Econometrica 70, 547–582, 2002.
Summary. A principal and an agent enter into a sequence of agreements. The principal faces an interim participation constraint at each date, but can commit to the current agreement; in contrast, the agent has the opportunity to renege on the current agreement. We show that every constrained efficient sequence must, after a finite number of dates, exhibit a continuation that maximizes the agent’s payoff over all such sequences.
(with Bhaskar Dutta and Sayantan Ghosal), Journal of Economic Theory 122, 143 – 164, 2005.
Summary. This paper studies a model of dynamic network formation when individuals are farsighted: players evaluate the desirability of a “current” move in terms of its consequences on the entire discounted stream of payoffs. We define a concept of equilibrium which takes into account farsighted behavior of agents and allows for limited cooperation amongst agents.
(with Parikshit Ghosh), Economica 83, 59–90, 2016.
Summary. We study loan enforcement in informal credit markets with multiple lenders but no sharing of credit histories, and derive the dynamics of loan size and interest rates for relational lending. In the presence of a sufficient fraction of ‘natural defaulters’, the rest of the market can be incentivized against default by micro-rationing—sharper credit limits and possibly higher interest rates that serve as gateways into new borrowing relationships. When there are too few natural defaulters in the market, this can be supplemented by macro-rationing—random exclusion of some borrowers. When information collection is endogenized, multiple equilibria may arise. (Published version of unpublished notes from 2001.)