Author: Jungyoll YunPublisher:
ISBN:
Category :
Languages : en
Pages : 41
Book Description
Simple Efficient Rank-order Contracts Under Moral Hazard and Adverse Selection
Author: Jungyoll YunAdverse Selection and Moral Hazard in Contract Law
Author: Nicole PetrickPublisher: GRIN Verlag
ISBN: 3640394127
Category : Business & Economics
Languages : de
Pages : 25
Book Description
Essay aus dem Jahr 2005 im Fachbereich BWL - Recht, Note: 1,7, Higher School of Economics Moscow, Russia, Sprache: Deutsch, Abstract: Legal and economical interpretations of contract, contract law and contract theory, asymmetric information, adverse selection and moral hazard. Paper explains negative effects of adverse selection and moral hazard for the case of transaction costs and incomplete contracts and describes incentives to avoid adverse selection and moral hazard, such as signaling and deductibles as well as indemnity contracts and valued contracts.
Simple Contracts with Adverse Selection and Moral Hazard
Author: Daniel GottliebPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
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.
Optimal Contract and Organizational Design Under Moral Hazard and Adverse Selection
Author: Bernd TheilenPublisher:
ISBN: 9783890125077
Category : Letting of contracts
Languages : en
Pages : 179
Book Description
Allocation, Information and Markets
Author: John EatwellPublisher: Springer
ISBN: 1349202150
Category : Business & Economics
Languages : en
Pages : 321
Book Description
This is an extract from the 4-volume dictionary of economics, a reference book which aims to define the subject of economics today. 1300 subject entries in the complete work cover the broad themes of economic theory. This volume concentrates on the topic of allocation information and markets.
Moral Hazard and Adverse Selection in Procurement Contracting
Author: James C. CoxDynamic Contracts with Moral Hazard and Adverse Selection
Author: Alex GershkovOptimal Contracts Under Adverse Selection and Moral Hazard
Author: Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This article presents a continuous-time agency model in the presence of adverse selection and moral hazard with a risk-averse agent and a risk-neutral principal. Under the model setup, we show that the optimal controls are constant over time, and thus the optimal menu consists of contracts that are linear in the final outcome. We also show that when a moral hazard problem adds to an adverse selection problem, the monotonicity condition well known in the pure adverse selection literature needs to be modified to ensure the incentive compatibility for information revelation. The model is applied to a few managerial compensation problems involving managerial project selection and capital budgeting decisions. We argue that in the third-best world, the relationship between the volatility of the outcome and the sensitivity of the contract depends on interactions between the managerial cost and the firm`s production functions. Contrary to conventional wisdom, sometimes the higher the volatility, the higher the sensitivity of the contract. The firm receiving good news sometimes chooses safer projects or invests less than it does with bad news. We also examine the effects of the observability of the volatility on corporate investment decisions.
Optimal Tenurial Contracts Under Both Moral Hazard and Adverse Selection
Author: Christian AtPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
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.
Optimal Contracts Under Moral Hazard and Adverse Selection
Author: Jaeyoung SungPublisher:
ISBN:
Category :
Languages : en
Pages : 51
Book Description
In spite of the importance of optimal contracting problems under moral hazard and adverse selection, current literature offers no optimal solutions to contracting problems under moral hazard and adverse selection with risk averse agents. The agent's risk aversion, however, appears to be critical for understanding managerial compensation problems. We present a continuous-time agency model with a risk-averse agent and a risk-neutral principal to show that moral hazard and adverse selection can be optimally resolved with a menu of linear contracts. In application, we discuss a few managerial compensation problems involving managerial project selection and capital budgeting decisions, and show that a flat-wage contract is sometimes optimal.