Implicit Contracts: Two Different Approaches
نویسنده
چکیده
In this paper, I compare two di¤erent approaches to model implicit contracting, the in nite-horizon approach typically used in the literature and a nite-horizon approach building on an adverse-selection model. I demonstrate that even the most convincing result of the in nite-horizon approach, namely that implicit contracting is improved, if the discount rate is lowered, does not carry over to the alternative modeling approach. Predictions of the rst approach should therefore be handled with care and subject to a thorough reinvestigation. Key words: Trust, nite horizon, in nite horizon, discounting, implicit contracting JEL classi cation: D82, D83, J33, M52 Financial support by the Deutsche Forschungsgemeinschaft (DFG), SFB-TR 15 (Governance and the e¢ ciency of economic systems), is gratefully acknowledged. Oliver Gürtler, Department of Economics, BWL II, University of Bonn, Adenauerallee 24-42, D-53113 Bonn, Germany. Tel.:+49-228-739214, Fax:+49-228-739210; E-mail: [email protected]
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