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Moral hazard contracts: Does one size fit all?


  • Koch, Alexander K.
  • Peyrache, Eloïc


We show that firms' practice of anonymous contracts ("one-size-fits-all") 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.

Suggested Citation

  • Koch, Alexander K. & Peyrache, Eloïc, 2008. "Moral hazard contracts: Does one size fit all?," Economics Letters, Elsevier, vol. 100(3), pages 399-401, September.
  • Handle: RePEc:eee:ecolet:v:100:y:2008:i:3:p:399-401

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    References listed on IDEAS

    1. Armando Levy & Tomislav Vukina, 2002. "Optimal linear contracts with heterogeneous agents," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(2), pages 205-217, June.
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    3. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 921-955.
    4. Meyer, Margaret A & Vickers, John, 1997. "Performance Comparisons and Dynamic Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 547-581, June.
    5. 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.
    6. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    7. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
    8. Bruce C. Greenwald, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 325-347.
    9. Bruce C. 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.).
    10. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
    11. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
    12. Fenghua Song & Anjan V. Thakor, 2006. "Information Control, Career Concerns, and Corporate Governance," Journal of Finance, American Finance Association, vol. 61(4), pages 1845-1896, August.
    13. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-1175, September.
    14. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-466, March.
    15. Gibbs, Michael, 1995. "Incentive compensation in a corporate hierarchy," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 247-277, April.
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    Cited by:

    1. Julia Nafziger, 2008. "Job Assignments, Intrinsic Motivation and Explicit Incentives," Bonn Econ Discussion Papers bgse5_2008, University of Bonn, Germany.
    2. Alexander K. Koch & Eloïc Peyrache, 2011. "Aligning Ambition and Incentives," Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(3), pages 655-688.

    More about this item

    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; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation


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