 Allocating Control in Agency Problems with Limited Liability and Sequential Hidden ActionsRAND Journal of Economics, 2005, vol. 36, issue 2, 318-336 Abstract: I discuss the optimal organization of sequential agency problems with contractible control actions under limited liability. In each of two stages, a risk-neutral agent can choose an unobservable effort level. A success in the first stage makes effort in the second stage more effective. Should one agent be in control in both stages (integration), or should different agents be in charge of the two actions (separation)? Both modes of organization can be explained on the basis of incentive considerations due to moral hazard, without resorting to commitment problems or ad hoc restrictions on the class of feasible contracts. Keywords: Organizational Behavior; Transaction Costs; Property Rights Organization of Production Management of Technological Innovation and R&D contract theory; hidden action; limited liability; moral hazard (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:36:y:2005:2:p:318-336 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in RAND Journal of Economics from The RAND Corporation |
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