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
The Entrepreneurial Organization of Heterogeneous Capital
TL;DR: In this article, the authors define capital heterogeneity in terms of subjectively perceived attributes, the functions, characteristics, and uses of capital assets, which are not given, but have to be created or discovered by means of entrepreneurial action.
Journal ArticleDOI
Are profit-maximisers the best survivors?: A Darwinian model of economic natural selection
TL;DR: The authors showed that profit-maximisation is not always the best strategy for survival and that profitmaximisers are not necessarily the best survivors because of the possibility of "spiteful" behaviour of the following kind.
Journal ArticleDOI
Theories of Share Tenancy: A Critical Survey
Keijiro Otsuka,Yujiro Hayami +1 more
TL;DR: In this paper, the authors examine the problems of various theoretical models in a unified framework, in Section II they first develop the basic framework of a general model of tenancy contract, and in Section III they clarify the contradictions latent in the traditional Marshallian theory, which asserts that share tenancy is inefficient because of the disincentive effect of cropsharing on the tenant's work effort.
Journal ArticleDOI
Firms' Choice of Method of Pay
TL;DR: Using data from the BLS Industry Wage Survey, the authors test the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m...
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Attracting responsible employees: Green production as labor market screening
Kjell Arne Brekke,Karine Nyborg +1 more
TL;DR: This article showed that if both socially responsible (green) and non-responsible (brown) firms exist in equilibrium, workers with high moral motivation, who shirk less than others, will self-select into the green firms.
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.