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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 empirical 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/10010383018
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Dynamic managerial compensation : on the optimality of seniority-based schemes
Garrett, Daniel F.; Pavan, Alessandro - 2014
either increase or decrease with tenure. However, risk aversion and high persistence of ability call for a reduction in the …
Persistent link: https://www.econbiz.de/10010476876
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Loss aversion, moral hazard, and stochastic contracts
Ho, Hoa - 2021 - Draft: March 10, 2021
both risk and loss averse, I show that if a penalty wage (i.e., a wage level at which the agent feels a substantial …
Persistent link: https://www.econbiz.de/10012498375
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The optimal contract under adverse selection in a moral-hazard model with a risk-averse agent
Maréchal, François; Thomas, Lionel - In: Games 9 (2018) 1/12, pp. 1-22
This paper studies the optimal contract offered by a risk-neutral principal to a risk-averse agent when the agent …
Persistent link: https://www.econbiz.de/10011849217
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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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On the Optimality of Search Matching Equilibrium When Workers Are Risk Averse
van der Linden, Bruno; Lehmann, Etienne - 2004
This paper revisits the normative properties of search-matching economies when homogeneous workers have concave utility functions and wages are bargained over. The optimal allocation of resources is characterized first when information is perfect and second when search effort is not observable....
Persistent link: https://www.econbiz.de/10010276945
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Moral hazard and ambiguity
Weinschenk, Philipp - 2010
We consider a principal-agent model with moral hazard where the agent's knowledge about the performance measure is ambiguous and he is averse towards ambiguity. We show that the principal may optimally provide no incentives or contract only on a subset of all informative performance measures....
Persistent link: https://www.econbiz.de/10008662585
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Binary payment schemes: moral hazard and loss aversion
Herweg, Fabian; Müller, Daniel; Weinschenk, Philipp - 2010
We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully...
Persistent link: https://www.econbiz.de/10008662594
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Hidden insurance in a moral hazard economy
Bertola, Giuseppe; Koeniger, Winfried - 2013
We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional form restrictions ensure that...
Persistent link: https://www.econbiz.de/10010225898
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Binary Payment Schemes : Moral Hazard and Loss Aversion
Herweg, Fabian - 2010
We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully...
Persistent link: https://www.econbiz.de/10013137958