Describability and agency problems
AbstractThis paper suggests a reason, other than asymmetric information, why agency contracts are not explicitly contingent on the agent's performance or actions. Two ingredients are essential to this reason. The first is the written form that contracts are required to take to be enforceable. The second is a form of discontinuity in the parties' preferences and in the technology that transforms actions into a (probabilistic) outcome. We show that under these conditions the chosen contract may not be explicitly contigent on the agent's action although, in principle, such actions are contractible and observable to all parties to the contract, court included.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 42 (1998)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
- D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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