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Optimal procurement of a credence good under limited liability

Bester, Helmut; Ouyang, Yaofu - 2017

This paper analyzes the optimal contract for a consumer to procure a credence good from an expert when (i) the expert might misrepresent his private information about the consumer’s need, (ii) the expert might not choose the requested service since his choice of treatment is non-observable,...

Persistent link: https://www.econbiz.de/10011781931

Moral Hazard with Limited Liability : Random-Variable Formulation and Optimal Contract Structures

Wang, Wenbin - 2019

This paper studies the optimal contract for a risk-neutral agency with limited liability. We introduce a novel formulation of the model, in which the contract design problem reduces to a problem of constructing the distribution function of a random variable. This formulation directly balances...

Persistent link: https://www.econbiz.de/10012905793

Optimal Contract Under Double Moral Hazard and Limited Liability

Cong, Jiajia - 2020

This paper investigates optimal contracts between risk-neutral parties when both exert efforts and the agent faces limited liability. It is shown that a simple share-or-nothing with bonus contract (SonBo for short) is optimal and implements the second-best outcome, i.e., the best possible...

Persistent link: https://www.econbiz.de/10012834125

Contracting With Synergies

Edmans, Alex; Goldstein, Itay; Zhu, John - C.E.P.R. Discussion Papers - 2013

This paper studies multi-agent optimal contracting with cost synergies. We model synergies as the extent to which … effort by one agent reduces his colleague's marginal cost of effort. An agent's pay and effort depend on the synergies he … exerts, the synergies his colleagues exert on him and, surprisingly, the synergies his colleagues exert on each other. It may …

Persistent link: https://www.econbiz.de/10011083428

Learning, termination, and payout policy in dynamic incentive contracts

DeMarzo, Peter M.; Sannikov, Yuliy - 2016

We study a principal-agent setting in which both sides learn about future profitability from output, and the project can be abandoned/terminated if profitability is too low. With learning, shirking by the agent both reduces output and lowers the principal's estimate of future profitability. The...

Persistent link: https://www.econbiz.de/10011864825

Job Assignments Under Moral Hazard : The Peter Principle Revisited

Koch, Alexander K. - 2011

Inefficient job assignments are usually explained with incomplete information about employees' abilities or contractual imperfections. We show that inefficient assignments arise even with full information about employees' types and complete contracts. Our further results provide a new...

Persistent link: https://www.econbiz.de/10013123052

Contracting with Moral Hazard, Adverse Selection and Risk Neutrality : When Does One Size Fit All?

Balmaceda, Felipe - 2018

This paper studies a principal-agent model in which the principal and agent are risk-neutral, there are two actions, adverse selection, moral hazard and limited liability. When the two actions are subject to moral hazard, there is no distortion at the top, the optimal action profile is downward...

Persistent link: https://www.econbiz.de/10012927852

Double-sided moral hazard, efficiency wages and litigation

Gürtler, Oliver; Kräkel, Matthias - 2007

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifiable performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

Persistent link: https://www.econbiz.de/10010383025

Double-sided moral hazard, efficiency wages and litigation

Gürtler, Oliver (contributor); … - 2007

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifi- able performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

Persistent link: https://www.econbiz.de/10003576494

Salesforce Contracting under Uncertain Demand and Supply : Double Moral Hazard and Optimality of Smooth Contracts

Dai, Tinglong - 2019

We consider the compensation design problem of a firm that hires a salesperson to exert effort to increase demand. We assume both demand and supply to be uncertain, with sales being the smaller of demand and supply, and assume that if demand exceeds supply then unmet demand is unobservable...

Persistent link: https://www.econbiz.de/10012900838