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Gaynor, Martin - 1990

In this paper, we investigate incentive structures within partnerships. Partnerships provide a classic example of the tradeoff between risk spreading and moral hazard. The degree to which firms choose to spread risk and sacrifice efficiency incentives depends upon risk preferences, for which...

Persistent link: https://www.econbiz.de/10012475660

Limited-Tenure Concessions for Collective Goods

Quérou, Nicolas; Tomini, Agnes; Costello, Christopher J. - National Bureau of Economic Research - 2021

We analyze theoretically an institution called a "limited-tenure concession" for its ability to induce efficient public … whether this limited-duration concession induces the socially optimal private provision. Finally, in a setting with costly … monitoring, we discuss the features of a concession contract that ensure first-best behavior, but at least cost to the …

Persistent link: https://www.econbiz.de/10012482733

A Theory of Firm Decline

Clementi, Gian Luca - 2009

We study the problem of an investor who buys an equity stake in an entrepreneurial venture, under the assumption that the former cannot monitor the latter's operations. The dynamics implied by the optimal incentive scheme is rich and quite different from that induced by other models of repeated...

Persistent link: https://www.econbiz.de/10012463457

Inventor Moral Hazard in University Licensing : The Role of Contracts

Dechenaux, Emmanuel - 2008

We examine commonly observed forms of payment, such as milestones, royalties, or consulting contracts as ways of engaging inventors in the development of licensed inventions. Our theoretical model shows that when milestones are feasible, royalties are not optimal unless the licensing firm is...

Persistent link: https://www.econbiz.de/10012464422

Real Options in a Dynamic Agency Model, with Applications to Financial Development, IPOs, and Business Risk

Philippon, Thomas - 2007

We study investment options in a dynamic agency model. Moral hazard creates an option to wait and agency conflicts affect the timing of investment. The model sheds light, theoretically and quantitatively, on the evolution of firms' dynamics, in particular the decline of the failure rate and the...

Persistent link: https://www.econbiz.de/10012465063

Choosing Agents and Monitoring Consumption : A Note on Wealth as a Corruption-Controlling Device

Tella, Rafael Di - 2007

There are a large number of cases where corruption has been discovered investigating levels of consumption that appear to be hard to justify. Yet, in the standard moral hazard model withholding of effort by the agent is not observable to the principal. We argue that this assumption has to be...

Persistent link: https://www.econbiz.de/10012465490

Contract Renegotiation in Agency Problems

Edlin, Aaron S. - 1997

This paper studies the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent. When contracts can be renegotiated, a well-known danger is that the principal can hold up the agent,...

Persistent link: https://www.econbiz.de/10012472728

Subjective Performance Measures in Optimal Incentive Contracts

Baker, George - 1993

Objective measures of performance are seldom perfect. In response, incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures. This paper explores the combined use of subjective and objective performance measures...

Persistent link: https://www.econbiz.de/10012474466

The Generalized Informativeness Principle

Chaigneau, Pierre - 2014

This paper shows that the informativeness principle, as originally formulated by Holmstrom (1979), does not hold if the first-order approach is invalid. We introduce a "generalized informativeness principle" that takes into account non-local incentive constraints and holds generically, even...

Persistent link: https://www.econbiz.de/10012457937

Moral Hazard, Incentive Contracts and Risk : Evidence from Procurement

Lewis, Gregory - 2011

Deadlines and penalties are widely used to incentivize effort. We model how these incentive contracts affect the work rate and time taken in a procurement setting, characterizing the efficient contract design. Using new micro-level data on Minnesota highway construction contracts that includes...

Persistent link: https://www.econbiz.de/10012461011

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