Bait Contracts

Marie-Louise Vierø ()
Additional contact information
Marie-Louise Vierø: Queen's University
Authors registered in the RePEc Author Service: Marie-Louise Vierø

No 1212, Working Paper from Economics Department, Queen's University

Abstract: This paper explores contracting in the presence of ambiguity. It revisits Holmstrom's sufficient statistic result of when to condition a contract on an outside signal. It is shown that if the signal is ambiguous, in the sense that its probability distribution is unknown, then Holmstrom's result can be overturned. Specifically, uninformative ambiguous signals can be valuable.

Keywords: contracts; ambiguity; optimism; incentives; signals; stock options (search for similar items in EconPapers)
JEL-codes: D80 D82 D86 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-08
New Economics Papers: this item is included in nep-bec and nep-cta
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1212.pdf First version 2009 (application/pdf)

Related works:
Journal Article: Bait contracts (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1212

Access Statistics for this paper

More papers in Working Paper from Economics Department, Queen's University Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().