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Payoff implications of incentive contracting

Author

Listed:
  • Garrett, Daniel F.

    (Toulouse School of Economics, University of Toulouse Capitole)

Abstract

In the context of a canonical agency model, we study the payoff implications of introducing optimally-structured incentives. We do so from the perspective of an analyst who does not know the agent's preferences for responding to incentives, but does know that the principal knows them. We provide, in particular, tight bounds on the principal's expected benefit from optimal incentive contracting across feasible values of the agent's expected rents. We thus show how economically relevant predictions can be made robustly given ignorance of a key primitive.

Suggested Citation

  • Garrett, Daniel F., 2021. "Payoff implications of incentive contracting," Theoretical Economics, Econometric Society, vol. 16(4), November.
    • Handle: RePEc:the:publsh:4293
    as

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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20211281/32381/920
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    References listed on IDEAS

    as
    1. Jose Miguel Abito, 2020. "Measuring the Welfare Gains from Optimal Incentive Regulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(5), pages 2019-2048.
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    Cited by:

    1. Garrett, Daniel F. & Georgiadis, George & Smolin, Alex & Szentes, Balázs, 2023. "Optimal technology design," Journal of Economic Theory, Elsevier, vol. 209(C).

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    More about this item

    Keywords

    Asymmetric information; mechanism design; robustness; procurement;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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