Payoff Implications of Incentive Contracting

Daniel Garrett

No 14725, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In the context of a canonical agency model, we study the payoff implications of introducing optimally structured incentives. We do so from the perspective of an analyst who does not know the agent's preferences for responding to incentives, but does know that the principal knows them. We provide, in particular, tight bounds on the principal's expected benefit from optimal incentive contracting across feasible values of the agent's expected rents. We thus show how economically relevant predictions can be made robustly given ignorance of a key primitive.

Keywords: Mechanism design; Robustness; Procurement (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-cta, nep-des, nep-hrm and nep-mic
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