Relational enforcement

Abstract

A principal incentivizes an agent to maintain compliance and to truthfully announce any breaches of compliance. Compliance is imperfectly controlled by the agent's private effort choices, is partially persistent, and is verifiable by the principal only through costly inspections. We show that in principal‐optimal equilibria, the principal enforces maximum compliance using deterministic inspections. Periodic inspection cycles are suspended during periods of self‐reported noncompliance, during which the agent is fined. We show how commitment to random inspections would benefit the principal, and discuss possible ways for the principal to overcome her commitment problem.

Country
United Kingdom
Keywords

C73, D83, relational contracts, ddc:330, Principal-agent models, dynamic enforcement, Contract theory (moral hazard, adverse selection), Relational contracts, persistence, costly inspections

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
1
Average
Average
Average
Green
gold