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Agency conflicts in the presence of random private benefits from project implementation

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  • Dye, Ronald A.
  • Sridharan, Sri S.

Abstract

We study a contracting problem where a principal delegates the decision to implement a “project” to an agent who obtains private information about the value of the project before making the implementation decision. Moral hazard arises because the agent gets private random non-contractible benefits, or incurs private random non-contractible costs, if the project is implemented. This contracting problem is pervasive, when “project” and “benefits” are interpreted broadly.

Suggested Citation

  • Dye, Ronald A. & Sridharan, Sri S., 2014. "Agency conflicts in the presence of random private benefits from project implementation," Economics Letters, Elsevier, vol. 123(3), pages 308-312.
    • Handle: RePEc:eee:ecolet:v:123:y:2014:i:3:p:308-312
    DOI: 10.1016/j.econlet.2014.02.025
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    References listed on IDEAS

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    More about this item

    Keywords

    Optimal contracting; Moral hazard; Random private benefits; Depressed incentives; Increasing residual values;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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