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Moral Hazard Contracts: Does One Size Fit All?

Author

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  • Koch, Alexander K.

    () (Aarhus University)

  • Peyrache, Eloic

    () (HEC Paris)

Abstract

Incentive theory predicts that contract terms should respond to differences in agents’ productivities. Firms’ practice of anonymous contracts thus appears puzzling. We show that such a “one-size-fits-all” approach 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

  • Koch, Alexander K. & Peyrache, Eloic, 2006. "Moral Hazard Contracts: Does One Size Fit All?," IZA Discussion Papers 2463, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2463
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    Cited by:

    1. Alexander K. Koch & Eloïc Peyrache, 2011. "Aligning Ambition and Incentives," Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(3), pages 655-688.

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    More about this item

    Keywords

    career concerns; incentive contracts; reputation; anonymous contracts;
    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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