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Incentives and Equilibrium in Agency with Adverse Selection

Faynzilberg, Peter S. - 2015

We show that contracting in agency with voluntary participation may involve incentives for the agent's abstention. Their provision alters the optimality criteria in the principal's decision-making, further distorts the mechanism, and may lead to breakdown of contracting in circumstances where...

Persistent link: https://www.econbiz.de/10013021575

Dynamic contracting : an irrelevance theorem

Eső, Péter; Szentes, Balàzs - In: Theoretical economics : TE ; an open access journal in … 12 (2017) 1, pp. 109-139

This paper generalizes a conceptual insight in dynamic contracting with quasilin- ear payoffs: the principal does not need to pay any information rents for extract- ing the agent’s “new” private information obtained after signing the contract. This is shown in a general model in which the...

Persistent link: https://www.econbiz.de/10011704662

Peer effects and incentives

Kräkel, Matthias - 2014

In a multi-agent setting, individuals often compare own performance with that of their peers. These comparisons influence agents incentives and lead to a noncooperative game, even if the agents have to complete independent tasks. I show that depending on the interplay of the peer effects, agents...

Persistent link: https://www.econbiz.de/10011430294

What drives reciprocal behavior? : the optimal provision of incentives over the course of careers

Fahn, Matthias; Schade, Anne; Schüßler, Katharina - 2017

We explore how inherent preferences for reciprocity and repeated interaction interact in an optimal incentive system. Developing a theoretical model of a long-term employment relationship, we first show that reciprocal preferences are more important when an employee is close to retirement. At...

Persistent link: https://www.econbiz.de/10011718616

Hidden Action and Outcome Contractibility : An Experimental Test of Moral Hazard Theory

Hoppe, Eva I.; Schmitz, Patrick W. - 2019

In a laboratory experiment with 754 participants, we study the canonical one-shot moral hazard problem, comparing … treatments with unobservable effort to benchmark treatments with verifiable effort. In our experiment, the players endogenously … negotiate contracts. In line with contract theory, the contractibility of the outcome plays a crucial role when effort is a …

Persistent link: https://www.econbiz.de/10014105234

International joint ventures : an interplay of cooperative and noncooperative games under incomplete information

Ott, Ursula F. - 2006

advantages, the failure rate of IJVs is very high. This book takes a theoretical approach to the lifecycles of IJVs. Game theory …, contract/incentive theory and repeated games, the author suggests solutions to the problems predicted. …

Persistent link: https://www.econbiz.de/10001669977

Characterization and uniqueness of equilibrium in competitive insurance

Luz, Vitor Farinha - In: Theoretical economics : TE ; an open access journal in … 12 (2017) 3, pp. 1349-1391

This paper provides a complete characterization of equilibria in a game-theoretic version of Rothschild and Stiglitz's (1976) model of competitive insurance. I allow for stochastic contract offers by insurance firms and show that a unique symmetric equilibrium always exists. Exact conditions...

Persistent link: https://www.econbiz.de/10011744297

Tournaments with gaps

Imhof, Lorens; Kräkel, Matthias - 2013

A standard tournament contract specifies only tournament prizes. If agents' performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the...

Persistent link: https://www.econbiz.de/10010198511

Empowerment and the dark side of delegation

Kräkel, Matthias - 2018

The existing delegation literature has focused on different preferences of principal and agent concerning project selection, which makes delegating authority costly for the principal. This paper shows that delegation has a cost even when the preferences of principal and agent are exogenously...

Persistent link: https://www.econbiz.de/10011795221

Inefficiency and regulation in credence goods markets with altruistic experts

Farukh, Razi; Kerkhof, Anna; Loebbing, Jonas - 2020

, price regulation should be accompanied by licensing arrangements that cap the number of experts in the market. Our theory …

Persistent link: https://www.econbiz.de/10012431181