Showing 11 - 20 of 64
I show that it is optimal to separate non-benevolent regulators when regulated projects are large. Separation prevents regulators from coordinating to appropriate all of the agent's informational rent when they know the type of the latter; therefore, there is a trade-off between saving on...
Persistent link: https://www.econbiz.de/10011865681
This paper extends Savage's subjective approach to probability and utility from decision problems under exogenous uncertainty to choice in strategic environments. Interactive uncertainty is modeled both explicitly, using hierarchies of preference relations, the analogue of beliefs hierarchies,...
Persistent link: https://www.econbiz.de/10011700273
This paper studies bilateral trade in which the seller makes a hidden investment that influences the buyer's hidden valuation. In general it is impossible to implement both first-best efficient trade and efficient investment using budget-balanced trading mechanisms. The paper fully characterizes...
Persistent link: https://www.econbiz.de/10011700620
We address the moral hazard problem of securitization using a principal-agent model where the investor is the principal and the lender is the agent. Our model considers structured asset-backed securitization with a credit enhancement (tranching) procedure. We assume that the originator can...
Persistent link: https://www.econbiz.de/10011783323
One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper, we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher efficiency are also riskier. Using a...
Persistent link: https://www.econbiz.de/10011848346
This paper studies the optimal contract offered by a risk-neutral principal to a risk-averse agent when the agent’s hidden ability and action both improve the probability of the project being successful. We show that if the agent is sufficiently prudent and able, the principal induces a higher...
Persistent link: https://www.econbiz.de/10011849217
Ortner et al. (Manage. Account. Res. 36(1):43–50, 2017) propose the State-Contingent Relative Benefit Cost Allocation Scheme as an incentive system for risky investment decisions. The note at hand reveals the information distribution implicitly assumed within the framework of this study. Based...
Persistent link: https://www.econbiz.de/10011849522
A buyer makes an offer to a privately informed seller for a good of uncertain quality. Quality determines both the seller's valuation and the buyer's valuation, and the buyer evaluates each contract according to its worst-case performance over a set of probability distributions. This paper...
Persistent link: https://www.econbiz.de/10011855861
This paper studies mechanism design when agents are maxmin expected utility maximizers. A first result gives a general necessary condition for a social choice rule to be implementable. The condition combines an inequality version of the standard envelope characterization of payoffs in...
Persistent link: https://www.econbiz.de/10011671855
This paper analyzes the case of a principal who wants to provide an agent with proper incentives to explore a hypothesis that can be either true or false. The agent can shirk, thus never proving the hypothesis, or he can avail himself of a known technology to produce fake successes. This latter...
Persistent link: https://www.econbiz.de/10011671897