Moral Hazard in Risk-Averse Teams

Eric Rasmusen ()

RAND Journal of Economics, 1987, vol. 18, issue 3, 428-435

Abstract: Holmstrom (1982) has shown that a non-budget-balancing contract induces a team of risk-neutral agents to choose the first-best effort levels. This is not generally true when agents are risk averse. Furthermore, a "massacre" contract, which punishes all but one agent when the outcome is low, can attain the first best over a wider range of parameters than any other budget-balancing contract.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (87)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819872 ... O%3B2-G&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:rje:randje:v:18:y:1987:i:autumn:p:428-435

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().