This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Endogenous Verifiability and Optimality in Agency: A non-contingent approach

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Manuel Willington () (ILADES-Georgetown University, Universidad Alberto Hurtado)
Roy Costilla ()
Abstract

In the context of a principal-agent model where verification of an agent’s effort is endogenously determined through strategic interactions between contracting parties, we derive a necessary and suficient condition to achieve the first best with a non-contingent or incomplete contract. These conditions relate the Principal’s benefit, the Agent’s cost, the probability of winning and the cost of litigation. Also, these conditions are found to be more general than the ones established in Ishiguro (2002) within a similar setup.

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.

File URL: http://www.economia.uahurtado.cl/pdf/publicaciones/inv189.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Ilades-Georgetown University, School of Economics and Bussines in its series ILADES-Georgetown University Working Papers with number inv189.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 31 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:ila:ilades:inv189

Contact details of provider:
Postal: Erasmo Escala 1835, 6500620 Santiago
Phone: (562) 692-0265
Fax: (562) 692-0303
Email:
Web page: http://www.economia.uahurtado.cl/
More information through EDIRC

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: (Marcela Perticara).

Related research
Keywords: incomplete contracts; endogenous verifiability; expectation damages.;

Find related papers by JEL classification:
D20 - Microeconomics - - Production and Organizations - - - General
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Bernheim, B Douglas & Whinston, Michael D, 1998. "Incomplete Contracts and Strategic Ambiguity," American Economic Review, American Economic Association, vol. 88(4), pages 902-32, September. [Downloadable!] (restricted)
    Other versions:
  2. Kvaløy, Ola & Olsen, Trond E., 2004. "Endogenous Verifiability in Relational Contracting," Discussion Papers 2004/20, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  3. Yeon-Koo Che & Donald B. Hausch, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March. [Downloadable!] (restricted)
  4. Justin Zhang & Tian Zhu, 2000. "Verifiability, Incomplete Contracts and Dispute Resolution," European Journal of Law and Economics, Springer, vol. 9(3), pages 281-290, May. [Downloadable!] (restricted)
  5. Chris William Sanchirico, 2004. "Games, Information, and Evidence Production: With Application to English Legal History," Law and Economics 0403002, EconWPA. [Downloadable!]
  6. Aaron Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," Berkeley Olin Program in Law & Economics, Working Paper Series 1155, Berkeley Olin Program in Law & Economics. [Downloadable!]
    Other versions:
  7. Bernardo, Antonio E & Talley, Eric & Welch, Ivo, 2000. "A Theory of Legal Presumptions," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 1-49, April.
    Other versions:
  8. Ishiguro, Shingo, 2002. "Endogenous Verifiability and Optimality in Agency," Journal of Economic Theory, Elsevier, vol. 105(2), pages 518-530, August. [Downloadable!] (restricted)
  9. Murat Usman, 2002. "Verifiability and Contract Enforcement: A Model with Judicial Moral Hazard," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 67-94, April.
  10. Stefan Krasa & Anne P. Villamil, 2000. "Optimal Contracts when Enforcement Is a Decision Variable," Econometrica, Econometric Society, vol. 68(1), pages 119-134, January.
Full references

Statistics
Access and download statistics

Did you know? Cannot find something on IDEAS? Encourage the publisher to index it! Instructions.

This page was last updated on 2009-11-8.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.