Fixed wages and bonuses in agency contracts: the case of a continuous state space

Maria Racionero and John Quiggin

No WPR04_6, Risk & Uncertainty Working Papers from Risk and Sustainable Management Group, University of Queensland

Abstract: In this paper, we extend the state-contingent production approach to principal-agent problems to the case where the state space is an atomless continuum. The approach is modelled on the treatment of optimal tax problems. The central observation is that, under reasonable conditions, the optimal contract may involve a fixed wage with a bonus for above-normal performance. This is analogous to the phenomenon of `bunching' at the bottom in the optimal tax literature.

Keywords: state-contingent production; moral hazard (search for similar items in EconPapers)
JEL-codes: D21 D82 (search for similar items in EconPapers)
Date: 2004-06
New Economics Papers: this item is included in nep-lab and nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.uq.edu.au/rsmg/WP/WPR04_6.pdf (application/pdf)

Related works:
Journal Article: Fixed Wages and Bonuses in Agency Contracts: The Case of a Continuous State Space (2006)
Working Paper: Fixed wages and bonuses in agency contracts: the case of a continuous state space (2004)
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:rsm:riskun:r04_6

Access Statistics for this paper

More papers in Risk & Uncertainty Working Papers from Risk and Sustainable Management Group, University of Queensland Contact information at EDIRC.
Bibliographic data for series maintained by David Adamson ( this e-mail address is bad, please contact ).