A note on the take-it-or-leave-it bargaining procedure with double moral hazard and risk neutrality

Alessandro Citanna ()

No 789, HEC Research Papers Series from HEC Paris

Abstract: In this note we study a take-it-or-leave-it bargaining procedure between two risk neutral individuals engaged in the joint stochastic production of a commodity. Each individual has to exert effort, that is, to provide a one-dimensional input which is unobserved to the other individual. The output-contingent sharing rule is constrained to lead to nonnegative consumption for both individuals, a limited liability constraint. The individuals enter joint production in one of two possible occupations, or tasks, the p-agent and the a-agent, which differ in their incentive intensity. Hence, incentives are asymmetric. The p-agent makes a take-it-or-leave-it offer to the a-agent, and has therefore all the contractual power, modulo providing the a-agent an exogenously given reservation utility.

Keywords: contract theory; bargaining theory (search for similar items in EconPapers)
JEL-codes: C73 C78 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2003-09-29
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:0789

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