Delegation of risky activities
This paper studies the delegation contract of a risky activity under the presence of adverse selection and moral hazard. The problem is posed as providing incentives from the principal to the agent to enhance the protective action of the agent through payment schemes. Given non-bankruptcy of both the principal and the agent, the principal rewards the agent if no accident occurs but penalizes the agent if an accident occurs. Given bankruptcy of either the principal or the agent, regardless of the agent's risk type, the agent is only rewarded with the same amount of remuneration and not penalized if the accident occurs. The social welfare level resulting from contracting processes depends on the asset levels of both parties and the agent's technology to reduce risks of the activity. Copyright © 2005 John Wiley & Sons, Ltd.
Volume (Year): 26 (2005)
Issue (Month): 5 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976|
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.:
- Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
- Watabe, Akihiro, 1999. "The effect of liability-sharing rules in delegating hazardous activities," International Review of Law and Economics, Elsevier, vol. 19(3), pages 349-368, September.
- Kahan, Marcel, 1996. "The incentive effects of settlements under joint and several liability," International Review of Law and Economics, Elsevier, vol. 16(4), pages 389-395, December.
- Laffont, Jean-Jacques & Tirole, Jean, 1986.
"Using Cost Observation to Regulate Firms,"
Journal of Political Economy,
University of Chicago Press, vol. 94(3), pages 614-41, June.
- Newman, Harry A. & Wright, David W., 1990. "Strict liability in a principal-agent model," International Review of Law and Economics, Elsevier, vol. 10(3), pages 219-231, December.
When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:26:y:2005:i:5:p:331-343. 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)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.