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
Citations
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Journal ArticleDOI
Teams, Autonomy, and the Financial Performance of Firms
TL;DR: In this paper, a structural model of teams, autonomy, and financial performance of British establishments using a large cross-section of British businesses is presented. And the authors find that team production does in fact improve financial performance for the typical establishment but that self-managed or autonomous teams do no better than closely supervised or non-autonomous teams.
Journal ArticleDOI
Bank opacity and risk-taking:: Evidence from analysts' forecasts
TL;DR: This paper investigated the impact of opacity on bank risk-taking, using a large panel of US bank holding companies, over the 1995-2013 period, and found that opacity increases insolvency risks among banks.
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African Traditional Healers and Outcome: Contingent Contracts in Health Care
TL;DR: In this article, an economic perspective of traditional healers is presented to explain the popularity of traditional medicine in African traditional medicine, and the advantages inherent in the use of outcome-contingent contracts.
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Group Rewards and Individual Sanctions in Environmental Policy
TL;DR: In this article, the authors examine an incentive scheme for a group of agents, where all agents are rewarded if the group meets its target, and only the agents that meet their individual target are rewarded.
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Research on the strategy of multinational enterprises: Key approaches and new avenues
TL;DR: In this article, a content analysis of 1116 papers on MNEs' strategy is conducted, and the authors provide insights for future research by combining main schools of strategy thought, without losing sight of the key foundations of strategy and strategic management.
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.