Overstatement and rational market expectation

Illoong Kwon and Eunjung Yeo

Economics Letters, 2009, vol. 104, issue 1, pages 9-12

Abstract: When an agent overstates his/her true performance, a rational market can still correctly guess the true performance. This paper shows, however, that such rational market expectation and a profit-maximizing principal can exacerbate the lack of productive effort by the agent.

Keywords: Overstatement; Rational; expectation; Moral; hazard (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:ecolet:v:104:y:2009:i:1:p:9-12

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