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Division of Labour and Directed Production
Ratto, Marisa; Schnedler, Wendelin - 2005
We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We...
Persistent link: https://www.econbiz.de/10011422133
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You Don't Always Get What You Pay For
Schnedler, Wendelin - 2007
Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...
Persistent link: https://www.econbiz.de/10011422168
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Standards and Incentives under Moral Hazard with Limited Liability
Reinshagen, Felix - 2012
We consider a model of moral hazard with limited liability of the agent and effort that is two-dimensional. One dimension of the agent’s effort is observable and the other is not. The principal can thusmake the contract conditional not only on outcome but also on observable effort. The...
Persistent link: https://www.econbiz.de/10010427619
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Banking regulation and prompt corrective action
Freixas, Xavier; Parigi, Bruno Maria - 2007
with risk and adverse selection, is unable to address issues related to moral hazard. Hence, instead of forcing banks to …
Persistent link: https://www.econbiz.de/10010264241
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Limited Liability and the Risk-Incentive Relationship
Budde, Jörg; Kräkel, Matthias - 2008
Several empirical findings have challenged the traditional view on the trade-off between risk and incentives. By … combining risk aversion and limited liability in a standard principal-agent model the empiri- cal puzzle on the positive … relationship between risk and incentives can be explained. Increasing risk leads to a less informative performance signal. Under …
Persistent link: https://www.econbiz.de/10010264917
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Division of labour and directed production
Ratto, Marisa; Schnedler, Wendelin - 2005
We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We...
Persistent link: https://www.econbiz.de/10010267331
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Legitimacy of control
Schnedler, Wendelin; Vadovic, Radovan - 2007
What is the motivational effect of imposing a minimum effort requirement? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principal-agent model where control...
Persistent link: https://www.econbiz.de/10010268243
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You don't always get what you pay for
Schnedler, Wendelin - 2007
Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...
Persistent link: https://www.econbiz.de/10010268396
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The Pygmalion effect : an agency model with reference dependent preferences
Daido, Kohei; Itoh, Hideshi - 2005
We attempt to formulate and explain two types of self-fulfilling prophecy, called the Pygmalion effect (if a supervisor thinks her subordinates will succeed, they are more likely to succeed) and the Galatea effect (if a person thinks he will succeed, he is more likely to succeed). To this...
Persistent link: https://www.econbiz.de/10010261169
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Caught between Scylla and Charybdis? Regulating bank leverage when there is rent seeking and risk shifting
Acharya, Viral V.; Mehran, Hamid; Thakor, Anjan - 2010
risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised …
Persistent link: https://www.econbiz.de/10010287043