IDEAS home Printed from https://ideas.repec.org/a/ecm/emetrp/v58y1990i6p1279-1319.html
   My bibliography  Save this article

Moral Hazard and Renegotiation in Agency Contracts

Author

Listed:
  • Fudenberg, Drew
  • Tirole, Jean

Abstract

The authors modify the standard principal-agent model with oral hazard by allowing the contract to be renegotiated after the agent's choice of action and before the observation of the action's consequences. In equilibrium, the agent randomizes over effort levels. The optimal contract gives the agent a menu of compensation schemes: safe ones intended for low-effort workers and risky ones for those whose effort is high. The optimal contract may give the agent a positive rent, in contrast to the case without renegotiation. Copyright 1990 by The Econometric Society.

Suggested Citation

  • Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
  • Handle: RePEc:ecm:emetrp:v:58:y:1990:i:6:p:1279-1319
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0012-9682%28199011%2958%3A6%3C1279%3AMHARIA%3E2.0.CO%3B2-E&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:58:y:1990:i:6:p:1279-1319. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/essssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.