Contracting with Repeated Moral Hazard and Private Evaluations

William Fuchs

Game Theory and Information from University Library of Munich, Germany

Abstract: A repeated moral hazard setting in which the Principal privately observes the Agent's output is studied. It is shown that there is no loss from restricting the analysis to contracts in which the Agent is supposed to exert effort every period, receives a constant efficiency wage and no feedback until he is fired. The optimal contract for a finite horizon is characterized, and shown to require burning of resources. These are only burnt after the worst possible realization sequence and the amount is independent of both the length of the horizon and the discount factor (δ). For the infinite horizon case a family of fixed interval review contracts is characterized and shown to achieve first best as δ → 1. The optimal contract when δ

Keywords: Repeated Moral Hazard; Private Monitoring; Efficiency Wages (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2005-11-21
New Economics Papers: this item is included in nep-mic
Note: Type of Document - pdf; pages: 40
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0511/0511007.pdf (application/pdf)

Related works:
Journal Article: Contracting with Repeated Moral Hazard and Private Evaluations (2007)
Working Paper: Contracting with Repeated Moral Hazard and Private Evaluations (2005)
Working Paper: Contracting with Repeated Moral Hazard and Private Evaluations (2005)
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:wuwpga:0511007

Access Statistics for this paper

More papers in Game Theory and Information from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA (volker.schallehn@ub.uni-muenchen.de this e-mail address is bad, please contact repec@repec.org).