Pareto Improving Inefficiency
We examine the effects of a systematic increase in the agents operating costs in a standard agency setting with moral hazard. We identify conditions under which the agent benefits from the increase in his costs. Perhaps more surprisingly, we show that the principal and he agent can both benefit from the increase in the agents costs under plausible conditions. Thus, increased inefficiency can be Pareto-improving.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: Cincinnati, OH 45221-0371|
Phone: (513) 556-2670
Fax: (513) 556-2669
Web page: http://business.uc.edu/academics/departments/economics.html
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cin:ucecwp:2008-04. 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: (Sourushe Zandvakili)
If references are entirely missing, you can add them using this form.