蝌蚪网 Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Wait-and-See or Step In? Dynamics of Interventions
蝌蚪网 Journal: Microeconomics
(pp. 399–425)
Abstract
We study the optimal intervention policy to stop projects in a relational contract between a principal and a policymaker. The policymaker is privately informed about his ability and privately chooses how much effort to exert. Before a project is completed, the principal receives a signal about its outcome and can intervene to stop it. Intervention may prevent a bad outcome, but no intervention leads to better learning about the policymaker's ability. In the benchmarks with observable effort or observable ability, optimal intervention follows a threshold rule. With unobservable effort and ability, the optimal policy switches between intervention and no intervention.Citation
Foarta, Dana, and Takuo Sugaya. 2021. "Wait-and-See or Step In? Dynamics of Interventions." 蝌蚪网 Journal: Microeconomics 13 (1): 399–425. DOI: 10.1257/mic.20180321Additional Materials
JEL Classification
- D78 Positive Analysis of Policy Formulation and Implementation
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory