Download or read book Moral Hazard and Bargaining Over Incentive Contracts written by Marcus Dittrich and published by . This book was released on 2014 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Incentive Contracts Under Moral Hazard and Non verifiable Performance written by Anja Schöttner and published by . This book was released on 2005 with total page 190 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Moral Hazard with Rating Agency written by Bappaditya Mukhopadhyay and published by . This book was released on 2003 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we address the issue of possible moral hazard that rating agencies might have. We discuss the feasibility of possible incentive contracts that can ameliorate this problem. We find, that incentive payments to the rating agency based on expected returns on debt will do away with the moral hazard problem.
Download or read book Moral Hazard Incentive Contracts and Risk written by Gregory Lewis and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Incentive Contracts Under Moral Hazard when the Agent is Free to Leave written by Florian Englmaier and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Incentive Contracts in Two sided Moral Hazards with Multiple Agents written by Nabil I. Al-Najjar and published by . This book was released on 1995 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Uncertainty Legal Liability and Incentive Contracts written by John Evans and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: To address agents' moral hazard over effort, incentive contracts impose risk on the agents. As performance measures become noisier, the conventional agency analysis predicts that principals will reduce the incentive weights assigned to such measures. However, prior empirical results (Prendergast 2002) frequently find the opposite, i.e., incentive weights are larger (agents bear more risk) in more uncertain environments. This paper provides new evidence on the association between the extent of uncertainty and the level of risk imposed on agents. In the context of contracts between managed care organizations and physicians, we examine the effect of task characteristics and the legal liability environment on the extent of risk that physicians bear. We derive the optimal weighting of multiple performance measures in a model of a physician's choice of revenue-generating and cost control efforts. The model predicts that physicians who face less task uncertainty bear more cost risk in their contracts, as predicted by the conventional moral hazard model. Likewise, the model predicts that as the association between task uncertainty and legal liability uncertainty becomes stronger, physicians bear less cost risk in their contracts. Our empirical results generally support these predictions. We offer an explanation for why these results tend to be consistent with the conventional moral hazard analysis, contrary to empirical results in a number of previous studies.
Download or read book Optimal Incentive Contracting with Ex Ante and Ex Post Moral Hazards written by Robert Puelz and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Predictions concerning structure and performance for managerial incentive contracts designed to prevent accidents are developed and tested. The model predicts a step-function penalty with more costly, more reliable audits used for higher loss reports to control ex post exaggeration of the loss. In addition, the penalty induces nonreporting that is imperfectly controlled through random audits. An empirical contract implemented to control workers' compensation medical losses provides evidence consistent with these predictions. The contract reduces both accident frequency and total losses, but increases reported loss severity as managers evade approximately 40 percent of the accident penalty by underreporting small losses.
Download or read book Moral Hazard and Limited Liability written by Rohan Pitchford and published by . This book was released on 1997 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book On the Job Search and Moral Hazard written by Espen R. Moen and published by . This book was released on 2011 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the interaction between intertemporal incentive contracts and search frictions associated with on-the-job search. In our model, agency problems call for wage contracts with deferred compensation. At the same time workers do on-the-job search. Deferred compensation improves workers' incentives to exert effort but distorts their on-the-job search decisions. We show that deferred compensation is less attractive when the value to the worker-firm pair of on-the-job search is high . Moreover, the interplay between search frictions and wage contracts creates feedback effects. If firms in equilibrium use contracts with deferred compensation, fewer firms with vacancies enter the on-the-job search market, and this in turn reduces the distortions created by deferred compensation. These feedback effects between the incentive contracts used and the activity level in the search markets may lead to multiple equilibria: a low-turnover equilibrium where firms use deferred compensation, and a high-turnover equilibrium where they do not. Furthermore, the model predicts that firms are more likely to use deferred compensation when search frictions are high and when the gains from on-the-job search are small.
Download or read book Optimal Contracting with Moral Hazard and Cascading written by Naveen Khanna and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper I identify optimal incentive contracts for managers of firms competing in the product market. Such firms often confront similar decisions and uncertainties. Managers can improve decision quality by generating private signals through costly effort. However, since signals are likely to be correlated, firms that decide later get additional information from the actions of earlier firms. This impacts effort choice. Decision quality is also affected if later managers disregard their own signals and blindly imitate preceding decisions. In a competitive environment, such cascading hurts profits. Contracts that solve both moral hazard and cascading problems typically put more weight on firm profits, making them expensive. Contracts with more weight on decision quality are less expensive but result in cascades. Shareholders choose contracts that maximize their net surplus. This results in testable implications about which industries may have more convergence in investment choices, greater pay-for-profit sensitivity, larger differences in observed contracts, more innovation, larger-sized firms, and potential for over-compensation.
Download or read book Incentive Contracts and Downside Risk Sharing written by Bernard Sinclair-Desgagne and published by . This book was released on 2017 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper seeks to characterize incentive compensation in a static principal-agent moral hazard setting in which both the principal and the agent are prudent (or downside risk averse). We show that optimal incentive pay should then be `approximately concave' in performance, the approximation being closer the more downside risk averse the principal is compared to the agent. Limiting the agent's liability would improve the approximation, but taxing the principal would make it coarser. The notion of an approximately concave function we introduce here to describe optimal contracts is relatively recent in mathematics; it is intuitive and translates into concrete empirical implications, notably for the composition of incentive pay packages. We also clarify which measure of prudence - among the various ones proposed in the literature - is relevant to investigate the tradeoff between downside risk sharing and incentives.
Download or read book The Economics of Contracts second edition written by Bernard Salanie and published by MIT Press. This book was released on 2005-03-11 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: A concise introduction to the theory of contracts, emphasizing basic tools that allow the reader to understand the main theoretical models; revised and updated throughout for this edition. The theory of contracts grew out of the failure of the general equilibrium model to account for the strategic interactions among agents that arise from informational asymmetries. This popular text, revised and updated throughout for the second edition, serves as a concise and rigorous introduction to the theory of contracts for graduate students and professional economists. The book presents the main models of the theory of contracts, particularly the basic models of adverse selection, signaling, and moral hazard. It emphasizes the methods used to analyze the models, but also includes brief introductions to many of the applications in different fields of economics. The goal is to give readers the tools to understand the basic models and create their own. For the second edition, major changes have been made to chapter 3, on examples and extensions for the adverse selection model, which now includes more thorough discussions of multiprincipals, collusion, and multidimensional adverse selection, and to chapter 5, on moral hazard, with the limited liability model, career concerns, and common agency added to its topics. Two chapters have been completely rewritten: chapter 7, on the theory of incomplete contracts, and chapter 8, on the empirical literature in the theory of contracts. An appendix presents concepts of noncooperative game theory to supplement chapters 4 and 6. Exercises follow chapters 2 through 5. Praise for the previous edition: “The Economics of Contracts offers an excellent introduction to agency models. Written by one of the leading young researchers in contact theory, it is rigorous, clear, concise, and up-to-date. Researchers and students who want to learn about the economics of incentives will want to read this primer.”—Jean Tirole, Institut D'Économie Industrielle, Universite des Sciences Sociales, France “Students will find this a very useful introduction to the ideas of contract theory. Salanié has managed to summarize a large amount of material in a relatively short number of pages in a highly accessible and readable manner.”—Oliver Hart, Professor of Economics, Harvard University
Download or read book Penalizing Success in Dynamic Incentive Contracts written by Tracy R. Lewis and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine optimal dynamic incentive contracts when adverse selection and moral hazard problems are present. We find that early success is optimally penalized in the sense that the agent who succeeds early subsequently faces a lower- powered incentive contract. Penalizing success in this manner serves to limit the agent's initial incentive to understate his ability.
Download or read book Optimal Incentive Contracts with Job Destruction Risk written by Borys Grochulski and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the implications of job destruction risk for optimal incentives in a long-term contract with moral hazard. We extend the dynamic principal-agent model of Sannikov (2008) by adding an exogenous Poisson shock that makes the match between the firm and the agent permanently unproductive. In modeling job destruction as an exogenous Poisson shock, we follow the Diamond-Mortensen-Pissarides search-and-matching literature. The optimal contract shows how job destruction risk is shared between the rm and the agent. Arrival of the job-destruction shock is always bad news for the rm but can be good news for the agent. In particular, under weak conditions, the optimal contract has exactly two regions. If the agent's continuation value is below a threshold, the agent's continuation value experiences a negative jump upon arrival of the job-destruction shock. If the agent's value is above this threshold, however, the jump in the agent's continuation value is positive, i.e., the agent gets rewarded when the match becomes unproductive. This pattern of adjustment of the agent's value at job destruction allows the firm to reduce the costs of effort incentives while the match is productive. In particular, it allows the firm to adjust the drift of the agent's continuation value process so as to decrease the risk of reaching either of the two inefficient agent retirement points. Further, we study the sensitivity of the optimal contract to the arrival rate of job destruction.
Download or read book Optimal Incentive Contracts Under Inequity Aversion written by Florian Englmaier and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Incentives Under Moral Hazard and Heterogeneous Agents written by Pierre Dubois and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
