Commitment and discretion in contracts: theory and evidence from retirement plans* Journal Article uri icon



  • AbstractWe consider a firm's problem of incentivizing its workforce through relational contracts, when workers effectively face a shorter time horizon due to possible separation shocks. Commitment issues then generate a trade‐off between efficiency and distribution, which affects both performance and profits. Profits under relational contracting can exceed those under formal contracting, despite lower performance, when discounting is moderate, firm bargaining power is weak, and shocks are likely. Using a matched employer–retirement plan dataset, and interpreting discretionary profit‐sharing plans and employee stock ownership plans as relational and formal contracting, respectively, we find some support for our predictions.

publication date

  • April 1, 2023

has restriction

  • hybrid

Date in CU Experts

  • January 8, 2023 2:42 AM

Full Author List

  • Kim J; Vikander N

author count

  • 2

Other Profiles

International Standard Serial Number (ISSN)

  • 0347-0520

Electronic International Standard Serial Number (EISSN)

  • 1467-9442

Additional Document Info

start page

  • 461

end page

  • 488


  • 125


  • 2