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Moral Hazard and Bargaining over Incentive Contracts

Dittrich, Marcus; Städter, Silvio - CESifo - 2014

This paper analyses bargaining over an incentive compatible contract in a moral hazard framework. We introduce the Kalai-Smorodinsky bargaining solution and compare the outcome with the commonly applied Nash solution. Whether worker’s effort is higher in the Nash or the Kalai-Smorodinsky...

Persistent link: https://www.econbiz.de/10010877973

How to Deal with Covert Child Labour, and Give Children an Effective Education, in a Poor Developing Country: An Optimal Taxation Problem with Moral Hazard

Cigno, Alessandro - CESifo - 2010

Given that credit and insurance markets are imperfect, and given also that intra-household transfers, and much of the work a child does, are private information, the second-best policy uses a combination of need and merit based education awards, together with a mix of taxes on parental income,...

Persistent link: https://www.econbiz.de/10008596586

Optimal Student Loans and Graduate Tax under Moral Hazard and Adverse Selection

Gary-Bobo, Robert J.; Trannoy, Alain - CESifo - 2013

We completely characterize the set of second-best optimal “menus”of student-loan contracts in a simple economy with risky labour-market outcomes, adverse selection, moral hazard and risk aversion. The model combines structured student loans and an elementary optimal income-tax problem à la...

Persistent link: https://www.econbiz.de/10010668475

Incentive Contracts and Efficient Unemployment Benefits

Demougin, Dominique; Helm, Carsten - CESifo - 2009

Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyze this issue in a principal-agent model, focusing on unemployment levels and labor productivity. In our model, a higher...

Persistent link: https://www.econbiz.de/10004979416

Scholarships or Student Loans? Subsidizing Higher Education in the Presence of Moral Hazard

Cigno, Alessandro; Luporini, Annalisa - CESifo - 2003

Student loans, even income-contingent ones, are not optimal. Potential university students with the appropriate characteristics should be offered a scholarship, dependent on both need and merit. The award of the scholarship should be conditional on the choice of university degree, but students...

Persistent link: https://www.econbiz.de/10005196264

Market Competition and Lower Tier Incentives

Theilen, Bernd - CESifo - 2008

The relationship between competition and performance-related pay has been analyzed in single-principal-single-agent models. While this approach yields good predictions for managerial pay schemes, the predictions fail to apply for employees at lower tiers of a firm’s hierarchy. In this paper, a...

Persistent link: https://www.econbiz.de/10005405811

Employee Referral, Social Proximity and Worker Discipline: Theory and Evidence from India

Dhillon, Amrita; Iversen, Vegard; Torsvik, Gaute - CESifo - 2013

We study an important mechanism underlying employee referrals into informal low skilled jobs in developing countries. Employers can exploit social preferences between employee referees and potential workers to improve discipline. The profitability of using referrals increases with referee stakes...

Persistent link: https://www.econbiz.de/10010674452

Second-Degree Moral Hazard in a Real-World Credence Goods Market

Balafoutas, Loukas; Kerschbamer, Rudolf; Sutter, Matthias - CESifo - 2013

Empirical literature on moral hazard focuses exclusively on the direct impact of asymmetric information on market outcomes, thus ignoring possible repercussions. We present a field experiment in which we consider a phenomenon that we call second-degree moral hazard – the tendency of the supply...

Persistent link: https://www.econbiz.de/10010706004

Optimal Incentive Contracts For a Worker Who Envies His Boss

Dur, Robert; Glazer, Amihai - CESifo - 2004

A worker’s utility may increase in his own income, but envy can make his utility decline with his employer’s income … various assumptions about the object and generality of envy. Envy amplifies the effect of incentives on effort and, therefore …, increases optimal incentive pay. Moreover, envy can make profitsharing optimal, even when the worker’s effort is fully …

Persistent link: https://www.econbiz.de/10005765867

Regional Implications of Financial Market Development: Credit Rationing, Trade, and Location

Ehrlich, Maximilian Von; Seidel, Tobias - CESifo - 2013

We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less...

Persistent link: https://www.econbiz.de/10010877832

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