Agency conflicts in the presence of random private benefits from project implementation

Ronald A. Dye and Sri S. Sridharan

Economics Letters, 2014, vol. 123, issue 3, 308-312

Abstract: We study a contracting problem where a principal delegates the decision to implement a “project” to an agent who obtains private information about the value of the project before making the implementation decision. Moral hazard arises because the agent gets private random non-contractible benefits, or incurs private random non-contractible costs, if the project is implemented. This contracting problem is pervasive, when “project” and “benefits” are interpreted broadly.

Keywords: Optimal contracting; Moral hazard; Random private benefits; Depressed incentives; Increasing residual values (search for similar items in EconPapers)
JEL-codes: D8 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:123:y:2014:i:3:p:308-312

DOI: 10.1016/j.econlet.2014.02.025

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