Moral hazard, competition and contract design: empirical evidence from managerial, franchised and entrepreneurial businesses in Norway

Arne Nygaard and Ingunn Myrtveit

Applied Economics, 2000, vol. 32, issue 3, 349-356

Abstract: Agency theory emphasizes the role of ownership, control and incentives in encouraging managers to improve efficiency. Owners often tie managers to contracts that reduce conflict of interest between owners and managers. The differences between alternative business ownership structures have been investigated. According to theory, we expect managers with an outcome-dependent dealer contract to be more efficient than managers with a more integrated and less performance based employee dealer contract. We also analyse how competitive pressure might reduce the moral hazard problem and therefore affect contract design. Berle and Means (The Modern Corporation and Private Property, Macmillan, New York, 1932) long ago stated that the market mechanism could constrain the agency problem. Even so, this problem has scarcely been investigated empirically. This paper also considers the contractual effect of potential monitoring costs, education and relationship age in a model tested on data from 175 dealer contracts in a multinational oil company.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/000368400322778 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:32:y:2000:i:3:p:349-356

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/000368400322778

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().