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Moral Hazard in Risk-Averse Teams

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Author Info
Eric Rasmusen

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Abstract

Holmstrom (1982) has shown that a non-budget-balancing contract induces a team of risk-neutral agents to choose the first-best effort levels. This is not generally true when agents are risk averse. Furthermore, a "massacre" contract, which punishes all but one agent when the outcome is low, can attain the first best over a wider range of parameters than any other budget-balancing contract.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 18 (1987)
Issue (Month): 3 (Autumn)
Pages: 428-435
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Handle: RePEc:rje:randje:v:18:y:1987:i:autumn:p:428-435

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  1. Roland Kirstein & Robert D. Cooter, 2007. "Sharing and Anti-Sharing in Teams," FEMM Working Papers 07001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management. [Downloadable!]
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  2. Roland Kirstein & Birgit Will, 2006. "Efficient compensation for employees' inventions," European Journal of Law and Economics, Springer, vol. 21(2), pages 129-148, April. [Downloadable!] (restricted)
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  3. Thomas J. Miceli & Kathleen Segerson, 2004. "Punishing the Innocent along with the Guilty: The Economics of Individual versus Group Punishment," Working papers 2004-37, University of Connecticut, Department of Economics. [Downloadable!]
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  4. Roland Kirstein, . "Anti-Teilen in Teams," German Working Papers in Law and Economics 2005-1-1127, Berkeley Electronic Press. [Downloadable!]
  5. Yuval Emek & Michal Feldman, 2007. "Computing an Optimal Contract in Simple Technologies," Levine's Bibliography 843644000000000184, UCLA Department of Economics. [Downloadable!]
  6. Roland Strausz, . "Moral Hazard in Sequential Teams," Papers 001, Departmental Working Papers. [Downloadable!]
  7. Francisco Alpízar & Till Requate & Albert Schram, 2004. "Collective versus Random Fining: An Experimental Study on Controlling Ambient Pollution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(2), pages 231-252, October. [Downloadable!] (restricted)
  8. Schmitz, Patrick W., 2002. "On the Interplay of Hidden Action and Hidden Information in Simple Bilateral Trading Problems," MPRA Paper 12531, University Library of Munich, Germany. [Downloadable!]
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  9. Roland Kirstein & Robert Cooter, . "Anti-Sharing," German Working Papers in Law and Economics 2005-1-1131, Berkeley Electronic Press. [Downloadable!]
  10. Shasikanta Nandeibam, 1994. "A free-rider problem with a free-riding principal," Review of Economic Design, Springer, vol. 1(1), pages 227-250, December. [Downloadable!] (restricted)
  11. Oyer, Paul, 2001. "Why Do Firms Use Incentives That Have No Incentive Effects?," Research Papers 1686, Stanford University, Graduate School of Business. [Downloadable!]
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  12. Larry Karp, 1998. "Nonpoint Source Pollution Taxes and Excessive Tax Burden," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 835, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
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  13. Yuval Emek & Michal Feldman, 2007. "Computing an Optimal Contract in Simple Technologies," Discussion Paper Series dp452, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem. [Downloadable!]
  14. Patrick Legros & Steven A. Matthews, 1992. "Efficient and Nearly Efficient Partnerships," Discussion Papers 991R, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  15. repec:bep:eaptop:v:5:y:2005:i:1:p:1233-1233 is not listed on IDEAS
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