On the Role of Uncertainty in the Risk-Incentives Tradeoff
AbstractWe use a simple agency model to clarify and characterize the various avenues through which changes in the level of uncertainty impact the optimal strength of linear incentives. Instead of attempting to characterize different "types" of uncertainty, which has been the approach in the literature so far, we base our characterization on the link between uncertainty and the agent's action choice. We then use this characterization to provide conditions under which the relationship between uncertainty and incentives can be positive and relate it back to the existing models in the literature.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.
Volume (Year): 8 (2008)
Issue (Month): 1 (April)
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Web page: http://www.degruyter.com
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- Avner Ben-Ner & Fanmin Kong & Stéphanie Lluis, 2011.
"Uncertainty, Task Environment, and Organization Design: An Empirical Investigation,"
1105, University of Waterloo, Department of Economics, revised Dec 2011.
- Ben-Ner, Avner & Kong, Fanmin & Lluis, Stéphanie, 2012. "Uncertainty, task environment, and organization design: An empirical investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 281-313.
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