Endogenous Verifiability and Optimality in Agency: A non-contingent approach
In the context of a principal-agent model where verification of an agent’s effort is endogenously determined through strategic interactions between contracting parties, we derive a necessary and suficient condition to achieve the first best with a non-contingent or incomplete contract. These conditions relate the Principal’s benefit, the Agent’s cost, the probability of winning and the cost of litigation. Also, these conditions are found to be more general than the ones established in Ishiguro (2002) within a similar setup.
|Date of creation:||Sep 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (562) 692-0265
Fax: (562) 692-0303
Web page: http://www.economia.uahurtado.cl/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Bernardo, Antonio E & Talley, Eric & Welch, Ivo, 2000.
"A Theory of Legal Presumptions,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 16(1), pages 1-49, April.
- Ishiguro, Shingo, 2002. "Endogenous Verifiability and Optimality in Agency," Journal of Economic Theory, Elsevier, vol. 105(2), pages 518-530, August.
- Stefan Krasa & Anne P. Villamil, 2000. "Optimal Contracts when Enforcement Is a Decision Variable," Econometrica, Econometric Society, vol. 68(1), pages 119-134, January.
- Aaron S. Edlin & Stefan Reichelstein, 1995.
"Holdups, Standard Breach Remedies, and Optimal Investment,"
NBER Working Papers
5007, National Bureau of Economic Research, Inc.
- Edlin, Aaron S & Reichelstein, Stefan, 1996. "Holdups, Standard Breach Remedies, and Optimal Investment," American Economic Review, American Economic Association, vol. 86(3), pages 478-501, June.
- B. Douglas Bernheim & Michael D. Whinston, 1997.
"Incomplete Contracts and Strategic Ambiguity,"
Harvard Institute of Economic Research Working Papers
1787, Harvard - Institute of Economic Research.
- Donald B. Hausch & Yeon-Koo Che, 1999.
"Cooperative Investments and the Value of Contracting,"
American Economic Review,
American Economic Association, vol. 89(1), pages 125-147, March.
- Murat Usman, 2002. "Verifiability and Contract Enforcement: A Model with Judicial Moral Hazard," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 67-94, April.
- Kvaløy, Ola & Olsen, Trond E., 2004.
"Endogenous Verifiability in Relational Contracting,"
2004/20, Department of Business and Management Science, Norwegian School of Economics.
- Ola Kvaløy & Trond E. Olsen, 2009. "Endogenous Verifiability and Relational Contracting," American Economic Review, American Economic Association, vol. 99(5), pages 2193-2208, December.
- Justin Zhang & Tian Zhu, 2000. "Verifiability, Incomplete Contracts and Dispute Resolution," European Journal of Law and Economics, Springer, vol. 9(3), pages 281-290, May.
When requesting a correction, please mention this item's handle: RePEc:ila:ilades:inv189. 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: (Marcela Perticara)
If references are entirely missing, you can add them using this form.