Flexible contracts

Piero Gottardi, Jean-Marc Tallon and Paolo Ghirardato

Games and Economic Behavior, 2017, vol. 103, issue C, 145-167

Abstract: This paper studies the costs and benefits of delegating decisions to superiorly informed agents, that is of adopting flexible contracts, relative to the use of rigid, non-discretionary contracts. The main focus of the paper lies in the analysis of the costs of delegation, primarily agency costs, versus their benefits, primarily the flexibility of the action choice in two different environments, one with risk and one with ambiguity.

Keywords: Delegation; Flexibility; Agency costs; Multiple priors; Imprecision aversion (search for similar items in EconPapers)
JEL-codes: D81 D82 D86 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Flexible contracts (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:103:y:2017:i:c:p:145-167

DOI: 10.1016/j.geb.2016.01.013

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