Income Fluctuation and Asymmetric Information: An Example of a Repeated Principal-Agent Problem*

Abstract

We examine a simple repeated principal-agent model with discounting. There are a risk averse borrower with an unobservable random income and a risk neutral lender. The efficient contract is characterized. It tends to the first-best (constant consumption) contract as the discount factor tends to one and the time horizon extends to infinity. I f the time… (More)

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@inproceedings{Thomas1986IncomeFA, title={Income Fluctuation and Asymmetric Information: An Example of a Repeated Principal-Agent Problem*}, author={Jonathan Thomas and Tim Worrall and Martin Cripps and Gareth Myles and Saul Jacka}, year={1986} }