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Reservation wage and optimal contract for experts

Author

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  • Jun, Jooyong
  • Yoon, Kyoung-Soo

Abstract

We examine the optimal contract for experts with type-dependent reservation wage. We show that Bhattacharya and Pfleiderer (1985)’s result, the possibility of achieving the truthful revelation of information with full surplus extraction, can be achieved with relaxing the restriction on the shape of reservation wage schedules. This outcome can be achieved through payoff functions that are affine in a convex transformation of the ex-post error. Our result is applied to the case of multiple experts.

Suggested Citation

  • Jun, Jooyong & Yoon, Kyoung-Soo, 2012. "Reservation wage and optimal contract for experts," Economics Letters, Elsevier, vol. 117(3), pages 619-623.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:619-623
    DOI: 10.1016/j.econlet.2012.08.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Contract; Type-dependence; Reservation wage;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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