Title: Ex post participation constraint in a principal–agent model with adverse selection and moral hazard
Abstract: This paper analyzes optimal contracting when an agent has private information before contracting and exerts hidden effort that stochastically affects the output. Additionally, the contract is constrained to satisfy the agent's ex post participation. We highlight three features of this model. First, the agent faces countervailing incentives. Second, the separation of types is never optimal. Third, the optimal constant bonus rewarding success is distorted downward below its efficient level.
Publication Year: 2013
Publication Date: 2013-07-26
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 33
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