Other regarding principal and moral hazard: the single agent case

Swapnendu Banerjee (Bandyopadhyay) and Mainak Sarkar

MPRA Paper from University Library of Munich, Germany

Abstract: Using the classic moral hazard problem with limited liability we characterize the optimal incentive contracts when first an other-regarding principal interacts with a self-regarding agent. The optimal contract differs considerably when the principal is ‘inequity averse’ vis-a-vis the self-regarding case. Also the agent is generally (weakly) better-off under an ‘inequity averse’ principal compared to a ‘status seeking’ principal. Then we extend our analysis and characterize the optimal contracts when both other-regarding principal and other-regarding agent interact.

Keywords: Other regarding preferences; self regarding preferences; inequity-averse; status- seeking; optimal contract (search for similar items in EconPapers)
JEL-codes: L2 (search for similar items in EconPapers)
Date: 2014-11-01
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Other-regarding principal and moral hazard: The single-agent case (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59654

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