Journal ArticleDOI
Moral Hazard in Teams
TLDR
In this article, the authors study moral hazard with many agents and focus on two features that are novel in a multiagent setting: free riding and competition, and show that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally.Abstract:
This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new characterization of informative (hence valuable) monitoring is derived and applied to analyze the value of relative performance evaluation. It is shown that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally. Competition per se is worthless. The role of aggregate measures in relative performance evaluation is also explored, and the implications for investment rules are discussed.read more
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Book ChapterDOI
Chapter 20 The industrial organization of health care markets
TL;DR: This work combines the theory of agency with a model of monopolistic competition to explore three regimes of health care organization that were dominant at different points in time: (1) independent physicians and cost-based reimbursement for hospitals; (2) regulation; and (3) managed care.
Posted Content
Fiscal Restraints and Voter Welfare
TL;DR: In this article, the authors explore the logic of &scal restraints in a political agency model with both moral hazard and adverse selection, and show that some forms of andscal restraint can only be desirable when incumbents are su¢ ciently likely to be benevolent.
Journal ArticleDOI
The self-reinforcing nature of crime
Joel L. Schrag,Suzanne Scotchmer +1 more
TL;DR: This article pointed out that attempts to trace crime to exogenous factors in the environment or in the moral character of citizens may be doomed to disappointment, since crime is a mutually reinforcing activity, and therefore enforcement parameters or aspects of moral character do not uniquely determine the crime rate.
Journal ArticleDOI
Governing Entrepreneurial Opportunity Recognition in MNEs: Aligning Interests and Cognition Under Uncertainty*
TL;DR: In this article, the authors integrate economic and behavioural approaches to identify communicative, behavioural, and value uncertainties encountered in the MNEs' opportunity recognition phase, and discuss key contingencies that influence solutions to these uncertainties through delegation of authority, provision of incentives, promotion rules, and use of clan structures.
Journal ArticleDOI
Evidence disclosure and verifiability
Jesse Bull,Joel Watson +1 more
TL;DR: In this paper, the authors explore the notion of verifiability by analyzing a simple model of evidence production in contractual relationships with complete information and provide results on maximal and minimal evidence production that are, respectively, necessary and sufficient for implementation.
References
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Posted Content
Production, information costs, and economic organization
Armen A. Alchian,Harold Demsetz +1 more
TL;DR: In this paper, the authors present a set of reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles, but full text can be found on the Internet Archive.
Journal ArticleDOI
Moral Hazard and Observability
TL;DR: In this article, the role of imperfect information in a principal-agent relationship subject to moral hazard is considered, and a necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived.
Posted Content
The Economic Theory of Agency: The Principal's Problem.
TL;DR: The canonical agency problem can be posed as follows as discussed by the authors : the agent may choose an act, aCA, a feasible action space, and the random payoff from this act, w(a, 0), will depend on the random state of nature O(EQ the state space set), unknown to the agent when a is chosen.
Journal ArticleDOI
Reexamination of the perfectness concept for equilibrium points in extensive games
TL;DR: The concept of perfect equilibrium point has been introduced in order to exclude the possibility that disequilibrium behavior is prescribed on unreached subgames [Selten 1965 and 1973]. Unfortunately this definition of perfectness does not remove all difficulties which may arise with respect to unreached parts of the game.
Journal ArticleDOI
Good News and Bad News: Representation Theorems and Applications
TL;DR: In this article, a notion of "favorableness" of news is introduced, characterized, and applied to four simple models: the arrival of good news about a firm's prospects always causes its share price to rise, more favorable evidence about an agent's effort leads the principal to pay a larger bonus, buyers expect that any product information withheld by a salesman is unfavorable to his product, and bidders figure that low bids by their competitors signal a low value for the object being sold.