Sharing with a risk-neutral agent
In the standard solution to the principalâ€“agent problem, a risk-neutral agent bears all the risk. The author shows that, in fact, multiple solutions exist, and often the risk-neutral agent is not the sole bearer of risk. As risk aversion approaches zero, the unique risk-averse solution converges to the risk-neutral solution, wherein the agent bears the least amount of risk. Even a small degree of risk aversion can result in agents bearing significantly less risk than the standard solution suggests.
Volume (Year): (2001)
Issue (Month): Q I ()
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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.:
- Haubrich, Joseph G, 1994.
"Risk Aversion, Performance Pay, and the Principal-Agent Problem,"
Journal of Political Economy,
University of Chicago Press, vol. 102(2), pages 258-76, April.
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Rodney L. White Center for Financial Research Working Papers
15-80, Wharton School Rodney L. White Center for Financial Research.
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The RAND Corporation, vol. 10(1), pages 74-91, Spring.
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