Contracts in informed-principal problems with moral hazard

Nicholas Charles Bedard ()
Additional contact information
Nicholas Charles Bedard: University of Technology, Sydney

Economic Theory Bulletin, 2017, vol. 5, issue 1, No 3, 34 pages

Abstract: Abstract In many cases, an employer has private information about the potential productivity of a worker, who in turn has private information about the effort she exerts on the job. Much of the analysis of this environment in the literature restricts the employer to offer contracts that depend only on observable outcomes (e.g., profit). This paper studies the advantages to the employer of offering the worker a set of potential contracts from which the employer will choose after the worker has accepted the offer, so called menu-contracts. Specifically, in a two-state principal-agent problem with moral hazard, I show when the principal can obtain strictly higher expected payoffs than the restricted contracts of the literature by offering a menu-contract.

Keywords: Informed principal; Moral hazard; Menu-contracts; Principal agent (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s40505-016-0093-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:etbull:v:5:y:2017:i:1:d:10.1007_s40505-016-0093-0

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40505

DOI: 10.1007/s40505-016-0093-0

Access Statistics for this article

Economic Theory Bulletin is currently edited by Nicholas C. Yannelis

More articles in Economic Theory Bulletin from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().