Ranking agencies under moral hazard

Bharat Sarath and Edward Henry Robbins
Additional contact information
Bharat Sarath: Stern School, New York University, 40 West Fourth Street, New York, NY 10012, USA
Edward Henry Robbins: Financial Economics Analytics and Research, 9140 Santayana Drive, Fairfax, VA 22031, USA

Economic Theory, 1997, vol. 11, issue 1, 129-155

Abstract: We provide rankings across uncertain outputs generated by agents functioning within the Principal-Agent paradigm. For agents who are identical except for their productivity, a necessary (but not sufficient) condition for an agent to be preferred is that her output dominates that of lower agents in the sense of First Degree Stochastic Dominance (FDSD) at every level of effort. Sufficient conditions are based on Blackwell's ranking of information systems and involves a characterization of FDSD using stochastic matrices. Our conditions for ranking outputs extends earlier results concerning the value of information within the agency framework. We also show how our techniques can be adapted to rank agents even if the first-order approach for determining optimal contracts fails to hold.

Date: 1997-11-17
Note: Received: April 2, 1996; revised version: October 30, 1996
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/7011001/70110129.pdf (application/pdf)
http://link.springer.de/link/service/journals/0019 ... 11001/70110129.ps.gz (application/postscript)
Access to the full text of the articles in this series is restricted

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:spr:joecth:v:11:y:1997:i:1:p:129-155

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().