Marina Halac
Ph.D. Candidate
Department of Economics
University of California, Berkeley
Contact information
Department of Economics, UC Berkeley
508-1 Evans #3880
Berkeley, CA 94720-3880
Tel: 510-258-8289
Email: mhalac@econ.berkeley.edu
Curriculum vitae
Fields of interest
Primary: Contract theory, game theory, organizational economics
Secondary: Economics of information, financial economics, international economics
Current research
Abstract. Relational contracts can be used to provide incentives if the future value of a relationship between contracting parties is sufficiently large. But what happens if the relationship's value is not commonly known? This paper studies optimal relational contract design in a principal-agent setting where the principal's outside option is her private information. I show that incentive provision is always less efficient than under symmetric information. The source of the inefficiency depends on the allocation of bargaining power. If the principal has strong bargaining power, the high-outside-option-type wants to mimic the low-outside-option-type to provide strong incentives and then renege and walk away. If the agent has strong bargaining power, the low type wants to mimic the high type to receive a high transfer when the agent proposes compensation. Both types may want to mimic the other type simultaneously under some bargaining power distributions. I characterize when separation of types is optimal, how it occurs in equilibrium, and how this depends on the parties' bargaining positions. Information may be revealed through default or rejection, which may occur immediately or gradually, and may be delayed.
Abstract. The question of how to develop a relationship is central to business and management. This is especially true when the environment is characterized by informational asymmetries and subjectivity, as for example in management consulting. This paper presents a model of relationship building inspired by features of the consultant-client relationship. I develop a model in which the consultant may have private information about the difficulty of the client's problem, and the client has private information about his decision to exert costly, difficulty-reducing effort. Consistent with the evidence, I show that consultants and clients optimally start with low-risk, low-return assignments, and move up to high-risk, high-return assignments over time as they accumulate relationship capital. The probability of conflict and breakup of the relationship due to differences of opinion about the magnitude of the client's problem is decreasing over the course of the relationship, but may jump when the parties switch to a higher-risk assignment. Implications for other relationships are briefly discussed.
Publications
"Financial Globalization, Crises, and Contagion," with S. Schmukler and P. Zoido-Lobaton, in A. Morales (Ed.), International Macroeconomics: Recent Developments, Nova Science Publishers, 2006.
"Distributional Effects of Crises: The Financial Channel," with S. Schmukler, Economia, 5(1), 1-67, 2004.
Teaching
Graduate Game Theory (Econ 201A), Fall 2007, with Prof. Matthew Rabin
Graduate Contract Theory (Econ 201B), Spring 2006, with Prof. Botond Koszegi
Graduate Macroeconomic Theory (Econ 202A), Fall 2005, 2006, with Prof. George Akerlof
References
Prof. Benjamin E. Hermalin (principal advisor), hermalin@econ.berkeley.edu
Prof. Shachar Kariv, kariv@berkeley.edu
