Moral Hazard and Bargaining Power

Dominique Demougin () and Carsten Helm

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Abstract. We introduce bargaining power in a moral hazard framework where parties are risk-neutral and the agent is financially constrained. We show that the same contract emerges if the concept of bargaining power is analyzed in either of the following three frameworks: in a standard principal2013agent (P2013A) framework by varying the agent's outside opportunity, in an alternating offer game, and in a generalized Nash-bargaining game. However, for sufficiently low levels of the agent's bargaining power, increasing it marginally does affect the equilibrium in the Nash-bargaining game, but not in the P2013A model and in the alternating offer game.

Date: 2006
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/33630/
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Published in German Economic Review 4 (2006) : pp. 463-470

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http://dx.doi.org/10.1111/j.1468-0475.2006.00130.x

Related works:
Journal Article: Moral Hazard and Bargaining Power (2006)
Journal Article: Moral Hazard and Bargaining Power (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:33630

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