Mele, Antonio (2010): Repeated moral hazard and recursive Lagrangeans.

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Abstract
This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques a la Marcet and Marimon (2009) 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. Several numerical examples illustrate how this methodology outperforms the standard approach.
Item Type:  MPRA Paper 

Original Title:  Repeated moral hazard and recursive Lagrangeans 
Language:  English 
Keywords:  repeated moral hazard; recursive Lagrangean; collocation method 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D86  Economics of Contract: Theory C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C63  Computational Techniques; Simulation Modeling D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D82  Asymmetric and Private Information; Mechanism Design C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61  Optimization Techniques; Programming Models; Dynamic Analysis 
Item ID:  21741 
Depositing User:  Antonio Mele 
Date Deposited:  31. Mar 2010 05:52 
Last Modified:  11. Jan 2014 10:05 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/21741 