Brown, Pamela Clark; Miller, Jeffrey B; Thornton, James R - In: Economica 61 (1994) 241, pp. 93-114
The ratchet is used frequently in incentive schemes even though the resulting ratchet effect is costly. Using a two-period, two-type, principal-agent model where the information asymmetry does not cause adverse selection or moral hazard, the authors show that, when coordination costs and the...