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Moral hazard contracts: Does one size fit all?

Author

Listed:
  • Alexander K. Koch
  • Eloïc Peyrache

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We show that firms' practice of anonymous contracts ("one-size-fits-all") can be reconciled with standard agency theory if careers are marked by frequent transitions between employers, and agents have career concerns because complete long-term contracts are not feasible.

Suggested Citation

  • Alexander K. Koch & Eloïc Peyrache, 2008. "Moral hazard contracts: Does one size fit all?," Post-Print hal-00463445, HAL.
    • Handle: RePEc:hal:journl:hal-00463445
    DOI: 10.1016/j.econlet.2008.03.003
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    References listed on IDEAS

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    1. Armando Levy & Tomislav Vukina, 2002. "Optimal linear contracts with heterogeneous agents," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 29(2), pages 205-217, June.
    2. Dustmann, Christian & Pereira, Sonia C., 2005. "Wage Growth and Job Mobility in the U.K. and Germany," IZA Discussion Papers 1586, Institute of Labor Economics (IZA).
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    5. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
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    11. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 183-198.
    12. Fenghua Song & Anjan V. Thakor, 2006. "Information Control, Career Concerns, and Corporate Governance," Journal of Finance, American Finance Association, vol. 61(4), pages 1845-1896, August.
    13. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-1175, September.
    14. Ricart i Costa, Joan E, 1988. "Managerial Task Assignment and Promotions," Econometrica, Econometric Society, vol. 56(2), pages 449-466, March.
    15. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
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    Cited by:

    1. Nafziger, Julia, 2008. "Job Assignments, Intrinsic Motivation and Explicit Incentives," Bonn Econ Discussion Papers 5/2008, University of Bonn, Bonn Graduate School of Economics (BGSE).
    2. Alexander K. Koch & Eloïc Peyrache, 2011. "Aligning Ambition and Incentives," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(3), pages 655-688.

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    More about this item

    Keywords

    Anonymous contracts; Career concerns; Incentive contracts; Reputation;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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