Games 2013, 4(3), 457-496; doi:10.3390/g4030457
Article

Contract and Game Theory: Basic Concepts for Settings with Finite Horizons

Received: 7 April 2013; in revised form: 11 July 2013 / Accepted: 6 August 2013 / Published: 21 August 2013
(This article belongs to the Special Issue Contract Theory)
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract: This paper examines a general model of contract in multi-period settings with both external and self-enforcement. In the model, players alternately engage in contract negotiation and take individual actions. A notion of contractual equilibrium, which combines a bargaining solution and individual incentive constraints, is proposed and analyzed. The modeling framework helps identify the relation between the manner in which players negotiate and the outcome of the long-term contractual relationship. In particular, the model shows the importance of accounting for the self-enforced component of contract in the negotiation process. Examples and guidance for applications are provided, along with existence results and a result on a monotone relation between “activeness of contracting” and contractual equilibrium values.
Keywords: external enforcement; self-enforcement; negotiation; agreements; contractual equilibrium
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MDPI and ACS Style

Watson, J. Contract and Game Theory: Basic Concepts for Settings with Finite Horizons. Games 2013, 4, 457-496.

AMA Style

Watson J. Contract and Game Theory: Basic Concepts for Settings with Finite Horizons. Games. 2013; 4(3):457-496.

Chicago/Turabian Style

Watson, Joel. 2013. "Contract and Game Theory: Basic Concepts for Settings with Finite Horizons." Games 4, no. 3: 457-496.

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