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Repeated moral hazard and recursive Lagrangeans

Mele, A (2014) Repeated moral hazard and recursive Lagrangeans Journal of Economic Dynamics and Control.

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Abstract

This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques à la Marcet and Marimon (2011) to problems with hidden actions. The method has many advantages with respect to promised utilities approach (Abreu, Pearce, and Stacchetti (1990)): it is a significant improvement in terms of simplicity, tractability and computational speed. Solutions can be easily computed for hidden actions models with several endogenous state variables and several agents, while the promised utilities approach becomes extremely difficult and computationally intensive even with just one state variable or two agents

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
AuthorsEmailORCID
Mele, AUNSPECIFIEDUNSPECIFIED
Date : 1 May 2014
Identification Number : 10.1016/j.jedc.2014.03.007
Additional Information : © 2014. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Depositing User : Symplectic Elements
Date Deposited : 20 Oct 2015 17:06
Last Modified : 01 May 2016 01:08
URI: http://epubs.surrey.ac.uk/id/eprint/808823

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