The authors modify the standard principal-agent model with oral hazard by allowing the contract to be renegotiated after the agent's choice of action and before the observation of the action's consequences. In equilibrium, the agent randomizes over effort levels. The optimal contract gives the agent a menu of compensation schemes: safe ones intended for low-effort workers and risky ones for those whose effort is high. The optimal contract may give the agent a positive rent, in contrast to the case without renegotiation. Copyright 1990 by The Econometric Society.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Econometric Society in its journal Econometrica.
Volume (Year): 58 (1990) Issue (Month): 6 (November) Pages: 1279-1319 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.