Showing 1 - 10 of 70
We analyze the impact of liability risks for malpractice on the optimal reimbursement schemes for hospitals. In our model, the hospital decides upon two unobservable efforts, a cost reduction effort and a quality improvement effort. We assume that the total effort is positive even without...
Persistent link: https://www.econbiz.de/10005063762
In case of a merger or an acquisition, a tort liability that arises from the seller's conduct is often imposed on the buyer through the doctrine of successor liability. If the buyer has as much information about the potential liability as the seller, the first best is achieved: all gains from...
Persistent link: https://www.econbiz.de/10005342318
We study a model of civil dispute with delegation in which a plaintiff's lawyer works on a contingent fee basis but a defendant's lawyer on an hourly fee basis. We first derive the conditions under which delegation to the lawyers brings both the plaintiff and defendant more payoffs, compared to...
Persistent link: https://www.econbiz.de/10005342327
In a typical corporate hierarchy, the manager is delegated the authority to make decisions that set directions for the organization, employ subordinates and contract with external suppliers. This paper explains when such delegation of authority can be optimal, using a model of a firm with three...
Persistent link: https://www.econbiz.de/10005063551
Promising emerging equity markets often witness investment herds and frenzies, accompanied by an abundance of media coverage. Complementarity in information acquisition can explain these anomalies. Because information has a high fixed cost of production, its equilibrium price is low when...
Persistent link: https://www.econbiz.de/10005063589
Liquid markets where agents have limited capacity to sign exclusive contracts, as well as imperfect knowledge of previous transactions by others, raise the following risk: An agent can promise the same asset to multiple counterparties and subsequently default. I show that in such markets an...
Persistent link: https://www.econbiz.de/10005063592
This paper is about freedom of choice and rigidity of choice rules as incentive devices. We study the optimal design of an agent's freedom of choice when his information is endogenous and costly to acquire. We show that curtailing the agent's authority over decision-making may be optimal even if...
Persistent link: https://www.econbiz.de/10005063595
In this paper we investigate the principal-multi agent relationship with moral hazard where a risk neutral principal contracts with multiple risk averse agents whose actions are unobservable to the principal. We show that the well--known trade--off between incentive and risk sharing can be...
Persistent link: https://www.econbiz.de/10005063623
This paper addresses the relationship between individual perceptions and the uses of a business language. Perceptions are modeled explicitly, and are not common knowledge. A business language enables individuals with different perceptions to trade. I present a formal criterion for faithfulness...
Persistent link: https://www.econbiz.de/10005063645
In this paper we develop a formal model of the optimal financing of research projects, when the projects differ in both their success probability and the cost of undertaking. We show that in the benchmark case of publicly observable costs the first best can be achieved. If the costs are private...
Persistent link: https://www.econbiz.de/10005063679