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The Ratchet Effect Re-examined: A Learning Perspective

Bhaskar, Venkataraman - C.E.P.R. Discussion Papers - 2014

We study dynamic moral hazard where principal and agent are symmetrically uncertain about job difficulty. Since effort is unobserved, shirking leads the principal to believe that the job is hard, increasing the agent's continuation value. So deterring shirking requires steeper incentives, which...

Persistent link: https://www.econbiz.de/10011083528

Dynamic Moral Hazard, Learning and Belief Manipulation

Bhaskar, Venkataraman - C.E.P.R. Discussion Papers - 2012

We study dynamic moral hazard, with symmetric ex ante uncertainty and learning. Unlike Holmstrom's career concerns model, uncertainty pertains to the difficulty of the job rather than the general talent of the agent, so that contracts are required to provide incentives. Since effort is privately...

Persistent link: https://www.econbiz.de/10011083746

Credence Goods, Costly Diagnosis, and Subjective Evaluation

Bester, Helmut; Dahm, Matthias - C.E.P.R. Discussion Papers - 2014

We study contracting between a consumer and an expert. The expert can invest in diagnosis to obtain a noisy signal about whether a low-cost service is sufficient or whether a high-cost treatment is required to solve the consumer’s problem. This involves moral hazard because diagnosis effort...

Persistent link: https://www.econbiz.de/10011084241

Bonus Culture: Competitive Pay, Screening, and Multitasking

Bénabou, Roland; Tirole, Jean - C.E.P.R. Discussion Papers - 2013

This paper analyzes the impact of labor market competition and skill-biased technical change on the structure of compensation. The model combines multitasking and screening, embedded into a Hotelling-like framework. Competition for the most talented workers leads to an escalating reliance on...

Persistent link: https://www.econbiz.de/10011083769

Adverse Selection and Moral Hazard in Anonymous Markets

Klein, Tobias; Lambertz, Christian; Stahl, Konrad - C.E.P.R. Discussion Papers - 2013

We study the effects of improvements in eBay's rating mechanism on seller exit and continuing sellers' behavior. Following a large sample of sellers over time, we exploit the fact that the rating mechanism was changed to reduce strategic bias in buyer rating. That improvement did not lead to...

Persistent link: https://www.econbiz.de/10011084388

Contracting under Incomplete Information and Social Preferences: An Experimental Study

Hoppe, Eva I; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2013

cornerstone of contract theory. We have conducted an experiment with 720 participants to explore whether the theoretical insights … are reflected by the behavior of subjects in the laboratory and to what extent deviations from standard theory can be … agency theory is indeed useful to qualitatively predict how variations in the degree of uncertainty affect subjects' behavior …

Persistent link: https://www.econbiz.de/10011084433

Gathering Information before Signing a Contract: Experimental Evidence

Hoppe, Eva I; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2009

A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the … report about an experiment with 508 participants designed to test whether this fundamental trade-off is actually relevant. In … particular, we investigate settings with both exogenous and endogenous information structures. We find that theory is indeed a …

Persistent link: https://www.econbiz.de/10005789080

Public Procurement in Times of Crisis: The Bundling Decision Reconsidered

Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2013

The government wants two tasks to be performed. In each task, unobservable effort can be exerted by a wealth-constrained private contractor. If the government faces no binding budget constraints, it is optimal to bundle the tasks. The contractor in charge of both tasks then gets a bonus payment...

Persistent link: https://www.econbiz.de/10011084088

Delegation and Incentives

Bester, Helmut; Krähmer, Daniel - C.E.P.R. Discussion Papers - 2007

This paper analyses the relation between authority and incentives. It extends the standard principal--agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority. The agent's subsequent choice of effort depends both...

Persistent link: https://www.econbiz.de/10005661941

Optimal Incentive Contracts under Moral Hazard When the Agent is Free to Leave

Englmaier, Florian; Muehlheusser, Gerd; Roider, Andreas - C.E.P.R. Discussion Papers - 2010

We characterize optimal incentive contracts in a moral hazard framework extended in two directions. First, after effort provision, the agent is free to leave and pursue some ex-post outside option. Second, the value of this outside option is increasing in effort, and hence endogenous. Optimal...

Persistent link: https://www.econbiz.de/10008554231