Chakrabarti, Subir K.Kim, Jaesoo2024-01-102024-01-102023-04Chakrabarti, S. K., & Kim, J. (2023). Optimal equilibrium contracts in the infinite horizon with no commitment across periods. Theory and Decision, 94(3), 379–404. https://doi.org/10.1007/s11238-022-09894-9https://hdl.handle.net/1805/37947The paper studies equilibrium contracts under adverse selection when there is repeated interaction between a principal and an agent over an infinite horizon, without commitment across periods. We show the second-best contract is offered in a perfect Bayesian equilibrium of the infinite horizon model. Unlike the equilibrium contracts in the finite-horizon, the equilibrium contracts in the infinite horizon are not subject to either the ratchet effect or take-the-money-and-run strategy, but rely on a carrot and stick strategy. We study two important applications, one of which is about the optimal regulation of a publicly-held firm. This application has a mixture of both moral hazard and adverse selection. The other application is to the problem of optimal nonlinear pricing when the valuation of the buyers are drawn from a continuum.en-USPublisher PolicyAdverse SelectionGames with incomplete informationOptimal Contracts with CommitmentPooling ContractsSeparating ContractsPerfect Bayesian EquilibriumOptimal Contracts with No commitmentArticle