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Simple contracts with adverse selection and moral hazard

Gottlieb, Daniel; Moreira, Humberto - In: Theoretical Economics 17 (2022) 3, pp. 1357-1401

multiplicative separability condition, the optimal mechanism offers a single contract. This condition holds, for example, when output … likelihood ratio property, the mechanism offers a single debt contract. Our results generalize if the output distribution is … "close" to multiplicatively separable. Our model suggests that offering a single contract may be optimal in environments with …

Persistent link: https://www.econbiz.de/10014536927

Optimal dynamic contracting: The first-order approach and beyond

Battaglini, Marco; Lamba, Rohit - In: Theoretical Economics 14 (2019) 4, pp. 1435-1482

maximizing contracts in dynamic principal-agent models. The FO-approach works when the resulting FO-optimal contract satisfies a …-optimal contract if the frequency of interactions is sufficiently high (or equivalently if the discount factor, time horizon and …

Persistent link: https://www.econbiz.de/10012215290

Dynamic delegation with a persistent state

Chen, Yi - In: Theoretical Economics 17 (2022) 4, pp. 1589-1618

In this paper, I study the dynamic delegation problem in a principal-agent model wherein an agent privately observes a persistently evolving state, and the principal commits to actions based on the agent's reported state. There are no transfers. While the agent has state-independent preferences,...

Persistent link: https://www.econbiz.de/10014536863

Optimal delegation and information transmission under limited awareness

Auster, Sarah; Pavoni, Nicola - In: Theoretical Economics 19 (2024) 1, pp. 245-284

We study the delegation problem between a principal and an agent, who not only has better information about the performance of the available actions but also superior awareness of the set of actions that are actually feasible. We provide conditions under which the agent finds it optimal to leave...

Persistent link: https://www.econbiz.de/10014536865

Paying with information

Kaya, Ayça - In: Theoretical Economics 18 (2023) 2, pp. 669-706

The founder of a start-up (principal) who has a project with uncertain returns must retain and incentivize an agent using promise of future payments and information gathering. The agent's effort incrementally advances production and such advance is a prerequisite for gathering new information....

Persistent link: https://www.econbiz.de/10014536898

Participation constraints in discontinuous adverse selection models

Martimort, David; Stole, Lars A. - In: Theoretical Economics 17 (2022) 3, pp. 1145-1181

upper semi-continuous in the control variable. We apply those conditions to economic environments in contract theory where …

Persistent link: https://www.econbiz.de/10014536915

(Bad) reputation in relational contracting

Deb, Rahul; Mitchell, Matthew F.; Pai, Mallesh M. - In: Theoretical Economics 17 (2022) 2, pp. 763-800

Motivated by markets for ``expertise,'' we study a bandit model where a principal chooses between a safe and risky arm. A strategic agent controls the risky arm and privately knows whether its type is high or low. Irrespective of type, the agent wants to maximize duration of experimentation with...

Persistent link: https://www.econbiz.de/10014536982

Robust contracting under double moral hazard

Carroll, Gabriel; Bolte, Lukas - In: Theoretical Economics 18 (2023) 4, pp. 1623-1663

. An analyst is uncertain about what actions are available and evaluates a contract by the expected payoffs it guarantees …

Persistent link: https://www.econbiz.de/10014537015

Experimentation in Organizations

Moroni, Sofia - In: Theoretical Economics 17 (2022) 3, pp. 1403-1450

We consider a moral hazard problem in which a principal provides incentives to a team of agents to work on a risky … better future contract terms or task assignments rather than monetary bonuses. …

Persistent link: https://www.econbiz.de/10014537018

Termination as an incentive device

Grochulski, Borys; Zhang, Yuzhe - In: Theoretical Economics 18 (2023) 1, pp. 381-419

In this paper, we study the conditions under which termination is a useful incentive device in the canonical dynamic principal-agent moral hazard model of Sannikov (2008). We find that temporary suspension of the agent after poor performance dominates termination if the principal's outside...

Persistent link: https://www.econbiz.de/10014537032