Sticking to Plans in Organizations

with Luis Zermeno

In an organization with differentially patient individuals, a sequence of optimal short-term contracts is renegotiation-proof and therefore time-consistent, whereas an optimal long-term contract is not, even in a symmetric-information environment. Ambitious long-term plans therefore have the potential create value relative to short-term plans but may be difficult to implement, as near-sighted interests may hinder their implementation.