Author: Robert M. Townsend
Publisher:
ISBN:
Category : Contracts
Languages : en
Pages : 0
Book Description
Optimal Contracts and Competitive Markets with Costly State Verification
Author: Robert M. Townsend
Publisher:
ISBN:
Category : Contracts
Languages : en
Pages : 0
Book Description
Publisher:
ISBN:
Category : Contracts
Languages : en
Pages : 0
Book Description
Optimal Contracts with Costly State Verification
Author: Stefan Krasa
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 35
Book Description
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 35
Book Description
Optimal Contracts in a Dynamic Costly State Verification Model
Author: Cyril Monnet
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
Book Description
This paper describes optimal contracts in a dynamic costly state verification model with stochastic monitoring. An agent operates a risky project on behalf of a principal over several periods. Each period, the principal can observe the revenues from the project provided he incurs a fixed cost. We show that an optimal contract exists with the property that, in each period and for every possible revenue announcement by the agent, either the principal claims the entire proceeds from the project or promises to claim nothing in the future. This structure of payments enables the principal to minimize audit costs over the duration of the project. Those optimal contracts are such that the agent's expected income rises with time. Moreover, except in at most one period, the principal claims the entire returns of the project whenever audit occurs. We also provide conditions under which all optimal contracts must satisfy these properties.
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
Book Description
This paper describes optimal contracts in a dynamic costly state verification model with stochastic monitoring. An agent operates a risky project on behalf of a principal over several periods. Each period, the principal can observe the revenues from the project provided he incurs a fixed cost. We show that an optimal contract exists with the property that, in each period and for every possible revenue announcement by the agent, either the principal claims the entire proceeds from the project or promises to claim nothing in the future. This structure of payments enables the principal to minimize audit costs over the duration of the project. Those optimal contracts are such that the agent's expected income rises with time. Moreover, except in at most one period, the principal claims the entire returns of the project whenever audit occurs. We also provide conditions under which all optimal contracts must satisfy these properties.
Optimal Contracts and Competitive Markets with Costly State Verifications
Optimal Contracting with Costly State Verification, with an Application to Crowdsourcing
Author: J. Aislinn Bohren
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
Book Description
A firm employs workers to obtain costly unverifiable information for example, categorizing the content of images. Workers are monitored by comparing their messages. The optimal contract under limited liability exhibits three key features: (i) the monitoring technology depends crucially on the commitment power of the firm virtual monitoring, or monitoring with arbitrarily small probability, is optimal when the firm can commit to truthfully reveal messages from other workers, while monitoring with strictly positive probability is optimal when the firm can hide messages (partial commitment), (ii) bundling multiple tasks reduces worker rents and monitoring inefficiencies; and (iii) the optimal contract is approximately efficient under full but not partial commitment. We conclude with an application to crowdsourcing platforms, and characterize the optimal contract for tasks found on these platforms.
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
Book Description
A firm employs workers to obtain costly unverifiable information for example, categorizing the content of images. Workers are monitored by comparing their messages. The optimal contract under limited liability exhibits three key features: (i) the monitoring technology depends crucially on the commitment power of the firm virtual monitoring, or monitoring with arbitrarily small probability, is optimal when the firm can commit to truthfully reveal messages from other workers, while monitoring with strictly positive probability is optimal when the firm can hide messages (partial commitment), (ii) bundling multiple tasks reduces worker rents and monitoring inefficiencies; and (iii) the optimal contract is approximately efficient under full but not partial commitment. We conclude with an application to crowdsourcing platforms, and characterize the optimal contract for tasks found on these platforms.
Optimal Contracts when Enforcement is a Decision Variable
Optimal Contracts Under Costly State Falsification
Author: Jeffrey Malcolm Lacker
Publisher:
ISBN:
Category : Contracts
Languages : en
Pages : 72
Book Description
Publisher:
ISBN:
Category : Contracts
Languages : en
Pages : 72
Book Description
Costly State Verification and Optimal Investment
Author: Bappaditya Mukhopadhyay
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
Book Description
We model a lender borrower relationship in a CSV framework. The project available with the firm is characterized by first order stochastic dominance. The lender audits the borrower to prevent the latter from strategic default. In this setup, we find that the optimal contract is the standard debt contract. However, a debt contract leads to overinvestment This result is in sharp contrast to those obtained in the literature. The key to these results is that the default probability of the project can be influenced by the nature of financial contract in place. The model also offers a possible explanation for differing debt equity ratios across economies that is consistent with the existing empirical findings.
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
Book Description
We model a lender borrower relationship in a CSV framework. The project available with the firm is characterized by first order stochastic dominance. The lender audits the borrower to prevent the latter from strategic default. In this setup, we find that the optimal contract is the standard debt contract. However, a debt contract leads to overinvestment This result is in sharp contrast to those obtained in the literature. The key to these results is that the default probability of the project can be influenced by the nature of financial contract in place. The model also offers a possible explanation for differing debt equity ratios across economies that is consistent with the existing empirical findings.
How Good are Standard Debt Contracts? Stochastic Versus Nonstochastic Monitoring in a Costly State Verification Environment
Author: John H. Boyd
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
We investigate ex ante efficient contracts in an environment in which implementation is costless. In this environment, standard debt contracts will typically not be optimal. Optimal contracts may involve defaults, even in states in which the borrower is fully able to repay. We then examine the welfare costs of arbitrarily restricting the set of feasible contracts to standard debt contracts. When model parameters are calibrated to realistic values, the welfare loss from exogenously imposing this restriction is extremely small. Thus, if implementation costs are actually nontrivial (as seem likely), standard debt contracts will be (very close to) optimal.
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
We investigate ex ante efficient contracts in an environment in which implementation is costless. In this environment, standard debt contracts will typically not be optimal. Optimal contracts may involve defaults, even in states in which the borrower is fully able to repay. We then examine the welfare costs of arbitrarily restricting the set of feasible contracts to standard debt contracts. When model parameters are calibrated to realistic values, the welfare loss from exogenously imposing this restriction is extremely small. Thus, if implementation costs are actually nontrivial (as seem likely), standard debt contracts will be (very close to) optimal.