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Moral Hazard Contracts: Does One Size Fit All?

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Author Info
Alexander K. Koch () (Royal Holloway, University of London and IZA Bonn)
Eloïc Peyrache () (HEC School of Management, Paris)

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Abstract

Incentive theory predicts that contract terms should respond to differences in agents’ productivities. Firms’ practice of anonymous contracts thus appears puzzling. We show that such a "one-size-fits-all" approach can be reconciled with standard agency theory if careers are marked by frequent transitions between employers, and agents have career concerns because complete long-term contracts are not feasible.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2463.

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Length: 9 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2463

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Related research
Keywords: anonymous contracts; career concerns; incentive contracts; reputation;

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Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation

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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. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November. [Downloadable!] (restricted)
  2. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter. [Downloadable!] (restricted)
  3. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Blackwell Publishing, vol. 53(3), pages 325-47, July. [Downloadable!] (restricted)
  4. Armando Levy & Tomislav Vukina, 2002. "Optimal linear contracts with heterogeneous agents," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 29(2), pages 205-217, June.
  5. Christian Dustmann & Sonia C. Pereira, 2005. "Wage Growth and Job Mobility in the U.K. and Germany," IZA Discussion Papers 1586, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June. [Downloadable!] (restricted)
  7. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May. [Downloadable!] (restricted)
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  8. Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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Cited by:
(explanations, 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. Alexander K. Koch & Eloïc Peyrache, 2008. "Aligning Ambition and Incentives," Economics Working Papers 2008-16, School of Economics and Management, University of Aarhus. [Downloadable!]
    Other versions:
  2. Julia Nafziger, 2008. "Job Assignments, Intrinsic Motivation and Explicit Incentives," Bonn Econ Discussion Papers bgse5_2008, University of Bonn, Germany. [Downloadable!]
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This page was last updated on 2009-12-14.

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