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Moral Hazard and Size Trade in Agency Contracts

Author

Listed:
  • Ishiguro, S.
  • Itoh, H.

Abstract

The purpose of the paper is to investigate how side track (or collusion) among agents affects the principal's welfare in a hidden action model. We assume that the agent's actions are mutually observable but not contradictable among them and hence direct coordination of actions via side contracting is infeasable. The side contract is thus contingent only on verifiable performance signals, and its main role is mutual insurance.

Suggested Citation

  • Ishiguro, S. & Itoh, H., 1996. "Moral Hazard and Size Trade in Agency Contracts," ISER Discussion Paper 0422, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0422
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    Cited by:

    1. Ishiguro, Shingo, 2004. "Collusion and discrimination in organizations," Journal of Economic Theory, Elsevier, vol. 116(2), pages 357-369, June.

    More about this item

    Keywords

    MORAL HAZARD; RISK; ASYMETRIC INFORMATION;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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