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We study mechanism design under endogenously incomplete commitment as it arises in contracting with escape clauses. An escape clause permits the agent to end a contractual relationship under specified circumstances, after which the principal can offer an ex-post contract. Escape clauses are...
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has decision-relevant private information, and the party who obtains authority decides in a self-interested way. As a … novel element in the literature on decision rights, we consider exit option contracts: the party without decision rights is …
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