Download or read book Optimal Share Contracts with Moral Hazard on Effort and in Output Reporting written by Alain de Janvry and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore in this paper the design of optimal share contracts when there is a double moral hazard, one on inputs exclusively provided by the agent (such as effort) and the other in reporting the level of output to be shared with the principal, and when there is a social efficiency cost to under-reporting. The optimal contract is second best in that it allows for residual moral hazard in both effort and output reporting. The model predicts that contract terms will vary with the value to the tenant of unreported output as well as with any capacity of the principal to directly supervise the agent. The model is written for a landlord-tenant share contract but applies as well for tax collection and franchising.

Download or read book Risk Sharing Risk Spreading and Efficient Regulation written by T.V.S. Ramamohan Rao and published by Springer. This book was released on 2015-10-22 with total page 303 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book provides an integrated approach to risk sharing, risk spreading and efficient regulation through principal agent models. It emphasizes the role of information asymmetry and risk sharing in contracts as an alternative to transaction cost considerations. It examines how contracting, as an institutional mechanism to conduct transactions, spreads risks while attempting consolidation. It further highlights the shifting emphasis in contracts from Coasian transaction cost saving to risk sharing and shows how it creates difficulties associated with risk spreading, and emphasizes the need for efficient regulation of contracts at various levels. Each of the chapters is structured using a principal agent model, and all chapters incorporate adverse selection (and exogenous randomness) as a result of information asymmetry, as well as moral hazard (and endogenous randomness) due to the self-interest-seeking behavior on the part of the participants.

Download or read book Simple Contracts with Adverse Selection and Moral Hazard written by Daniel Gottlieb and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a principal-agent model with both moral hazard and adverse selection. Risk-neutral agents with limited liability have arbitrary private information about the distribution of outputs and the cost of effort. We obtain conditions under which the optimal mechanism offers a single contract to all types. These conditions are always satisfied, for example, if output is binary or if the distribution of outputs is multiplicatively separable and ordered by FOSD (if it is not ordered, the optimal mechanism offers at most two contracts). If, in addition, the marginal distribution satisfies the monotone likelihood ratio property, this single contract is a debt contract. Our model suggests that offering a single contract may be optimal in environments with adverse selection and moral hazard, where offering flexible menus of contracts provides gaming opportunities to the agent.

Download or read book Moral Hazard and Non exclusive Contracts written by Alberto Bisin and published by . This book was released on 1998 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Contracts with Moral Hazard and Adverse Selection written by Alex Gershkov 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 Robust Contract Designs written by Yimin Yu and published by . This book was released on 2020 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider incentive compensation where the firm has ambiguity on the effort-contingent output distribution: the parameters of the output probability distribution are in an ellipsoidal uncertainty set. The firm evaluates any contract by its worst-case performance over all possible parameters in the uncertainty set. Similarly, the incentive compatible condition for the agent must hold for all possible parameters in the uncertainty set. The firm is financially risk neutral and the agent has limited liability. We find that when the agent is financially risk neutral, the optimal robust contract is a linear contract--paying the agent a base payment and a fixed share of the output. Moreover, the linear contract is the only type of contracts that are robust to the parameter uncertainty. When there is model uncertainty over a general effort-contingent output distribution, we show that a generalized linear contract is uniquely optimal. When the agent is risk-averse and has a piecewise linear utility, the only optimal contract is a piecewise linear contract that consists of progressive fixed payments and linear rewards with progressive commission rates. We also provide the analysis for the trade-off between robustness and worst-case performance and show that our results are robust to a variety of settings, including cases with general lp-norm uncertainty sets, multiple effort levels, etc. Our paper provides a new explanation for the popularity of linear contracts and piecewise linear contracts in practice and introduces a flexible modeling approach for robust contract designs with model uncertainty.

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 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Renegotiation proof Contracts with Moral Hazard and Persistent Private Information written by Bruno Strulovici and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: How does renegotiation affect contracts between a principal and an agent subject to persistent private information and moral hazard? This paper introduces a concept of renegotiationproofness, which adapts to stochastic games the concepts of weak renegotiation-proofness and internal consistency by exploiting natural comparisons across states. When the agent has exponential utility and cost of effort, each separating renegotiation-proof contract is characterized by a single "sensitivity" parameter, which determines how the agent's promised utility varies with reported cash flows. The optimal contract among those always causes immiserization. Reducing the agent's cost of effort can harm the principal by increasing the tension between moral hazard and reporting problems. Truthfulness of the constructed contracts is obtained by allowing jumps in cash flow reports and turning the agent's reporting problem into an impulse control problem. This approach shows that self-correcting reports are optimal of the equilibrium path. The paper also discusses the case of partially pooling contracts and of permanent outside options for the agent, illustrating the interaction between cash-flow persistence, renegotiation, moral hazard, and information revelation. -- Repeated Agency ; Asymmetric Information ; Persistent Information ; Contract Theory ; Principal Agent ; Limited Commitment ; Renegotiation ; Recursive Contracts

Download or read book Optimal Wage Contracts Under Worker Moral Hazard when Workers Have Finite Lives written by Jon Strand and published by . This book was released on 1988 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Tenurial Contracts Under Both Moral Hazard and Adverse Selection written by Christian At and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper determines the optimal tenurial contract between a monopoly landlord and a tenant protected by limited liability under both adverse selection (based on the tenant's ability) and moral hazard (based on the tenant's choice of effort). We identify different optimal contracts depending on the tenant's outside option. For intermediate values, there is a threshold of tenant ability depending on the outside option level below which the optimal contract is a separating sharecropping contract, and a pooling one otherwise. We also find that an increase in the outside option does not monotonically increase the tenant's optimal effort.

Download or read book General Equilibrium written by Frank Hahn and published by Routledge. This book was released on 2003-09-02 with total page 398 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years certain leading figures in the world of economics have called the usefulness of general equilibrium theory into question. This superb new book brings together leading economic theorists with important contributions to the ongoing debate. General equilibrium theorists including Michio Morishima, Michael Magill and Martine Quinzii debate strengths, weaknesses and possible futures with leading thinkers such as Herb Gintis, Pierangelo Garegnani and Duncan Foley, who seek to explain the rejection of general equilibrium. Uniquely, none of the contributors portray general equilibrium theory as the perfect guide to market economies actual behaviour, but rather illustrate that there is insufficient acquaintance with existing alternatives and that general equilibrium theory is often used as an ideal 'benchmark'.

Download or read book Local Movie Supply in the German Motion Picture Industry written by Florian Kumb and published by Springer. This book was released on 2017-12-27 with total page 217 pages. Available in PDF, EPUB and Kindle. Book excerpt: Florian Kumb provides a comprehensive review of the current state of the international literature on the motion picture industry and then applies a mix of appropriate quantitative and qualitative research methods in three empirical studies. He enters uncharted research territory examining the effects that major film characteristics cause in the post-theatrical exhibition, he identifies key factors that influence public film funding decisions, and then forecasts the future market development of a European film-financing network. The author shows that the characteristics of local movies, public film funding, and the local film financing network are major reasons for the low international competitiveness of Germany’s motion picture industry.

Download or read book Optimal Contracts Under Adverse Selection Moral Hazard and Type Dependent Reservation Utilities written by Natalie Packham and published by . This book was released on 2015 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a continuous-time setting where a risk-averse agent controls the drift of an output process driven by a Brownian motion, optimal contracts are linear in the terminal output; this result is well-known in a setting with moral hazard and - under stronger assumptions - adverse selection. Using techniques from stochastic control theory, we show that this result continues to hold when in addition reservation utilities are type-dependent. This type of problem occurs in the study of optimal compensation problems involving competing principals.

Download or read book Timing of Effort and Reward written by Jun Yang and published by . This book was released on 2014 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies a three-sided moral hazard problem with one agent exerting upfront effort and two agents exerting ongoing effort in a continuous-time model. The agents' effort jointly affects the probability of survival and thus the expected cash flow of the project. In the optimal contract, the timing of payments reflects the timing of effort: payments for upfront effort precede payments for ongoing effort. Several patterns are possible for the cash allocation between the two agents with ongoing effort. In one case where the two agents face equally severe moral hazard, they share the cash flow equally at each point of time. In another case where the two agents have different severities of moral hazard, their payments are sequential. In a more general case, the two agents with ongoing effort split the cash flow first over time and then over quantity at each point of time. This study provides a framework to understanding a broad set of contracting issues in business. The characteristics suggested in the optimal contract help us identify the causes of business failures such as the recent debacle of Mortgage-Backed Securities (MBS).

Download or read book Executive Compensation and Earnings Management Under Moral Hazard written by Bo Sun and published by DIANE Publishing. This book was released on 2010-08 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. Examines how the opportunity to manipulate affects the optimal pay contract, and establishes necessary and sufficient conditions under which earnings management occurs. The author¿s model provides a set of implications on the role earnings management plays in driving the time-series and cross-sectional variation of executive compensation. In addition, the model's predictions regarding the changes of earnings management and executive pay in response to corporate governance legislation are consistent with empirical observations. Charts and tables.

Download or read book Dynamic Labor Contracts with Asymmetric Information written by Sevin Yeltekin and published by . This book was released on 1999 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Contract and Organizational Design Under Moral Hazard and Adverse Selection written by Bernd Theilen and published by . This book was released on 1996 with total page 179 pages. Available in PDF, EPUB and Kindle. Book excerpt: