STICERD Economic Theory Seminars
Relational Contracts: Public versus Private Savings
Daniel Garrett (University of Essex), joint with Francesc Dilme
Thursday 28 May 2020 15:30 - 17:00
Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.
Unless otherwise specified, in-person seminars are open to the public. Please ensure you have informed the event contact as early as possible.
Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.
About this event
We study relational contracting with an agent who has consumption-smoothing preferences as well as the ability to save to defer consumption (or to borrow). Our focus is the comparison of principal-optimal relational contracts in two settings. The first where the agent’s consumption and savings decisions are private, and the second where these decisions are publicly observed. In the first case, the agent smooths his consumption over time, the agent’s effort and payments eventually decrease with time, and the balances on his savings account eventually increase. In the second, the agent consumes earlier than he would like, consumption and the balance on savings fall over time, and effort and payments to the agent increase. Our results suggest a possible explanation for low savings rates in certain industries where compensation often comes in the form of discretionary payments.
Related
Economic Theory Seminars are held on Thursdays in term time at 15:30-17:00, both ONLINE and IN PERSON in SAL 3.05.
Seminar organisers: Dr Andrew Ellis and Dr Christopher Sandmann.
For further information please contact Sadia Ali: s.ali43@lse.ac.uk.
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