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Horner, Johannes; Samuelson, Larry - Cowles Foundation for Research in Economics, Yale University - 2015

We study a discrete-time model of repeated moral hazard without commitment. In every period, a principal finances a … the returns of a successful project unbeknownst the principal. The absence of commitment is reflected both in the solution … period to the next. We show that removing commitment from the equilibrium concept is relatively innocuous -- if the players …

Persistent link: https://www.econbiz.de/10011170126

Insurance and information : firms as a commitment device

Bovenberg, Ary Lans; Teulings, Coen N. - 2001

We explore the role of firms in insuring non-verifiable output. As a device that allows workers to commit to thedelivery of their output, the firm arises endogenously as an alternative to the market if workers are sufficiently riskaverse and the firm can base its incentive payments on good...

Persistent link: https://www.econbiz.de/10011316894

A Location Model of a Firm's Organizational Mode Under Moral Hazard

Andal, Emmanuel Genesis T. - 2017

This paper explores the role of incomplete contracts when firms take into account their locations when deciding on their organizational form. For each of its activities, a firm faces the decision of whether to vertically integrate or to outsource, choosing the less costly of these two...

Persistent link: https://www.econbiz.de/10012952667

Moral Hazard in the Revelation of Knowledge

Faynzilberg, Peter S. - 2015

We formulate and solve the problem of optimal mechanism-design by a principal facing adverse selection and moral hazard from different sources. The parties' decision problem is comprised of a publicly observable collective choice and a partially private social choice. As in agency with pure...

Persistent link: https://www.econbiz.de/10013021573

Subjective evaluation versus public information

Bester, Helmut; Münster, Johannes - 2013

This paper studies a principal-agent relation in which the principal's private information about the agent's effort choice is more accurate than a noisy public performance measure. For some contingencies the optimal contract has to specify ex post inefficiencies in the form of inefficient...

Persistent link: https://www.econbiz.de/10009752336

Subjective evaluation versus public information

Bester, Helmut; Münster, Johannes - 2013

Persistent link: https://www.econbiz.de/10009781395

What is Wrong with Moral Hazard and Adverse Selection Problems in the Conventional Economic Theory

Lemennicier, Bertrand - International Centre for Economic Research (ICER) - 2014

The purpose of this paper is to challenge the conventional theory of moral hazard and adverse selection. Moral hazard and adverse selection problems in contemporary economic theory are plagued with four major aws: 1) the alleged asymmetrical information between buyer and seller as a problem in...

Persistent link: https://www.econbiz.de/10010941789

The Curse of Long Horizons

Bhaskar, Venkataraman - 2018

We study dynamic moral hazard when the principal can only commit to spot contracts. Principal and agent are ex ante symmetrically uncertain about the difficulty of the job, and update their beliefs on observing output. Since the agent's effort is private, he has an additional incentive to shirk...

Persistent link: https://www.econbiz.de/10012907047

Authority and incentives in organizations

Kräkel, Matthias - 2013

The paper analyzes the choice of organizational structure as solution to the trade-off between controlling behavior based on authority rights and minimizing costs for implementing high efforts. The analysis includes the owner of a firm, a top manager and two division heads. If it is more...

Persistent link: https://www.econbiz.de/10010198507

Authority and incentives in organizations

Kräkel, Matthias - 2013

The paper analyzes how the choice of organizational structure leads to the best compromise between controlling behavior based on authority rights and minimizing costs for implementing high efforts. Concentrated delegation and hierarchical delegation turn out to be never an optimal compromise. If...

Persistent link: https://www.econbiz.de/10009748623