Dynamic Principal-Multiple Agent Contracts
Sevin Yeltekin ()
Computational Economics from University Library of Munich, Germany
Abstract:
I explore the nature of optimal static and dynamic contracts in an environment with moral hazard, where individuals contracting with the same principal receive correlated productivity shocks. The environment resembles the one considered in relative compensation theory ( i.e tournament theory), but extends this theory by solving for the optimal static and dynamic contracts in this setting. I compute and analyze \emph{independent} (each worker's compensation depends only on her output) and relative contracts (each worker's compensation depends on the xoutputs of all workers contracting with the same principal). Results imply that the optimal static relative contract is not substantially different from the optimal static independent contracts. However, the dynamic relative contract displays a strong a tournament feature; the contract gives the highest compensation to the worker who produces more than her counterparts and the lowest compensation to the least productive worker. I also characterize the stochastic processes for consumption and effort implied by dynamic contracts, and study the age-earnings profiles of the workers.
Keywords: dynamic contracts; mechanism design; tournaments; lotteries (search for similar items in EconPapers)
JEL-codes: C6 D8 J3 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1998-07-18
New Economics Papers: this item is included in nep-mic
Note: Type of Document - PDF and PS; prepared on UNIX Solaris; to print on HP/PostScript/; pages: 34 ; figures: included.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/comp/papers/9807/9807001.ps.gz (application/postscript)
https://econwpa.ub.uni-muenchen.de/econ-wp/comp/papers/9807/9807001.pdf (application/pdf)
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:wpa:wuwpco:9807001
Access Statistics for this paper
More papers in Computational Economics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).