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Information, Risk Sharing, And Incentives In Agency Problems

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  • Jia Xie

Abstract

This article studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or dealt with by a contract on the outcome, so information systems are used for incentives only. When the outcome is noncontractible, a risk‐averse principal relies on imperfect information for both incentives and risk sharing. Under the first‐order approach, this article relaxes Gjesdal's criterion for ranking information systems and finds conditions justifying the first‐order approach when the principal is risk averse and the outcome is noncontractible.

Suggested Citation

  • Jia Xie, 2017. "Information, Risk Sharing, And Incentives In Agency Problems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(1), pages 157-182, February.
    • Handle: RePEc:wly:iecrev:v:58:y:2017:i:1:p:157-182
    DOI: 10.1111/iere.12212
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    References listed on IDEAS

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    1. Peng Liu & Jia Xie, 2021. "Optimal Contract Design in Residential Brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 493-530, June.

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